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Baseline: Unless You Know Your Regular Sales Volume, You Won't Be Able To

The document discusses key performance measures for evaluating the effectiveness of branded entertainment. It outlines three levels of impact branded entertainment can have on audiences: 1) cognitive attitude or awareness, 2) affective attitude by emotionally engaging audiences, and 3) conative attitude by driving purchase intent and behavior. Regular use of branded entertainment can also lead to repeat purchases, loyalty, and brand advocacy over time. The second part discusses five factors to consider when evaluating the return on investment (ROI) of a product promotion: 1) baseline sales without promotion, 2) forward buying effects after promotion, 3) cannibalization of other product sales, 4) impact on competitor sales, and 5) incremental category sales from new customers. Calculating

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Rupangi Vats
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37 views

Baseline: Unless You Know Your Regular Sales Volume, You Won't Be Able To

The document discusses key performance measures for evaluating the effectiveness of branded entertainment. It outlines three levels of impact branded entertainment can have on audiences: 1) cognitive attitude or awareness, 2) affective attitude by emotionally engaging audiences, and 3) conative attitude by driving purchase intent and behavior. Regular use of branded entertainment can also lead to repeat purchases, loyalty, and brand advocacy over time. The second part discusses five factors to consider when evaluating the return on investment (ROI) of a product promotion: 1) baseline sales without promotion, 2) forward buying effects after promotion, 3) cannibalization of other product sales, 4) impact on competitor sales, and 5) incremental category sales from new customers. Calculating

Uploaded by

Rupangi Vats
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Performance measures

What purpose has branded entertainment fulfilled?

 Cognitive attitude of audience (Information, awareness, knowledge): Was this


branded entertainment limited to cognitive attitude of customers. If limited to only
this aspect, the purpose of branded entertainment is defeated as there is no conversion
of audience into potential or actual customer and thus no business generation.

 Affectionate attitude: Has the branded entertainment touched emotions of audience. If


yes that means branded entertainment has not only created cognitive attitude but has
also touched audience emotions. If audience didn’t act even after this, that means the
branded entertainment was not strong enough to touch the next level of customer
buying attitude i.e conative attitude.

 Conative (Intent to purchase and purchase): The strong branded entertainment are
those which not only influences audience (customer) cognitive and emotive attitude
but also drive heir purchase intention and ultimately leads to actual purchase.

The continuous use of branded entertainment forms by brands leads to

 Repeat purchase

 Loyalty

 Brand advocacy

1. Baseline: Unless you know your regular sales volume, you won’t be able to
understand how much volume is driven by the promotion. If your productions weren’t on
offer, how much would you still sell to your loyal customers? 
2. Forward buying: Don’t forget the volumes drop just after the promotion. Known as
consumer stock-up, the additional sales generated during a promotion often result in
fewer sales (promo dip) in the days that follow. 
3. Cannibalization: What impact does the promoted product have on the sales volume
of your remaining products in the category? Or does volume from other non-promoted
products prevent the promoted products from achieving high volumes?
4. Competitors’ volumes: You need also need to be able to quantify the impact your
promotion had on the competition (often requiring expert judgement). How much of the
additional volume is stolen from substitutive competitor products?
5. Category incremental: You will likely trace some of the increased sales volume back
to consumers who only purchased the product because it was on promotion in the first
place.

Once you understand how much of your promoted volume is incremental and where the sales
volumes are coming from, the second step is to understand the impact that each of these five
effects has on promotion ROI. Here I recommend starting with a very simple calculation:

Incremental volume = competitor + category volume

The real volume uplift, as I like to call it, is the sum of the additional volume redirected from
competitors (effect 4) and the category’s incremental volume (effect 5). Then, we also need
to take into account the direct impact that effects 1 to 3 have on ROI. This impact can be
summarized as the three ‘hidden’ promotional costs:

Cost of subsidy: When you sell the product at a discounted price to consumers that would
have purchased the product even without a promotion (baseline), you will naturally forego
some revenues.

Cost of consumer stock-up: When you experience a volume increase at a discounted price,
this may be to the detriment of sales at a regular price outside of promotion.
Cost of cannibalization: When you sell the promoted product at a discounted price in place of
other products at a regular price, some revenues will be lost. Technically, this effect can be
positive if you are able to up-sell from less profitable products. But in my experience, price
promotions are rarely an effective up-selling tool.

The third and final step to calculate promotion ROI is to consider the costs directly derived
from the promotion. These costs vary per industry and across the value chain. The most
common are:

Slot fees charged by retailers for featuring promotions on leaflets/catalogues

Display/advertising costs from improving the in-store display or advertising the promotion in
and/or outside the point of sale

Costs from free samples and products

Once you have calculated all of the volume effects and costs, effectively calculating the
promotion ROI is a rather straightforward task. The return of a promotion can be calculated
as the sum of all promotional costs, including both “hidden” and direct costs, divided by the
profit generated from the promotion:

ROI = net profit impact/promotion investment

Why you need to know your promotion ROI

Promotions don’t just change customer behavior, they also affect a company’s profits.
Knowing your promotion ROI and volume uplift is key to understanding the real impact of
your promotions. While conducting a reliable promotion analysis can be a challenge for
companies, there is a lot of information held in these simple, yet effective KPIs.

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