Exhibit 17.6 Sales of a major brand reflecting the impact of promotions.
The promoted sales volume for a majority of FMCG brands
accounts for a very substantial proportion of their total sales. According to NielsenIQ, in
most markets across the globe, more than half the sales in the FMCG sector are of promoted products.
Exhibit 17.6 plots the weekly sales trend for
a leading brand in the market. The chart indicates that the on-promotion volume of this brand
accounts for 43% of the total sales, and the gains resulting from promotions make up 26% of sales.
Some promotions work better than others, and some items respond better than others
to promotions. Some promotions generate big gains, whereas others cannibalize. Some promotions are
profitable, while others may incur a loss.
There is realization too that excess levels of promotions can impair a brand’s image
and weaken its loyalty. Furthermore, the total cost of promotions is high and has been growing
steadily over the years.
Given their scale, and the considerable impact that promotions have on a brand’s
performance, manufacturers need to evaluate and rationalize promotions. They need to prioritize the
most effective promotions and weed out those that yield less impressive results. And they need to
understand how promotions work so that they can develop more effective promotions plans and
strategies.
