Giant Consumer Products: The Sales Promotion Resource Allocation Decision

Group 10 Souraya KESSARIA - kessarias16@iimk.ac.inMohamed ANAS - mohamedas16@iimk.ac.inDeepak JANGJID - deepakj16@iimk.ac.inNamrata PAI P - namratapp16@iimk.ac.inPreethi P - preethip16@iimk.ac.in

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Key Facts

Giant Consumer Product, Inc has to maintain its above average growth

Frozen Foods Division(FFD) which is one of the major contributor to the revenue has shown a decline in sales volume

Promotional strategy has been proposed to improve the sales of Dinard and Natural products of FFD

It can have various negative impacts such as brand equity erosion, cannibalization of other products etc.

Mr. Allen Capps asked for a detailed analysis of the previous promotion impact so that they can decide for next year promotional strategy

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Exhibit 3

Average Sales Volume For Dinardo 32 Dinardo 16

When Item is on promotion 12156109.53 5959175.78

When Item is not on promotion 8617646.01 3361452.06

When nothing is on promotion 8896880.26 3929552.64

Incremental Volume from promotion 3259229.26 2029623.14

Revenue change from promotion 6844381.45 4871095.54

Variable cost change from promotion 2411829.65 1684587.21

Promotional cost change from promotion 70051.48 94253.93

Marketing Margin Change from Promotion 4362500.32 3092254.41

Average Sales Volume For Natural

Average Monthly Incremental Volume for Natural 751799.14

Average % Store Promoting for Natural 7.57

Average Monthly Incremental Volume/ Promo Point 99247.52

Incremental Volume from 25% Promo Points 2481188.02

Revenue change from promotion 7195445.25

Variable cost change from promotion 2233069.21

Promotional cost change from promotion 4125425.00

Marketing Margin Change from Promotion 836951.03

Dinardo

Natural

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Exhibit 3- Dinardo

Average Sales Volume For Dinardo 32 Dinardo 16

When the other Dinardo item is ON promotion 8617646.01 3361452.06

When nothing is on promotion 8896880.26 3929552.64

Volume change from promotion of other item -279234.25 -568100.57

Revenue change from promotion -586391.93 -1363441.37

Variable cost change from promotion -206633.35 -471523.47

Promotional cost change from promotion -191223.00 -182485.00

Marketing Margin Change from Promotion -188535.59 -709432.90

Total Brand Impact from promotion on Top-line Revenue

Total Effect of D32 Promotion 5480940.08

Total Effect of D16 Promotion 4284703.61

Total Brand Impact from promotion on Marketing Margin

Total Effect of D32 Promotion 3653067.42

Total Effect of D16 Promotion 2903718.82

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Impact of PromotionParticulars Dinardo

32Dinardo 16

Natural

Impact on Top-line Revenue

5480940.08

4284703.61

7195445.25

Impact on Marketing Margin

3653067.42

2903718.82

836951.03

The top-line revenue values are all high for all the three products (highest for Natural and least for Dinardo16)

Marketing margin is also good for all three products (highest for Natural and least for Dinardo 16)

The analysis suggest that all the three products should be promoted as all the three will provide positive return

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Effect of Promotion

Promotion will prove to be profitable for FFD

The promotion strategy will be beneficial for the retailers as margin for these products are high

Moreover the profit can be maximized when both the retailers and manufacturer is benefited

By going for pay for performance we can ensure that the promotion strategy will be passed to the consumers

Therefore both consumers and retailers will be benefited

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Promotion Structure

Pros• Immediate sales increase

Cons• Can lead to forward buying• Retailer could raise the price to

customer after intended period of promotion and pocket the difference

• Retailers could sell it at low price even after the intended period – condition customer to expect well trusted brands “on deal”

• Non- complaince by retailers• Stock piling by consumers

Off invoice Pricing

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Promotion Structure contn..

Pros Cons

Increase in

actual sales

No forward

buying

Retailers

forced to

comply

Stock piling

by consumers

Retailer

dissatisfaction

Pre-established target

Pros Cons

Increase in

actual sales

No forward

buying

Retailers have

to comply with

the policy

Stock piling by

consumers

Pay for performance

Go for pay for performance promotional structure

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Thank You