Promotions are a powerful tool, especially in retail. Many of us have racked our brains more than once about how to attract new customers, increase the average check, increase sales turnover, etc. I will talk about the methods of planning and forecasting promotions in the following articles. Subscribe to my blog so you don't miss this topic. Today I will tell you how to analyze the effectiveness of promotions carried out using a real example.
Promotions (important to know)
I think that every marketing manager at least once in his life planned or invented a new promotion. As a rule, a promotion in retail network is a reduction in prices for certain goods from different product groups. The goal is to attract new customers or bring back old ones. And the task Promotions- not to be unprofitable, moreover, it must be profitable (ROI). Price cuts for a dozen items should pay off for the rest of the items by increasing sales across the entire range.
Analysis of the effectiveness of promotions
There are quite a few varieties (communications) of promotions, I will talk about such communication as “leaflets (with a decrease in the price of goods)”. The principle of analysis can be applied to any promotion and in some cases even to analyze the effectiveness of advertising.
And so, we have an assortment for you. You have already chosen which and how many SKUs to send to the flyer. If you haven't chosen yet, use . The purpose of the selection is the most popular products that overlap with your competitors. But more about this in the following articles (subscribe to the newsletter, no matter what you miss the methodology for planning and forecasting promotions)
Let's assume that we made a discount on promotional goods within two weeks. For analysis, we need a weekly sales report. Logically, the review period would be two weeks prior to leaflet distribution and two weeks during leaflet distribution. If you advertised a promo for just one day, or didn't advertise at all, but simply put a pack of leaflets on the cash register, the matter does not change the essence. We take this period. In other words, to analyze the promo, we need a promo sales period and the same period before the promo.
Required indicators for analysis
For analysis we need the following indicators sales:
Number of buyers (number of receipts)
Sales volume (in pieces)
Turnover (Revenue)
Purchase price
Selling price
And for economic analysis you will need to know the costs of printing and distributing flyers (or advertising) If you are unable to obtain this data, subscribe to my blog, I will definitely write an article on a simplified analysis of the effectiveness of promotions.
We analyze the effectiveness of promotions in several stages:
Stock analysis
Analysis of promotions by stores
Sales analysis
Conclusion (the effectiveness of the promotion)
Now everything is in order. The example is taken from the Smak retail chain, which is no longer working, so I decided to make this data public.
Stock analysis
We select the product that participated in the promotion and record sales for these positions for two periods according to the above indicators. It does not matter what database you have 1C, Axsapta or any other. We need to get the following, where the gross income can be calculated by the formula:
Now we calculate the coefficients and changes in indicators promotional goods. To do this, we add the header of our analysis and put down the necessary formulas for the calculation
I will not prescribe formulas, they are quite simple and contain division and subtraction. But for whom it is difficult to think, you can download this analysis at the end of the article and view all the formulas or just use the template.
Here, too, in my opinion, the formulas are not difficult, but as for novice analysts, you know what to do. Correctly - download this template at the end of the article.
We stretch the formulas for the entire promo assortment and for now forget about this table and move on to the next one.
Analysis of Promotions by Stores
In principle, we will need the same report as above, but already broken down by stores.
We also add the header of the table and put down the formulas. What to do with formulas you already know
We stretch the formulas for all items and move on to the next table.
Sales analysis
It couldn't be easier! We remove the sales report and get the following data:
We prescribe the header of the report and put down the formulas in% ratio:
Well, we have received the necessary data, now we can analyze them and draw conclusions.
Conclusion (Effectiveness of the promotion)
We make several plates, according to which the result of the effectiveness of the promotion will be visible. We insert into these tables the data obtained from the calculations that we made with you. What formulas to use, see the template, which can be download at the end of the article.
Well, the analysis is ready! What conclusions can be drawn? Is the effectiveness of the event visible? Everything is clear and simple.
The cost of the promotion was 64,571 rubles, including discounts and printing and distribution costs. This figure is not always negative. It can be made positive, but it depends on many other factors, for example, on the purchasing department.
Yes, we spent money, but what did we get in return?
The increase in all indicators, we see that the number of buyers has increased, the number of purchases has increased, the volume of sales has increased across the entire range, and not just for promotional goods.
I hope this article will help you in analyzing your activities. Good luck and more buyers!
A BTL promotion can be called successful if it has a good response from buyers, provides a high profitability of sales, emphasizes and improves the brand image, strengthens partnerships with resellers (beneficial to both sides of the trade marketing program).
It is possible to develop such a promotion if you clearly set the goal of conducting BTL activity and stick to it throughout the entire period of developing the promotion.
The main types of goals for trade marketing promotions
A promotional goal is a clear, measurable value of growth or improvement in one of the following six groups of metrics: brand strength improvement indicators, shopper behavior indicators, product distribution, consumer attitudes towards the product, resellers attitudes towards the product, and sales performance indicators.
Brand Strength Improvement Indicators
Within this group, the goal of the action can be two indicators: the growth of knowledge and brand image.
- Growing brand awareness: increasing product awareness at the point of sale or increasing the recall of the company name.
- Improving the image characteristics of the product, creating the right associations with the product, evoking certain feelings when buying a product
An example of goals for improving brand strength: increasing target market knowledge of a company's new product from 0% to 30% based on the results of a promotion; improving the image of "stable", "reliable", "competent".
Buyer Behavior Improvement Indicators
Promotions are designed to create additional motivation among buyers in order to stimulate additional demand for the product. The following 4 types of indicators will help assess whether the activity was really noticeable by market consumers and created a motive for a trial purchase of goods.
- Increase in overall traffic
- Trial Buying Incentive
- Increasing the frequency of purchases of the company's product
- Increase in the volume of one purchase
Distribution Quality Improvement Indicators
The quality of product distribution directly affects the turnover of the company's product at the point of sale, helps to increase product knowledge and demonstrate the product to the buyer in the most beneficial way. 50% of the success of a product on the market depends on the quality of distribution.
The quality of distribution or distribution of goods can be described by 6 indicators:
- Compliance with the recommended retail price of the product
- Increasing product distribution
- Increasing the share of a shelf of goods on a shelf in the Republic of Tatarstan
- Allocation of additional places for the display of goods (secondary placement)
- Increase the quality and visibility of display on the shelf.
- Filling the shelves and reducing the shortage of goods on the shelves (reducing out of stock)
The recommended retail price is effective in case of product distribution through several different sales channels, as well as in case of high popularity of the product among the market audience. The high popularity of the product and the existence of rush demand often leads to a situation where resellers overprice the product and do not broadcast it to the market. The opposite situation may arise: a significant price reduction by a reseller to attract more buyers. Such actions have a negative response from other intermediaries of the company.
Indicators of improving consumer attitude to the product
A positive attitude towards the product forms the loyalty of the audience, increases the profitability of the business. Possible goals in this direction:
- Attracting attention to the product: focusing the attention of the consumer only on the product of your company
- Enter the relevant set from which the consumer chooses
- Build emotional attachment and loyalty to the company's product
Indicators of improving relations with resellers
Within this group of indicators, the purpose of the action is to strengthen relations with intermediaries that may affect the company's product:
- Increasing direct recommendations of the product to the consumer from the sales staff: may be necessary in the case when the seller in the store plays an important role in the purchase decision or can influence, push the consumer to make a purchase of your particular product
- Increase the frequency of purchasing goods from your company, reduce switching to competitors, increase the period of cooperation
- Build and strengthen partnerships with key intermediaries to generate additional long-term benefits
An example of the goals of this type of promotion: increasing the recommendations of the drug by pharmacists of large pharmacies for colds, increasing the volume of average monthly purchases of goods by 30%.
Sales dynamics indicators
The ultimate goal of any promotion is to improve business performance. Therefore, in each marketing campaign, the following sales performance indicators must be provided, without which the promotion cannot be considered successful:
- Growth in sales or profit in absolute terms
- An increase in the turnover of a particular item of goods in point of sale(leaving the shelves)
- Market share growth
Marketing promotions and product lifecycle
Goals BTL shares depend directly on . At each individual stage of product development, different support is required from the trade marketing department.
- At the stage of introduction to the market, the key goals are the growth of a trial purchase, the growth of knowledge about the product, drawing attention to the product
- At the stage of growth, the main goals of the promotion are: increasing the frequency of purchases, stimulating decision-making in favor of the purchase of goods, creating image characteristics of the product.
- At the stage of maturity, attention should be paid to increasing the size of the purchase per 1 buyer, creating an emotional commitment to the product, strengthening the brand image
- During the decline stage, the key goals should be to maintain the frequency and volume of purchases, strengthen emotional commitment and product loyalty, update the brand image, including creating a visible novelty.
This article will show why successful promotions sometimes do not increase company profits, explain what indicators to consider when running a marketing campaign, and demonstrate how to determine the effectiveness advertising campaign not to sell at a loss.
Companies often mispredict and misjudge the effectiveness of marketing campaigns. Usually they take into account the funds that the company spent to attract customers, pay for advertising distribution channels, make a discount, spend marketing research etc. And if the gross profit covers these expenses, the action is recognized as successful. However, marketers do not take into account other factors associated with the management of the product range: the turnover of goods, the presence of risks on balances, the volume of balances. How do these indicators affect share performance calculation and what formula accurately describes the profitability of ongoing sales?
- 3 Super Effective Marketing Promotions to Attract Customers
Formulas for evaluating the effectiveness of marketing campaigns
In theory. Typically, marketers calculate the effectiveness of promotions according to the following principle. First determine the gross income from goods sold. Take into account the difference between the retail price at the sale and the purchase price:
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Vd \u003d (Tsr - Z) × K,
- where Vd - gross income from goods sold during the sale;
- Цр - the price of goods at sale;
- Zz - the price of goods during the purchase;
- K is the number of goods sold.
After that, the profit from the sale is estimated according to the formula:
Pr \u003d Vd - Z,
- where Pr - profit from the share;
- Z - the cost of advertising and preparing for the sale.
On practice. If you follow these formulas, the calculation of the effectiveness of a sale with a sale will be inaccurate. Imagine a situation. The company purchased 12 goods for 1 thousand rubles. With an extra charge, the cost of one unit of production amounted to 2 thousand rubles. During the season, the company sold ten products at this price. In this case, the product cannot be returned to the supplier.
In order to sell off the leftovers, the company decided to conduct a marketing campaign, reducing the price to 1.5 thousand rubles. One item sold at a discount. The company spent conditional 100 rubles. on operating costs (advertising, delivery, storage, etc.). Calculate profit using the formula:
Pr \u003d ((1500 - 1000) × 1) - 100 \u003d 400 rubles.
The company made a profit. But marketers did not take into account: if not for the action, the sold unit of goods would have remained in the warehouse, and the suppliers had already been paid. The season had passed and the company would not have been able to sell the products at the original price. It is also problematic to keep the goods in stock. In addition, the profit here is calculated incorrectly. How to calculate the effectiveness of a marketing campaign?
Formulas for calculating the effectiveness of sales promotions
In theory. We calculate the effectiveness of marketing sales promotions using the formula:
PAL = Revenue - Ops costs - COG,
- where PAL (from the English profit after leftovers) is the company's expected profit from the sale of goods, taking into account the balances;
- Revenue - expected revenue after the sale, including revenue from the sale of potential balances;
- Ops costs - expected transaction costs for order execution;
- COG (from the English cost of good) - the expected cost of purchasing goods, including the cost of leftovers.
To determine what profit we will receive before and after the action, we will build a forecast:
∆PAL = PAL (x+) - PAL (x–),
- where ∆PAL is the expected profit from the share;
- PAL (x+) - expected profit from the sale of goods, taking into account the action;
- PAL (x–) - the expected profit from the sale of goods, excluding shares.
On practice. We use the formula for the example we gave above. Then the potential profit from all goods without shares is defined as follows:
PAL (x–) \u003d (10 × 2000) - (10 × 100) - (12 × 1000) \u003d 7000 rubles.
Revenue Ops costs COG
We deduct the cost price (COG) of all purchased items, not just those sold. The profit from one unit of products that we plan to sell with a 25% discount will be:
PAL \u003d 1500 - 100 - 1000 \u003d 400 rubles.
Based on the share, the company will receive the following profit:
PAL (x+) = (10 × 2000 + 1500) - (11 × 100) - (12 × 1000) = 8400 rubles.
The total profit from the sale of one product at a discount will be:
∆PAL \u003d PAL (x +) - PAL (x -) \u003d 1400 rubles.
This is for 1 thousand rubles. more than the standard formula. The sale of a unit of goods is profitable for the company, even if the price is reduced to 100 rubles. (95% discount) when the sale proceeds are equal to the operating costs.
It is necessary to build a PAL forecast for each product in order to assess the risks of inventory and the impact of a marketing campaign on profit. We expected that the company would not be able to sell the remaining two units, so selling them, even at a discount, made a profit.
Result
Two conclusions can be drawn from the examples of calculating the effectiveness of stocks. First, given the risks of balances, very deep discounts can be effective. Second: you can spend more on customer acquisition (picture), to sell the rest. For the company, such an action will still be profitable.
It is not necessary and even dangerous to strive to increase the average check now. Expensive offers and additional sales in a crisis will only scare away. 90% of the efforts should be focused on keeping the old guest and attracting new customers to increase the number of transactions. In the arsenal of a competent restaurateur, now there should be mainly "attractive" and "return" promotions.
HOW TO ATTRACT NEW GUESTS
The main tools for attracting guests are a discount coupon, a gift with a purchase, and a low “entrance” price.
For the sake of attracting new guests, it is possible to “give up” the average bill and cost for a while. Yes, the check can go down, and the cost can go up. But if you are sure that new guests will actually come to the restaurant as a result of the promotion, then this is a normal and even healthy situation.
HOW TO RETURN GUESTS
There are two types of return mechanics: single return (come back - get it) or multiple return (collect 5 stamps - get it).
- We focus on the mechanics of the first type for guests who have visited you for the first time: we offer them a significant privilege with the expectation that next time they will come with the company (a second coffee as a gift).
- It makes sense to offer multiple return promotions to guests who visit your establishment periodically, with a hint that you would be glad to see them more often. Accordingly, you need to think about ways to promote promotions in order to hit the target exactly.
An investor can earn income from shares in two ways: by increasing the market value of shares and by paying dividends.
The main income of an investor on shares is the growth in the market value of shares. If the company is doing well, its revenue and profits are growing, the company is developing, paying dividends, which are also growing, this has a positive effect on the share price, and it grows. An investor, seeing this state of affairs and evaluating the prospects, buys companies. If the company's business continues to do just as well, the share price rises, then the investor can sell the shares at a higher price and make a profit.
It consists of an increase in the market value of shares and dividends. The return on shares shows how much income, in percentage or nominal terms, the shares brought. Profitability in the general sense is calculated as the amount of profit divided by the amount of invested funds. Since it is possible to get not only profit on shares, but also a loss, the profitability can be negative. Consider how to determine the return on stocks.
Stock dividend yield
The dividend yield of shares is characterized by the ratio of the dividend to the share price. Dividend yield is calculated using the formula:
d is the amount of the dividend for the year
p is the market price of the share
For example, dividends on Gazprom shares for 2013 were equal to 7.2 rubles. The share price is 130 rubles.
The dividend yield is 7.2/130*100%=5.53%
Market (current) return on shares
The market return on shares, that is, due to the growth in market value, is calculated by the formula:
P1 is the sale price of the share
P0 - stock purchase price
The current stock return is also calculated and shows the return that an investor will receive if he sells a share at the current market price.
If the purchase price of Gazprom shares is 120 rubles and the sale price is 135 rubles, then the yield is (135-120)/120*100%=12.5%.
Total stock return
Total return is the sum of dividends and growth in market value
Let's take the same numbers as in the previous example: (7.2 + (135-120))/120*100% = 18.5%
Return on shares in percent per annum
You can own a share for less or more than a year. Therefore, in order to compare the return on shares with the return on another instrument, for example, a deposit, it must be reduced to an equivalent value - the return in percent per annum. To do this, the yield is multiplied by the coefficient k=365/number of days of holding the share. If a share has been owned for 250 days, the annual percentage return is calculated as follows:
(7,2 + (135-120))/120 * 365/250 * 100% = 27,01%
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