This case describes sales promotion strategy at frozen foods maker Giant Consumer Products. The case focuses on the multi-disciplinary facets of brand management and sales promotion. Started with background analysis, problem statement, problem analysis, identification and assessment of alternatives, and recommendation and implementation.
Following apspects are included in the case :
consumer products marketing strategy
food industry brand equity brand management
quantitative analysis of return sales promotion return on marketing investment (ROMI) Cannibalization
Brand Equity Erosion
Customer Buying pattern
Frozen food division (FFD) is the key contributor to Giant Consumer Product’s (GCP) profits which have successfully grown over the past 30 years. The company has two main products lines, Italian frozen dinner “ DinardoTM”, and organic frozen foods “Natural mealsTM ”. However, recently FFD has encountered a shortfall in sales volume and gross revenues. Now, Allan Capps the CEO of GCP is hesitant about running a trade sales promotion with retailers. And if so, which brand should the marketing funds be allocated to?
1. Using the data in exhibits 1 & 4 (may use spreadsheet), develop solution templates in case exhibit 3 for Sanchez. How would this help in solving his problem?
Marketing academics recommend that the precise amount required is what should govern the budget. Commercial concerns override. Unfortunately, unless you know what works, its exact cost and that it gave value for money, you are stymied. In principle, budgeting precisely what you need is the right way to do it. The only justification for spending money on promotional activity is that it will achieve marketing objectives that contribute to long-term growth in profits.
Working on Promotional Budget:
There are five ways in which companies set their promotional budgets: 1. They set the figure at what they spent last year, plus a little bit more for inflation and any expected market growth. 2. They set it as a fixed percentage of turnover, established over time for the company and industry. 3. They set it to be the same as, or in ratio to, what major competitors spend. 4. They set it as the amount needed to achieve the defined marketing objectives – that is, what is needed, no more, no less. 5. In these cost-cutting days, if you have not, through marketing accountability, shown value for money from all your marketing, then expect to be given the same as last year or for the budget to be cut! Work on Timing :
Sales promotions are often run to meet short-term market needs. They must also work with the lead times of intermediaries and suppliers. This makes timing a critical issue and one about which there is often conflict. It is important to be clear from the beginning about the following time constraints: • when the promotion is needed to impact on the consumer; • how long it will last;
• how that relates to the purchase frequency of your product or service; • what lead times intermediaries require;
• how long you have for print and merchandise delivery; • when you need your promotional concepts ready.
The time available at each stage strongly affects what can and cannot be achieved. Managing this can be significantly helped by the use of simple project management tools. Work on Communication : Every promotion success is lies on successful mass communication to reach the customes effectively. 2. Do you advise Sanchez to run a national sales promotion?If so, which one of the items the funds be allocated: Dinardo 32, dinardo 16 or natural meals?
Yes, it is recommended to run national sales promotion. The fund should be allocated to Natural meals based on the workout below, which gives 165% on ROMI
|Total Brand Impact from Promotion | | | |on Top-line Revenue | | | |Total Effect of D32 Promotion | $ (1,197,278.37) | | |Total Effect of D16 Promotion | | $ | | | |2,775,636.96 | |Total Brand Impact from Promotion on Marketing Margin | | | |Total Effect of D32 Promotion | $ 2,576,012.75 | | |Total Effect of D16 Promotion | | $ | | | |(879,443.14) | |ROMI |71% |-20% |
Brand Awareness campaign – Natural Meals
|Average Monthly Incremental Volume for Natural Meals |705,252 | |Average % Store Promoting for Natural |7.61 | |Average Monthly Incremental Volume /Promo Point |92,674 | |Incremental Volume from 25% Promo Points |2,316,859 | |Revenue change from promotion | $ | | |6,718,892 | |Variable Cost change from promotion | $ | | |2,085,173 | |Promotion Cost change from promotion | $ | | |4,125,425 | |Marketing Margin Change from promotion | $ | | |508,294 | |ROMI |165% |
For brand awareness of Natural meals, Giant should also consider like : ← Coupon Offering
← Pay for Performance
← In-store Product Placement
← Repackaging for Natural Meals 32 oz portions
← Brand Recognition/Brand Loyalty
3. Prepare Sanchez for additional strategic/ tactical questions that he anticipates from Flatt given at the end of case. A) Would the promotion end up being a “Win” for not only FFD, but also for retailers and consumers? Yes, This is considered as Joint Promotion option with Retailers. Promotions involve giving away some of your margin such as in the form of discounts, cheap interest rates, competition prizes or premiums. Extra business should more than pay for this, but there’s no getting around the initial investment. The secret of joint promotions is establishing a mutually beneficial partnership with retailers. The needs joint promotions can meet include the following:
• to gain trial for your product or service from among the customers of another product or service; • to associate your product or service with someone else’s in the mind of your target audience; • to make a promotional offer that will attract your customers at low cost to yourself; • to explain to your customers new ways in which your product or service can be used; • to place your product in an environment where potential customers are likely to see it; • to reduce the cost of a planned activity by sharing it with someone else. Building partnerships is no easy matter, but they can explore with this now. A natural evolution of participants is normal. It may also be that, in some cases, partnership principles have not been thought through as well as they could have been.
B) How should FFD structure the promotion? Should FFD go with the “off invoice pricing” that retailers often prefered – having the manufacturer temporarily reduce the price-to-retailer (PTR) of a given item for a specified time so that retailers could purchase it in the quality desired – or should FFD stick with the “pay-for-performance” approach? Under the “pay-for-performance” approach, retailers were compensated only for the actual amount that they should, retailers were compensated only for the actual amount that they sold during the promotional period, as verified by registered scanner data.)
Alternatively, should FFD compensate retailers only if they hit some pre-estabilished target? Identifying a joint market involves thinking about your customers in broader terms, both in relation to other people who are trying to sell to them and in relation to people you are trying to reach who are already customers of someone else. The key to planning a joint promotion is an accurate profile of your existing customers. The key elements in this profile are: • demographic data – age, sex, social class, geographical distribution; • their relationship to you – how often they buy, at what price level, with what degree of loyalty; • their needs, interests and aspirations – other things they buy, what they want from life. Promotion start with Off-the-Shelf Offers and them increase to Price promotions and Prize promotions.