I tell after i pick
Please be sure to show your work (points will depend upon my being able to tell what you did).
1) We went over incremental revenue to cost in class. Please compute the ratios for
2018 for a) trade promotions and b) consumer promotions. Please compare each to the industry
average.
2) We went over the Return-on-Marketing-Investment (ROMI) in class. Please
provide the ROMI for 2018 and 2019 for BOTH trade promotions and consumer
promotions.
3) Kathy Ayers has asked you to provide two things that you think might explain the trade
promotion results and two things that you think might explain the consumer promotion
results. Be sure to carefully explain.
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Sahni, Chintagunta and Zou 2017
We find that the offers cause the average expenditure to increase significantly, by
$3.03 (a 37.2% increase) during the promotion window. However, the redemption
rate of these offers is low. Importantly, ninety percent of these gains are not
through redemption of the offers. The individuals who spent more on the platform
in the past are more responsive to the offers; and the effect of the offers is
significantly higher among individuals who did not transact on the platform in the
year before the offer was given. Interestingly, the promotion causes carryover to the
week after the promotion expires; we find that spending increases by $1.55 in the
week after the offer expires. Additionally, we find evidence for cross category
spillovers to non-promoted products – offers not applicable to a ticket genre cause
an increase in spending in that genre. We conclude that emailed offers can serve as a
form of “advertising” for the firm’s products rather than tools of price discrimination.
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Want to gain distribution, encourage stock at certain levels (for example, prior to
running a consumer promotion), encouraging the channel to promote.
Push Marketing
Shelf Space Higher levels of inventory to limit stockouts Effort
Coop advertising offset the impact of competitive promos
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General Motors ran a price promotion “You pay what we (employees) pay” in the
summer of 2005 that was imitated after five weeks by it two major U.S. competitors.
Increased sales, but at a loss of $5000 per vehicle. Overall negative impact.
Cadillac sponsored a Super Bowl post-game show to promote the ability of its V-
Series cars to hit 60 mph in less than five seconds. Created a special Web site
promoting a “Five Second Film Competition”- shoot and upload a five-second film on
any topic. More than 2.5 million consumers visited the site, 2600 submited films, in
the four months following the promotion, Cadillac V-series sales jumped by 25%.
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One interesting idea is to spend more time attempting to design promotions that are
easy for consumers to adopt and difficult for competitors to imitate.
Home Depot – employing Olympic athletes. Flexible work week and benefits. Created
stronger links to the Olympics than many other Olympic sponsors. Plus lots of
publicity.
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