Magazine: Analytic Consulting (Part 5) – Promotions: high costs – varying returns

Nielsen vice president Uta Werner and senior vice president Rick Hall are the authors of a study on how to overcome obstacles that are in the way of high-efficiency promotions. They say that manufacturers know how much they spend on promotions, but do they know how much they make in returns? FMCG manufacturers do have access to sales data, but they also need to see how much they would have sold without implementing the promotion. What is more, they also have to calculate with other factors influencing promotional sales positively. Consumer packaged goods (CPG) manufacturers spend 7.5 percent of their revenues on advertising and 19 percent on trade. The average returns generated by promotions is 11 percent and 43 percent of promotions are loss-making from a financial perspective, while the average ROI is at 75 percent in the lower one fifth of promotion campaigns examined No wonder that many manufacturers aren’t satisfied with their promotions. Nielsen’s experts think the situation can be improved by focusing on 4 key areas: 1. challenges in measurement, 2. strategic planning vs tactical reality, 3. managing and implementing the promotional plan, 4. the management process.