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romotion Profitability for a Retailer P 商大师 http:/www.3dashi.com
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PR OM OT IO N 促销促销 005 Contents Marketing Modeling I Promotion Profitability for a Retailer Data Methodology Correlates Key findings 12341234 03 09 13 16
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DATA >> Promotion Profitability for a Retailer Data Methodology Correlates Key findings 12341234 03 09 13 16
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DATA Weekly point-of-purchase scanner data for 2003 CVS ExtraCare Loyalty program, 2 years panel data Internal company records, et. CVS
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HOW CAN WE EVALUATE THE EFFECTS OF PROMOTION
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Δ SALES Δ SALES = Promotion Sales – Baseline Sales Gross Lift Manufacturer V.S. Retailer
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Switching Stockpiling Store net unit impact = Incremental Lift + Halo = Gross lift – Switching – Stockpiling + Halo
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Gross Lift = Unit sales of a item – baseline The number of weeks varies with the turnover Seasonality of the item Gross Lift
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Consider two extreme situations Accounting for the gross lift from all promoted items Season Store Frist difference Switching
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Loyalty program panel data Estimate the stockpiling percentage for a category across stores Stockpiling Compare promotional buyers with nonpromotional buyers 1 2
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Halo d goes from 1 to 4 for the health, beauty, edible products and general merchandise departments Separate halo effect for each department Deseasonalize and first difference
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Store net unit impact = Gross lift – Switching – Stockpiling + Halo Finally, net unit impact and net profit impact can be calculated: = Gross lift (1– %Switching – %Stockpiling + %Halo) Store net profit impact = Promotion sales – Base sales – Switching loss – Stockpiling loss+ Halo gain
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Promotion Sales Base Sales Switching loss Stockpiling loss Halo gain – – – + +
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CORRELATES >> Promotion Profitability for a Retailer Data Methodology Correlates Key findings 12341234 03 09 13 16
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“ We are not aware of any research that quantifies the net unit and net profit impact of promotion for a retailer and studies the correlates of that net impact. --by the author
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Conceptual Framework Store net unit impact = Incremental Lift + Halo = Gross lift – Switching – Stockpiling + Halo Store net unit impact: incremental lift Store net profit impact: the retailer’s promotion V.S. regular margin
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KEY FINDINGS >> Promotion Profitability for a Retailer Data Methodology Correlates Key findings 12341234 03 09 13 16
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Key findings 1
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20 2 There is a positive halo effect of promotion; for every unit of gross lift,.16 unit of some other product is purchased elsewhere in the store. 3 Despite the substantial net unit impact, more than half of CVS promotions are not profitable, because promotional margin is often significantly less than regular margin.
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4 5 Cross-store variation is a small component of total variation in net impact. Cross-category and cross- brand components are both significant, and the latter is particularly substantial in net profit impact. Many promotion and brand correlates that are positively associated with net unit impact have a negative association with net profit impact, revealing a difficult challenge for retailers.
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thanks for your attention T
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