Our client, a beverage producer, engaged us to evaluate their promotional performance across their brand portfolio.
Imagine our surprise when we found that promotions appeared to be going on for 5-6 months longer than the planned period.
Of course, the promotions weren’t actually going on this long…
…instead, it became clear that retailers were purchasing promotional packs at a very favourable rate out of all proportion to their sell-out rate, and stock-piling them for months.
We devised a best-practice methodology for evaluating ‘stock overhang’. We applied the methodology to over 400 promotions (special packs, gift packs, temporary price reductions and seasonal promotions) on 13 brands in 4 accounts.
There was a huge cost from overselling promotional packs. On one brand alone, stock overhang was costing them €800k in lost profit, of which 30% was accounted for by a single promotion in a single account. This changed the profitability equation dramatically – when the true costs were added up, many previously ‘profitable’ promotions became unprofitable.
Promotional deployment was brought in line with true ROI. As important, the client made critical changes to the sales planning process and production schedules to reduce overhang with savings running into €millions.