Is your promotional spend driving profitable volume? - A Silo Analytics Report
Issued by Jessica de Bufanos, Head Analyst at Silo Analytics - Aug 15th 2017, 09:39
We have officially entered a recession. This means tough times ahead for both retailers and manufacturers alike. “Demand is down and business conditions are tough.”
Now more than ever we see PRICE and PROMOTION playing a vital role in volume growth and share gain across retailers and brands. The trading environment is tough and shoppers are being conditioned to shop based on deals and price. Promotional execution is critical to success, however, once the promotion has run who is measuring its success? “Was it a profitable promotion? Which promotional mechanics are more or less successful than others? What price generates best volume uplift? What retailer generates the best return and likewise what brand fares best on promotion?”
It is the holy grail of marketing to measure the ROI of promotional effectiveness.
Silo Analytics has developed a statistical measure and software capabilities to marry two complex data sets: Till Volume Data and Broadsheet Promotional Reach in order to highlight promotional opportunities at a granular level.
The insights generated from the marrying of the rich data sets is key to strategic decision-making at all levels in the business. In today’s cut-throat retail environment, price and promotion is a key volume driver. Our science has shown that some categories sell up to 95% of volume on promotion/deal. Themed promotions, Black Friday and loyalty schemes are all adding fuel to the promotional frenzy fire.
Silo Analytics recently reported on the surge of promotional activity from the Independent and Wholesale sector. This sector is increasingly partaking in themed occasions such as Back to School, Valentine’s Day, Mother and Father’s Day, Easter, Eid, Diwali etc. in addition to this, the sectors’ promotional reach through newspaper penetration is significant in comparison to branded retail.
Silo’s Basket Analysis shows what categories are being promoted the most and inflation across the promoted basket.
Silo measures the effectiveness of Bulk buys vs. combo deals vs. airtime promotions vs. gimmick giveaways.
Graph 1 shows the correlation of weekly Till Volume (grey shaded area) to Promotional Reach (blue bars) at the most granular level (SKU, Retailer, Region). 92% of this SKU’s total volume is sold on broadsheet promotion/deal resulting in low base line volumes.
Graph 2 shows the correlation of weekly Till Volume (grey shaded area) to Promotional Reach (blue bars) (SKU, Retailer, National). In Mar16 an ad-hoc themed promotion was run with an investment cost of 3x the average promotion. Significant volume was achieved. However, was it profitable volume?
Graph 3 shows the correlation of weekly Till Volume (grey shaded area) to Promotional Reach (blue bars) (SKU, Retailer, National). Jun15 Month End was this SKU’s best performing promotion; Jul Month End was its worst performing promotion. Understand why these promotions worked/didn't work in order to improve volumes and profitability.
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