The promoted sales volume for a majority of FMCG brands accounts for a very substantial proportion of their total sales. In New Zealand, for instance, which is one of the most heavily promoted markets in the world, according to Nielsen, nearly 60% of grocery purchases in 2012 were promoted products.
But how effective are these promotions? Considering that the proportion of on-promotion sales is so high, one would imagine that companies can barely afford not to understand their impact.
This chapter dwells on the different forms of trade and consumer promotions, the need to rationalize them, and the metrics and methods to evaluate them. It explains the basic approach to assessing promotions in terms of gain in volume, value and profit. It introduces the topic of market modelling for promotions evaluation, and outlines the basic design of models. These econometric based methods are covered in greater depth in the next chapter, Market Mix Modelling.