Merchandising, Trade Promotion

Trade Promotions: Measuring Effectiveness to Increase ROI

Did you know that a Nielsen study revealed that 55% of trade promotion dollars fail to increase market share or category growth for brands and retailers? The truth is, when it comes to measuring the effectiveness of trade promotions, brands often overlook the most important metrics to determine ROI, which could cost them the opportunity for up to an 800% return.

In this post, we will go over the four metrics sales managers should pay attention to in order to not only properly measure effectiveness, but to improve their trade promotion strategy and boost their bottom line.

Measure Granular Data

When it comes to measuring trade promotion effectiveness, it can be difficult to account for all of the factors that play into a boost or drop in sales. While a manager can collect data on shipments and units sold during a promotion, it is harder to determine the effects of weather, events/ holidays, and retailer compliance.

 

 

To get a better idea of the conditions that are affecting your promotions, try focusing on more granular data. Below are a few ways of doing this:

  • Track performance week to week — or even day to day — rather than month to month. This will help you notice any trends early on, account for those more ambiguous factors such as weather, and take corrective action if needed.
  • Conduct more frequent rep visits. When reps are constantly checking in on promotions, you are more likely to catch out of stocks before they happen and ensure retailer compliance. Additionally, the more contact your reps have with the retailer empowers them to form stronger relationships that will benefit your brand.
  • Collect real-time data. There are software solutions that let you collect data instantly and store it in the cloud, allowing for analysis at the back office to occur faster than ever before This means that managers can monitor performance in the field and use the data to identify areas of success or for improvement.
  • Measure your shelf space — literally. The experts over at Franck Coffee measure their shelf space down to the centimeter. While this may seem like overkill, getting this precise helps you identify any encroachment into your domain. Additionally, don’t underestimate the power of visuals. Even having a little more space on the shelf could be enough to grab the shopper’s attention away from your competitors.

 

 

Track Market Share and Category Growth

Keeping an eye on your market share is obviously a major component of your promotion strategy. After all, the whole point of running promotions is to capture more of the market and smoke out your competitors. But what if we told you that focusing on something that may also help your competitors could benefit you in the long run?

That “something” is category growth. Category growth is just as important as market share, and a great promotion should work to expand the audience of people you market your product to. There are only so many potential customers within your current market, so expanding it to people who don’t yet have a hankering for products like yours. Consider the familiar pushes of men towards skincare products by brands introducing lines specifically for them, or health-conscious consumers into snacks by offering low fat and sugar-free options.

Yes, focusing on category growth may also benefit your competition, since bringing new customers into your market will probably boost their sales too. However, as long as your promotions are top-notch, you shouldn’t have to worry about losing potential customers to the other guy. If a customer’s introduction into your category is with your brand, that first impression is likely to create long-lasting loyalty that will continue to pay off well into the future.

 

Prioritize POS Data

Sure, tracking your shipment data is important — but when measuring promotion effectiveness, knowing how much product is sitting around in storage isn’t as important as knowing how much of it is actually leaving the shelf in the hands of shoppers.

 

 

Measure in consumer units to better understand if your promotion is actually increasing your sales. Your consumer units should be measured in whatever way the consumer purchases them; If you sell individually packaged products, those are your units, but if you sell products by the case, you should count those instead. Prioritizing the tracking of POS data will aid you in the next step of measuring promotion effectiveness, which is…

 

Analyze Incremental Sales

Incremental sales data tracks the additional sales that occur due to a marketing or promotional campaign. Monitoring incremental sales and comparing them to your expected sales can give you insight into how much more product you sold as a result of a promotion. While it may seem like a no-brainer, there is a key reason to monitor your incremental sales lift in relation to your promotion strategy. The following example explains why:

Let’s say you are running a promotion in two separate stores that cost you $3000 each to run. In store A, your expected sales are $4,000, you end up selling $6,000 dollars worth of product — but when you factor in the $3,000 cost, you actually lost $1,000, making the promotion a bust. In store B however, your expected sales were only $1,000, you sell $5,000, and after factoring in the $3,000 cost, you have a lift of $1,000. This caveat matters big time, as a perceived increase in sales isn’t always what it seems to be.

Paying close attention to incremental sales data is critical to ensuring your promotional spend isn’t going to waste and that your promotional strategy doesn’t just seem effective, but that it actually is.

 

A good trade promotion strategy will benefit both your brand and the retailers that sell it. Using the methods above, not only will you be able to better measure the success of your promotions, you will be providing value for yourself and for your partners that will show them just how much brighter you shine than the brands next to you on the shelf. 

 

Melissa Sonntag

Melissa is a recent graduate of Northeastern University and a content marketing specialist at Repsly, Inc. She is committed to applying her skills in order to bring value to Repsly readers and customers. Outside of work, Melissa enjoys practicing yoga, making music, and anything dog-related.

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