Promotion Evaluator evaluates promotions in terms of the volume, value and profit impact of the promotions plan, on all of the items in the category, as well as the category as a whole.
For plan depicted in the video, considering the big price discount for Koko Krunch, we see a large projected gain in volume. The gain in value is not as large due to the discount, and for the same reason the brand’s gross margin has plummeted.
At the bottom of this screen you can see that for the category as a whole, while there is significant increase in volume, value sales have declined and profits have dipped considerably.
This analysis, however, does not account for the promotional support that the retailer might have received from the manufacturers of the promoted brands.
And importantly it does not account for the gains in sales of other product categories, through the additional store traffic generated by the promotions in breakfast cereals.
The plan would be beneficial, if the increase in shopper traffic resulted in gains in sales and profits across product categories that more than compensated the loss in breakfast cereals.
Promotion Evaluation: Volume, Value and Gross Margin
Baseline: Weekly baseline sales volume, value, COGS and gross margin. (Estimates of these
metrics for those weeks where there are no promotions and no stock outs).
Volume: Expected weekly sales volume and gain/loss in volume due to the cumulative impact of all
causal factors (promos, merchandising).
Value: Expected weekly sales value, cost of promotion (feature advertising) and gain/loss in
sales value due to the cumulative impact of all causal factors.
Gross Margin columns: Expected weekly COGS, gross margin and gain/loss in gross margin due to the
cumulative impact of all causal factors.
COGS: Cost of goods sold (COGS) = Sales Value − Purchase Cost and Promo Cost.
Promotion Details: Move cursor over rows to check details on causal factors including merchandising
Promo earnings and costs: Cost of promotions pertains to cost of features, and earnings relate
Features are co-operative advertisements in newspapers, pertaining to in-store promotions. The cost of
these ads is split 50:50 between retail chain and supplier.
Large feature inserts cost $1,200 whereas smaller inserts cost $800.
The retail chain earns $2,000 from suppliers for each product, each week on regular display, $3,500 for
endcap (gondola end) displays and $5,000 for special displays.