Measurement and evaluation of retail promotions

Abstract

Promotions involve a complicated interplay of factors and are a result of a synchronized sequence of activities between manufacturers and retailers. The outcome of promotions pivot on several elements beyond the control of any one party in the supply chain. 'How' a promotion performed has a more straight forward answer than 'Why' a promotion performed a certain way. This research attempts to define a quantitative methodology to measure performance of promotions and reveal insights to consumer product manufacturers and retailers that will help answer the 'How' and the 'Why' of promotions. The measures used are simple, but the combination of analysis creates a complex structure of many dimensions that reveals intricate insights into the functioning of the supply chain, the most important asset in executing promotions. We present to you a three dimensional framework termed the 'Promotion Performance Cuboid' with structural elements consisting of three foundational supply chain measures, inventory, stockouts, and performance of sales against target forecasts. The measures when viewed together through the Promotion Performance Cuboid, tell a revealing story of the underlying dynamics of promotions and the elements that actually control promotional become lucid.