Tracking the effectiveness of your Promotional ROI Spend
Issued by Jessica De Bufanos, Head Analyst at Silo Analytics - Dec 1st 2016, 08:43
Total SA retail promotional frequency is showing significant growth but who measures if that significant investment is profitable to the business? Who is evaluating the effectiveness of each promotion? What science is being used to develop promotional calendars?
It is the holy grail of marketing to measure the ROI of promotional effectiveness.
Silo has developed a statistical measure and software capabilities to marry two complex data sets: Till Volume Data and Broadsheet Promotional Reach to highlight promotional opportunities at a granular level.
The factors we measure when evaluating promotional effectiveness amongst others are:
> Price on Promotion
> Mid-Month vs. Month End Promotion
> Size and Placement of Image on Broadsheet
> Length of Promotion
> Daily Papers vs. Community Papers
> Insert vs. Press Ad
> Value Added Promotion vs. straight price promotion
> Price of product advertised by competitor retailers in same month
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.
The trading environment is tough and shoppers have been conditioned to shop on deals and price. Promotional execution and measurement is critical to success and the profitability of your business.
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.
Thank you for reading this article. To find out more or to schedule a presentation on our case studies, contact:
HEAD: SILO ANALYTICS
Tel: +27 31 203 3300
The severe drought and the depreciation of the rand in 2016 has seen annual food inflation reaching 11.7% in December 2016 when compared to December 2015 (as reported by StatsSA). This is a hard stat to swallow for the average Joe but times are tough and smart consumers are becoming experts at shopping on the deal.
For those who think the name Black Friday is linked to doom, war and/or plague - you are wrong. Black Friday (the day after Thanksgiving Thursday) is, in fact, the day when many retailers who do not make a profit until the Christmas trading period, move from the red into the black (in accounting terms).