1. Analyzing the impact of
Sales promotion
Atanas Luizov
Атанас Луизов
Burgas Free University
Business Faculty
www.bfu.bg

2. Sales Promotion
The importance of evaluation
Sales promotion effects measurement is limited in practice.
Reasons:
- Managers neither have time or have required skills to build models that can
measure SP effects.
- The software for building marketing models may not be suitable.
- Managers may not want to measure SP effects.
- Managers may not have access to data of acceptable quality for measurement.
- Managers may decide it is too costly to collect data for measurement.
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3. Sales Promotion
Empirical generalizations (1)
1. Temporary price reduction substantially increase sales.
2. Higher market-share brands are less deal elastic.
3. The frequency of deal changes the consumer’s reference price.
4. The greater the frequency of deals, the lower the height of the deal spike.
5. Cross-promotional effects are asymmetric.
6. Retailers pass less than 100 percent of trade deals through.
7. Display and feature advertising have strong effects on item sales.
8. Advertised promotion can result in increased store traffic.
9. Promotions can effect sales in complementary and substitute categories.
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4. Sales Promotion
Empirical generalizations (2)
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5. Sales Promotion
Basic concepts (1)
The Baseline sales
… an estimate of sales in absence of specific promotional activity for specific
product and for determined time period.
Incremental sales
… these are sales that are directly attributable to the promotion during the
period.
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6. Sales Promotion
Basic concepts (2)
Incremental sales
Baseline sales
Post-promotion deep
Total sales = Baseline sales + Immediate incremental sales
Incremental sales = f (temporary price reduction, displays, features, …)
Baseline sales = f (regular shelf price, advertising stock, distribution,
competitive activity, seasonality, …)
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7. Sales Promotion
Effects resulting from sales promotion (1)
1.
Brand switching: purchasing a different brand
2.
Timing acceleration: purchasing earlier.
3.
Quantity acceleration: purchasing more.
4.
Purchase acceleration: general term for timing and quantity acceleration
together.
5.
Stockpiling: having higher stock at hand due to timing- or quantity
acceleration.
6.
Anticipatory responses: deferring the purchase until the anticipated
promotion week.
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8. Sales Promotion
Effects resulting from sales promotion (2)
7.
Store switching: purchasing in a different store.
8.
Deal-to-deal purchasing: purchasing only on promotion.
9.
Increased consumption: purchasing more and consumption it faster.
10. Repeat purchasing: trying a brand on promotion and repurchasing it.
11. Category switching: substituting purchases between categories.
12. Complementary effects: buying product from other categories as
complements to the promoted brand.
13. Store-traffic effects: choosing a store because of a sales promotion, and
purchasing other, non-related product in that same store.
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9. Sales Promotion
The time frame of promotional effects
1. The immediate effects of promotions are reflected in short-term changes in
sales.
2. The adjustment effects of promotions refer to the transition period between
the short-term response and the resulting equilibrium, which be either
means reversion or a new sales level.
3. The permanent effects of promotions require that a proportion of the event’s
impact is carried forward and sets a new trend.
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10. Sales Promotion
Fig. 1: The time frame of promotional effects
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11. Sales Promotion
Sales promotion experiments
Time series quasi-experiments
Time series quasi-experimental deign can be diagrammed as follows:
O 1 O 2 O 3 O 4 X5 O 6 O 7 O 8 O 9
The estimation for the promotion effect is:
Op- Opre
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12. Sales Promotion
Example
10 20 30 40 50 90
Op- Opre = 90 – 30 = 60
Op- Opre = 90 – 60 = 30
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13. Sales Promotion
Sales promotion experiments
Two-group pre-post experiments
The two-group pre-post experiment can be diagrammed as follows:
Promotion group
O1
O2
O3
O4
X
O5
O6
O7
O8
Control group
C1
C2
C3
C4
C
C5
C6
C7
C8
The estimation for the promotion effect is:
(Op – Cp) -(Opre – Cpre)=( Op- Opre)-( Cp- Cpre)
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14. Sales Promotion
Example
Pre-promotion
Promotion
group
Control
group
Promotion
Post-promotion
100
105
110
105
170
140
120
110
100
90
95
100
95
120
130
110
100
90
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15. Sales Promotion
Regression analysis applied to sales promotion
Data
Experimental vs. nonexperimental
Panel vs. store
Consumer sales vs. warehouse withdraws
Level of aggregation
Temporal
Across stores
Across brand size/style/flavor
Across consumer
Dependent variables
Category sales
Brand sales
Market share
Independent variables
Promotion
Advertising
Distribution
Price
Lags
Interactions
Competition
Other variables (seasonality, weather)
Functional form
Linear
Multiplicative
Attraction
Semilog
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16. Sales Promotion
Example: dependent variables
Period
Category sales
Brand sales
1
1000
300
2
1000
300
3
1000
300
4 (promotion)
1200
600
5
850
200
6
1000
300
7
1000
300
8
1000
300
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17. Sales Promotion
Example: independent variables
Deal-discount
amount _ off  regular _ price  discounted _ price
deal _ discount _ percentage 
amount _ off
*100
regular _ price
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18. Sales Promotion
Example: independent variables
Advertising support
freaquency _ of _ feature (display) 
number _ of _ weeks _ with _ feature (display) _ only
total _ number _ of _ weeks
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19. Sales Promotion
Time series analysis applied to Sales promotion
Univariate time series analysis
SALES = f (T, S, C, I)
T – trend
S – seasonality
C – cycle
I - irregularity
Models: additive, multiplicative, mixed
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20. Sales Promotion
Time series analysis applied to Sales promotion
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21. Sales Promotion
The PROMOTER methodology
The PROMOTER model:
St  Tt * SIt * X t * b t  p t   t 
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22. Sales Promotion
The PROMOTER methodology
Data are adjusted for seasonality, trend, and any factors whose effects are
known a priori.
An initial baseline is estimated.
Clearly “contaminated” promotion periods are removed from the data.
“Abnormal” outlier sales periods are identified and weighted to reflect how
much influence they should have in computing the baseline.
A new baseline is computed.
If the new baseline is theoretically unreasonable, corrective action is taken.
Is the new baseline close to the previously calculated baseline?
The baseline is readjusted for seasonality, etc. and these data are
compared to the actual to ascertain the effects of promotion.
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23. Sales Promotion
Example
t
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
20
22
18
19
23
20
21
19
41
10
19
20
22
21
23
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t
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
b+
e
20
22
18
19
23
20
21
19
-
-
19
20
22
21
23
18
20
19,7
20
21,3
22
20,7
20,2
19,7
19,3
19,8
20,3
21
22
20,7
b
We use three periods moving average.
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24. Thank you!
Contact:
Atanas Luizov
BFU
louizov@abv.bg
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