Giant Consumer Products

Sales Promotion Case Analysis

Situation at Hand
Giant Consumer Product has to maintain its above average growth in a profitable
manner
Frozen Foods Division(FFD) contributing one third of the total revenue has not performed
as per the expectation
Byron Flatt, VP Sales suggested a sales promotion for short term sales lift of FFD
products
Allan Capps, CEO is concerned about its negative impacts such as brand equity erosion,
cannibalization of other products, issues related to retailers etc.
He needs to be convinced that required results would be achieved without affecting long
term health of the brands

Question 1
To what extent should the concerns that Capps has raised
regarding trade promotions (cannibalization, brand equity
erosion, forward-buying, pass-through, and consumer
stockpiling) affect the go or no-go decision to field a
national sales promotion?

CANNIBALIZATI
ON

Promoting one item and having any incremental volume come at the
expense of another item
D32 ad D16 are effectively the same product; so even though crosscannibalization will occur, consumption of Dinardos will increase
IF D32 is PROMOTED: Natural meals will not have cannibalization
threat since its consumer base as well as value proposition is different
IF Natural Meals is PROMOTED: High Possibility of D32 being
cannibalized since Natural Meals is a better product and people will
switch quicker

BRAND EQUITY
EROSION

Implementing a price-off deal on a superpremium brand without

tarnishing its premium image
Brand equity erosion depends on the duration, frequency and type of
promotion. Hence care should be taken about these factors
IF DINARDOs is PROMOTED: Brand equity may not be affected to a
large extent since the category is positioned at price-conscious
customers
IF Natural meals is PROMOTED: Brand erosion is a sure thing here
since its customer base is the health-conscious, elite crowd who will
see any promotion as a downgraded version
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Forward
Buying

Pass Through

Consumer

Stockpiling

Retailer purchases at discounted Price-to-Retailer to sell at regular prices when

the promotion expires
Or continue selling the product at discounted prices conditioning customers for
consistent discounts
GCP should effectively promote the promotion as well the duration of the
promotion
Leverage clout with retailers by ensuring compliance with promotion by enabling
checks/audits

Retailers not passing PTR discount to customers, unchanged PTC

May lead to drop in sales in post-promotion months
GCP has enough clout with retailers to enforce binding conditions
Ensure retailers pass through discounts on PTR to PTC

consumer buy large quantities at low prices and store for future use
Might cause drop in sales post-promotion
Sanchez not much concerned for Frozen Foods average freezer size not
large enough to stock larger quantities

Question 2
Do you advise Sanchez to run a national sales promotion?
If so, to which one of the items should the funds be
allocated:
(a)Dinardos32-ounce packages,
(b)Dinardos16-ounce packages, or
(c)Natural Meals?

 As per Mike Sanchezs calculations

Total Brand Impact from
- Total Effect of Dinardo
- Total Effect of Dinardo

Total Brand Impact from

- Total Effect of Dinardo
- Total Effect of Dinardo

Promotion on Top-line Revenue

32 Promotion
16 Promotion
Promotion on Marketing Margin
32 Promotion
16 Promotion

$ (11,97,277.97)
$
27,75,636.80

GCP Calculations

$ (46,51,075.71)
$ (25,00,547.19)

ROMI
- Dinardo 32 Promotion
- Dinardo 16 Promotion
- Natural Meals Promotion

-121.23%
-57.78%
12.08%

 The numbers suggest

Dinardo 32 ounce and Dinardo 16 ounce SKUs both give negative return on marketing
investment for promotion
Natural Meals offers a positive return on marketing investment
So, Sanchez should not run a promotion on Dinardo products
Under the assumption, as mentioned in the case, that Dinardos customer base would not
be enticed to Natural Meals, even if Natural Meals is on promotion, there will be no
significant cannibalisation effect of a promotion for Natural Meals on Dinardo product
sales
So Sanchez can run a national promotion on Natural Meals

Thank You!
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