Functions & Frameworks: Sales Promotion

Showing posts with label Sales Promotion. Show all posts

Tuesday, October 15, 2013

One of the challenges I often receive from my bosses at work is on how to prove revenue uplift from sales promotion campaigns. It gets more exciting when finance involves themselves since the uplift generated must closely match the ROMI (Return on Marketing Investment) forecast. But for the sake of discussion, I will share how I measure revenue uplift coming from sales promotion campaigns.

What's the Current Situation

Running a sales promotion campaign is often done for the purpose of stimulating sales. At the end of the day, business owners want to achieve additional revenues. However, how often does a business owner measure revenue lifts from the promotions they usually run.

Sales promotion campaigns and generated sales can be correlated but is it actually the factor causing people to buy?

Correlation does not imply causation

How much of the total sales should have been added by the promotion versus the sales generated by the people who would have bought the item regardless of the promotion. What every business owner wants is to use its sales promotion budget to stimulate sales that will bring in additional revenues.

Understanding the Concept and Science of Revenue Lift Measurement

In order to successfully measure revenue uplift, the focus is to remove the potential revenue generated by customers who would pay full value for the product. Yes, people might have been enticed by the promotion (who would say no to a 50% off right?) however, there are also people who would have bought it even without the additional discount.

The idea is simple: Everyday, a store has a set of customers coming in to buy the things they need at the moment. Regardless of any promotion, these customers will pay full value. In effect, there is no point in incentivizing regular customers. They would have generated the same sales revenues you already forecasted on a daily basis.

However, sales promotion can either convert non-buyers to buyers OR push regular customers to increase their order size. Running a full blown sales promotion campaign would help do this. BUT, the way it will be measured is by removing the potential spend of a regular customer and measuring the remainder as the true revenue lift.

Makes sense?

How to Use It

Let's say you want to run a 50% off on all items during pay day. Let's call it Pay Day Sale. But before you do a full blown campaign, you don't want your bosses to feel that the campaign will result to a revenue lift that would have been the same amount even if there was no promotion. What you want to achieve is to prove that your proposed sales promotion campaign will generate additional revenue on top of what is the expected sales for the day.

So the only way to find out, is to test your promotion and measure success prior to a full blown launch.

Step 1:

Identify your test and control group. Your test group will be the people who will be exposed to the promotion and the control group will be the people who will see the regular price.

Step 2:

Record your conversion rate per group. (How many customers bought over total customers who saw the product)

Example: Out of 100 viewers, 10 bought. - Conversion rate is 10% (10/100).

Step 3:

Identify Average Spend per customer. Do this by getting total spent divided by total buyers per group.

Example: Total gross sales - P100,000.
Total converted customers - 50.
Average Spend per customer - P2,000 (100,000/50)

Step 4:

Identify ideal spend per customer. Ideal because this is the potential sales revenue of the customers being observed WITHOUT the promotion.

Get total targeted customers (test plus control group)
Multiply it to the conversion rate of your control group
Multiply result to the average spend of the control group

Note: We are benchmarking it to the control group because we would expect the same customer behaviour without the promotion.

Step 5

To get Revenue Uplift, deduct the total spent of the entire group from the ideal spend per customer in step 4.

That's it! :)

EXAMPLE:

Real Revenue Uplift Calculator - niccotan.com

As you can see, the VIP test group who saw the promotion generated P135,000. Normally, people would correlate this to the uplift. That the promotion generated P135,000 in gross sales compared to the P40,000 of the test group. Some people would also say it has a higher conversion rate.

This is a vanity metric.

Let's factor in a hypothesis:

If the entire group was exposed only to the regular priced items, will they spend more or less the total spent of the test group?

Looking at the conversion rate, 20% of the VIP members bought at regular price. If we follow the same conversion rate to the entire group, we will generate P200,000 in total (potential).

This is going to be the benchmark for the sales promotion campaign and its real revenue lift. By factoring in the potential gross sales without the promotion, we can remove the expected revenue for this campaign.

Hence, the real revenue uplift is actually P25,000. A far cry from P135,000. So in reality, your VIP members were expected to spend P150,000 in gross sales and the promotion only increased their order size to P25,000 (which is 14% lift)

Summary

To recap, this tool is quite useful in forecasting revenue lifts from an upcoming promotion. This can be tweaked to measure lifts coming from new customers too. But I find it very useful in measuring real lifts from monthly promotional campaigns. This way, I have a more scientific approach in planning future promotions.

I hope this tool was able to help you in planning your own sales promotion campaigns and the associated revenue lifts.

Note: if the KPI is converting non-buyers to buyers, the sales promotion campaign will be measured differently - in terms of customer conversion rates and matching that with customer lifetime value.

6:43 PM Posted by Nicco Joselito Lopez-Tan (陳里道) 4

Sunday, October 28, 2012

In my opinion, the most crucial part of the sales process is when sales people meets objections. The reason behind this is because aside from not making the sale, it can demotivate a salesperson specially newbies in this profession.

As sales managers, you should make this very clear in the beginning that your neophytes will definitely meet objections and sometimes, they will never be able to answer all of them. The higher the position they are presenting to, the more complex are the questions and sometimes, basic product information is not enough.

I really believe that meeting objections is more of an art than a science. It is in the way you say things that would make it satisfactory for the client enough that they might forego any unanswered objections and buy your product.

Here's a deck my students in De La Salle University prepared for this topic. There's a lot of techniques discussed in the slides that you'll be able to use when you meet a client objection.

In a nutshell, my tips before and during handling objections:

KNOW your product inside-out. It is not enough to know the basic FAB (Features-Attributes-Benefits) but also know warranty/guarantee coverage.
KNOW your competitors. You don't want to be blindsided by features you don't know so that you can answer your client's directly what's the difference with your product.
ANTICIPATE your client's questions. Here's a tip: Google your product and if there's an available review. Most likely your client's questions would be the same with the people who made the online review.
PRACTICE with someone when you can. It is only through this that you would be able to overcome your fear of meeting objections.
HAVE the confidence of a king. Yes - a king! Have you ever seen a king who doubts his uttered words?

7:52 PM Posted by Nicco Joselito Lopez-Tan (陳里道) 0

Sunday, August 28, 2011

Term 1 has finally ended - Yay! =)

Anyhoo, I've been quite busy for the last few months since I've been juggling work, three classes (yes THREE classes) and my three weeks vacation at UK. So I didn't really have enough time to post here for my avid readers (if there's any haha).

All right, I'll keep this one short and simple. I just want to walk all of you through the process of creating an effective Sales Promotion Plan. Some of you might ask why since most of you are in marketing (and would think that the sales promo plan should come from the sales team) but since it's one of the marketing communication tools, the marketing person (which is you) should be the one strategizing how the sales promo should go (at least). :P

Sales Promotion Plan Outline

Environmental Analysis -Analyze all external factors that affects your brand (DSTEP analysis)
Internal Analysis - This is where the SW analysis comes in (strengths and weaknesses of your brand)
Consideration of the Marketing Strategy - Overall marketing strategy and how sales promotion would fit in the plan.
Identification of the Target Audience - Who is your primary target market for this sales promotion plan?
Determination of the Sales Promotion Objectives - Determine what needs to be accomplished for this campaign. I.E. Increase sales volume, acquisition, etc.
Budget Determination - include all costs that make up the sales promotion campaign and exclude other marcom tools.
Identifying the promotional objective - from all the determined objectives in number 5, identify which objectives would fit your KRAs/KPIs
Developing the program - what are the specific programs you will implement?
Design of campaign elements - mechanics of your program.
Research and pre-testing - this will include all related literature to support your program.
Implementing the promotional program - general flow of the sales promo campaign (works best if its graphical)
Briefing the sales force - pep talk! hehe =)
Delivery of items - all logistical requirements go here.
Fulfillment (in case of consumer) - if its a consumer promo, how will the consumer receive his/her item.
Contingency plan - if your initial plan fails, what would be the alternative activities you can conduct to push the program (at least break even).
Evaluation and Feedback - what would be the tools you will use to evaluate your program. Feedback mechanism?

There you go! Easy right? =D

11:21 PM Posted by Nicco Joselito Lopez-Tan (陳里道) 1

Friday, July 15, 2011

MONDE BISCUITS

SALES PROMOTION PLAN

SUMMARY OF FACTS:

Company Background:

Monde Nissin Corporation (MNC) has been incorporated in 1979 and has continuously provided Filipino consumers high quality products and has been a consistent top biscuit player in the market. For more than two decades, MNC has steadily and aggressively risen to be the Philippine’s leading food manufacturer and is carving its niche as one of the most competitive players in the global industry. From its first biscuit, MNC has evolved into a premier food firm.

Currently, MNC has been producing biscuits and cookies and has a nationwide reach for its distribution channels from supermarkets down to the sari-sari store. To compete with the crackers product line, MNC through its sister company Monde M.Y. San Corporation is a major player in the crackers category.

Monde M.Y San Corporation is a Filipino firm originating from an ice cream parlor situated in Escolta in 1935. Three Chinese brothers headed by Mar Yu San, sparked the M.Y. San legacy of creating and baking premium food products.

Monde Product Offerings:

List of Monde Biscuits with Gross Price and Unit of Measure:

PRODUCT	FLAVORS	GROSS PRICE	UNIT
1-1 Rice 56g x 10’s	Chili, Original	375.26	Case
1-1 Snowy 92g x 8’s	Chili, Original	549.69	Case
Bingo 28g x 30 x 10’s	Choco Mint, Double Choco, Orange, Peanut, Vanilla	841.24	Case
Bingo 84g x 60’s	Double Choco, Peanut, Vanilla	478.14	Case
Breadstix 130g x 30’s	Chiz, Regular	361.96	Case
Breadstix 20g x 10 x 10’s	Chiz, Regular	280.41	Case
Breadstix 35g x 60’s	Chiz, Regular	244.33	Case
Butter Coco 10g x 24x 12s		341.44	Case
Butter Coco 90g x 60s		478.14	Case
Cubes 25g x 60s	Choco N Cream, Vanilla	311.13	Case
Eggnog 13.5g x 20s	Choco, Regular	312.37	Case
Eggnog 18g x 100s	Choco, Regular	280.41	Case
Eggnog 32g x 60s	Choco, Regular	259.79	Case
Puffins 50g x 60s	Butter, Cinnamon	716.29	Case
Snack Pie 100g x 12’s	Butter, Cinnamon	195.84	Case
Sumo Hoops 18g x 4x 10s	Choco, Milk, Peanut, Strawberry	672.99	Case
Tini Wini 36gx60s	Choco Fudge, Cookies N Crea, Strawberry	349.48	Case
Wafer 11.5g x 20’s	Choco, Vanilla, Yummy Butter	474.23	Case
Voice 25g x 30 x 10s	Butter, Choco, Peanut	841.24	Case

List of Monde M.Y. San Biscuits with Gross Price and Unit of Measure:

PRODUCT	FLAVORS	GROSS PRICE	UNIT
Bakers Graham 400gx14s		508.76	Case
Brownies 100gx24s		461.69	Case
Butter Cookies Plastic 800gx12s		1,349.57	Case
Chips’n Nuts 100gx24s		452.54	Case
Chips’n Nuts 25gx12s		892.69	Case
Crushed Grahams 200gx24s		486.43	Case
Fita Carton 150gx54s		486.43	Case
Fita 25gx24x10s	Choco, Mocha, Regular	672.99	Case
Fita Plastic 600gx12s		1,201.61	Case
Fita Singles 8.5gx20x20s		326	Case
Fita Slugs 80gx40s		318.76	Case
Fita Spread 25gx24x10s	Bacon, Strawberry, Tuna	679.99	Case
Graham Honey Singles 300s		841.24	Case
Graham Plastic 700gx12s		1,201.61	Case
Grahams Choco Handy Pack 24s		512.91	Case
Graham Choco Singles 300s		896.91	Case
Handy PK Sky 100gx50s		508.25	Case
Handy PK Sky 200gx40s		725.77	Case
Happy Time 1.5kgx4s		667.51	Case
Honey Graham 200gx24s		466.14	Tin
MY San Bakers Graham 6s		557.47	Case
Skyflakes 25gx30s10s	Original, Garlic, Onion	841.24	Case
Skyflakes 360s		1,009.48	Case
Skyflakes Plastic 850gx12s		1,201.61	Case

Source: Monde Nissin Corporation, August 2007

Monde Biscuits Distribution Channels:

MNC prides itself with an efficient sales force that ensures nationwide distribution. The outlets being served are as follows: wholesale, distributors, sub-distributors, supermarkets, convenience stores, and groceries. The distributors handle the orders of smaller retailers and sari-sari stores.

Monde Communication Channels:

Monde Biscuits are being advertised through television and radio. MNC rarely uses prints and billboards to communicate ots products to consumers. To name a few of its latest television ads, some 30-second commercials were done for Sky Flakes, Fita, Bingo Peanut Butter, and Bingo Choco Mint

Competitive Landscape

The Biscuits industry players are divided into three groups: Large Manufacturers, Neighborhood Bakers, and the cottage or backyard producers.

There are at least 16 large manufacturers of biscuits and cookies in the country. These include companies that are also known to product other food products directly or through their affiliates. The entire industry was estimated to be P4.4 billion as per the NSO’s data last 2003.

According to an industry player, the biscuits and cookies market is concentrated among four major players, namely: Monde Nissin Corporation together with subsidiary Monde M.Y. San Corporation, Rebisco and URC. Overall, MNC and Monde M.Y. San Corporation are estimated to hold 40% of the entire biscuits and cookies market while Rebisco Captures 25%, URC, 16% while other companies share the remaining 19% of the market.

By product type, sources say crackers (Sku Flakes, Magic Flakes, Blueskies, etc) are the best selling Variety followed by sweet biscuits (e.g. Eggnog, Marie, etc), and wafers (e.g. Tini Wini, etc).

In 2004, majority of these companies registered double-digit sales growths, with the highest posted by First Choice Food Corporation at 80.9%. Croley Foods Manufacturing Corp. recorded 26.9% increase in sales while Rebisco posted 23.5% and Monde M.Y. San Corporation improved by 13.8%. Here is a summary of revenues by selected players (in Million PhP):

COMPANY	2003	2004
Croley Foods Manufacturing Corporation	181.6	230.5
Felicisimo Martinze & Co. Inc.	54.2	49.9
First Choice Food Corporation	271.4	491.1
Grand Alphatech International Corporation	162.2
Metro Biscuit Corporation	36.4
Monde M.Y. San Corporation	2,761.6	3,413.5
Republic Biscuit Corporation	337.8	417.1
Rits Food Product Corporation	16.8

Among the top players, MNC’s top three competitors are: Republic Biscuit Corporation, Universal Robina Corporation and First Choice Food Coporation.

DSTEP Analysis

Demographics:

The demographics who patronize biscuits are people coming from the ABCDE market and brands being purchased are relative to the socio-economic profiles. Also, research findings show that biscuits are impulse-buying items because a person needs not to think long to purchase one. Consumers easily switch from one brand to another. Brand loyalty is rarely seen in the biscuit category.

Social:

The biscuit industry, specifically crackers, is now being seen as an alternative for “meryenda” and viewed as a healthy source and substitute for fatty foods. People who are into the ‘alternative’ lifestyle and who seeks a good low-in-calorie snacks are the social group that the biscuit industry is serving.

Technology:

Due to the increase of competitors, technological change was seen through the cutting edge research and development departments created by these companies to create innovative products to serve the Filipino consumers better. More variations are now present to distinctly stand out from competition.

Economic:

There is an issue that the growing consumer spending for transportation and communications attributed mainly to spending on cell phone cards which are eating into the consumer’s limited disposable income. However, MNC sees the country’s economic difficulties could be an opportunity for growth as more consumers turn to biscuits and cookies as an alternative “merienda” meals.

Political:

Due to the rising cost of raw materials such as flour and sugar, packaging materials, fuel, and electricity costs, MNC finds it challenging to reach its targets since Monde biscuits highly depend on volume to be able to generate good profit. And there are no current legislations that help brings down the prices of these basic commodities.

STATEMENT OF THE PROBLEM:

What Sales Promotion campaign can Monde take in order to increase their revenues by the end of 2005?

PRIMARY TARGET MARKET

Socio-economic class CDE looking for an alternative and affordable source for snacks. These are the people who are budget conscious and would choose value for money VS high quality.

KRA/KPI AND OBJECTIVE

Key Result Area: Revenues

Key Performance Indicator: Increase in total sales and volume

Objective: To increase revenues by 30% by the end of 2005.[1]

SALES PROMO OPTIONS

Consumer Promotions Options:

Option 1: Buy one Get one FREE with front aisle location at major supermarkets (Price packs + Point of Purchase Strategy)

Rationale: Since biscuits and cookies are items that don’t really need a lot of time for thinking, the purchase decision would most likely be a factor of price and visibility. Purchasing a premium spot in major supermarkets will ensure visibility while a Buy One Get One Free promo might induce consumers to purchase specially in the last minute where they are about to pay for their groceries.

Pros: High visibility and sales promo is volume-based promo so higher chances of purchasing two or more items VS a single pack.

Cons: Premium spot is expensive.

Option 2: Limited Bundled Snack Box (Cross-Promotions Strategy)

Rationale: Combining several items in one snack box would increase chances of purchase VS competition that offers one item per pack. This promo aims to target people who wants variety in their purchased goods and combining Monde biscuit brands maybe able to persuade them to switch.

Pros: Targets a market that patronizes variety. Bundling non-performing goods will be disposed as well as induce trial.

Cons: Bundled items may not be the items consumers’ want. So choosing the right items to bundle is the key.

Option 3: For Every Purchase of 2 packs SkyFlakes, customer gets a FREE sports tumbler (Premiums)

Rationale: Skyflakes is one of the top performing brand of Monde biscuits and is also viewed by many as a ‘diet’ food that can be taken in replacement of the traditional fatty merienda. Offering a premium item in line with the “active lifestyle” and “weight management” positioning, the premium item might pull consumers to purchase more crackers.

Pros: Offering a premium item per 2 packs of skyflakes will significantly increase volume sales since people are drawn to getting the sports tumbler. This is also a good strategy to penetrate the ‘health’ conscious market who are still not buying skyflakes for their merienda.

Cons: Limited stocks of premium items might upset consumers and therefore switch to other brands.

Option 4: Get a chance to win PHP1,000,000 for every pack of Monde biscuit purchased (Prizes: Contests)

Rationale: Offering 1,000,000 pesos will be a good come-on for all consumers. It can encourage other consumers to switch to a Monde brand. This is also beneficial for the sari-sari stores since it can target the “tingi” or per-piece market.

Pros: Offering it in a limited time will help stimulate the market and therefore increase the sales of Monde biscuits. It is also helping the sari-sari stores to sell their Monde brand products.

Cons: Contests entails permits, the selection process for the winner, and the execution of the event nationwide. And doing a contest means it needs advertising to help communicate the new promo.

Trade Promotions Options:

Option 7: Retailers 4% straight discount off the price list on each case (Price Off)

Rationale: In order to stimulate volume purchasing from retailers, a 4% straight discount will be offered so that each retailer is encouraged to purchase more than what they are usually purchasing.

Pros: Sales by volume will increase.

Cons: Retailer acceptance might not be as expected. Distributors may not offer the 4% discount.

Option 8: For every case of Monde biscuits purchased, Distributors will get extra case at no cost. (Free goods)

Rationale: An extra case of goods can stimulate more purchase from distributors. Can be used to encourage distributors to push the products to their retailers.

Pros: Distributors will actively seek retailers to dispose the extra cases to earn twice rather than the standard sale.

Cons: Distributors might horde products.

RECOMMENDATIONS

Upon reviewing the alternative sales promotion options, Option 1, Option 4 and Option 7 will be taken into consideration.

Combining a consumer promotion with a trade promotion will potentially increase the push-and-pull power of the Monde brand. Consumers will be offered a very appealing promo while the trade is encouraged to sell more since the higher the volume, the larger the profit is for this type of goods which is volume-driven.

PROGRAM MECHANICS

Option 1: Buy one Get one FREE with front aisle location at major supermarkets (Price packs + Point of Purchase Strategy)

· Premium point-of-purchase locations will be rented by MNC to feature top performing brands as well as non-performing brands to meet two objectives: Increase sales volume for top-performing brand and induce trial for non-performing brands.

· All major supermarkets and grocery stores will be selected for this promo (SM, Rustans, Robinsons, PureGold, Cherries)

· Timeframe: 2 months interval (except months with other promos are running)

· Bundling can either be top performing brands + top performing brands OR one top-performing + one non-performing brand

Option 4: Get a chance to win PHP1,000,000 for every pack of Monde biscuit purchased (Prizes: Contests)

· For every pack of Monde biscuits (any brand), consumers are eligible to win PHP1M.

· Packs will be printed with special seals showing that the pack has a promo code that can win PHP 1M

· One winner will get a chance to win PHP 1M

· Secondary prices will be raffled as follows: 500K, 250K and 5 winners of 50K, 50 winners of 10K (Total prize: 2.5M pesos)

· Retailers are not eligible to win as well as family and relatives up to 2^nd degree of MNC and M.Y. San employees.

· Time Frame: 3 months

· MNC and M.Y San will print 5million specialized packs containing unique promo codes.

· Electronic Raffle will be made every month leading to the last month which is offering the PHP1M prize.

Option 7: Retailers 4% straight discount off the price list on each case (Price Off)

· Distributors will be given 5% discount for ever case sold to the retailers

· Retailers can purchase as much as they can depending on stock availability

· Straight discount will be implemented for retailers and distributors

· Time Frame: Will be implemented during lean months as well as together with the option 4 sales promotion.

OPERATIONAL PLAN

The price packs and POS initiative will be implemented five months in a year. Jan and February since these are the month people usually budget their money due to the sudden increase of purchases from the previous months as well as the non-stop party. We can target consumers who want to lose weight after the holiday food fest.

Late October to November and December would be the month to target people who will be spending during all soul’s/saint’s day as well as for the Christmas holiday where people are receiving their 13^th month pay.

The Retailer Price Off campaign will start from March to July to prepare them to sell more as soon as we launch the Consumer Contest. March and April is perfect for summer (can be positioned as a good ‘diet’ food) and May to July would be the months were the specialized packaged will be distributed to all distribution channels.

Action Plan:

Activity	To Dos	Person Responsible	Feedback Mechanism
Price Packs + POS	Coordinate with Supermarkets	Marketing	Signed Contracts
	Create Merchandising Materials and POS design	Marketing and Purchasing	Contract from supplier and design from creative
Retailer Price Off	Coordinate with promo to Distributors	Trade Marketing	Signed agreement from Distributors
	Roll out to Retailers	Distributors	Total number of purchase orders
Contest	Advertising	Marketing and Ad Agency	Schedule of announcement and creative
	Production of specialized packs	Marketing and Purchasing	Manufacturing plant’s signed contract and estimated date of shipment
	Electronic raffle draws	Marketing	Contestants claiming the prizes

[1] The target date is assumed to be year 2005 as per the case facts.

10:34 AM Posted by Nicco Joselito Lopez-Tan (陳里道) 6

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Tuesday, October 15, 2013

5 Steps in Measuring Real Revenue Uplift from Sales Promotion Campaigns