Giant Consumer Products

Integrated Marketing Communication

Assignment GIANT CONSUMER PRODUCTS: THE SALES PROMOTION RESOURCE ALLOCATION DECISION

Analyses of questions are in below mentioned pages: Using the data available in Exhibit 1 & 4 (available in excel spreadsheet in case supplementary material folder) develop solution templates in the case exhibits 3 for Sanchez. How would this help in solving his problem?...............................................2 Do you advise Sanchez to run a national sales promotion? If so, which one of the items should the funds be allocated to: Dinardo 32, Dinardo 16 or Natural Meals?. . .4 Prepare Sanchez for additional strategic/ tactical questions that he anticipates from Flyatt given at the end of the case.............................................................................5

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Using the data available in Exhibit 1 & 4 (available in excel spreadsheet in case supplementary material folder) develop solution templates in the case exhibits 3 for Sanchez. How would this help in solving his problem?

Table 1 Dinardo’s 32

Dinardo’s 16

Average Monthly Volume for: When The item is ON Promo 10,460,942.5 tion

6,210,220.4

When the item is NOT ON Promotion

6,816,235

3,088,564.63

When nothing is on promotion

7,174,738.6

3,798,942.4

Incremental Volume from Promotion

3,286,203.9

2,411,278

Revenue change from promotion

6,901,028.19

5,787,067.2

Variable cost change from Promotion

2,431,790.89

2,001,360.74

Promotion cost change from 3,757,213.25 Promotion

4,307,862.57

Marketing Margin change from Promotion

(522,156.11)

712,024.06

Integrated Marketing Communication The first part of the Sanchez’s solution (Table 1) shows an increase in marketing margin for D32 promotion, and a fall for D16 promotion. But, a consideration of inter-brand cannibalization (Table2) helps us understand the real picture. Cannibalization of D16 can be noticed when D32 is being promoted. This results in a drop of overall revenues and margins.

Table 2 Dinardo’s Dinardo’s 32 16 Average Monthly Volume When the other Dinardo’s items is on promotion

5,740,724.2

424,648

When nothing is on promotion

7,174,738.6

3,798,942.4

Volume change from promotion of other item

(1,434,014.24)

(3,374,294.4)

Revenue change from promotion of other item

(3,011,430,24)

(8,098,306.56)

Variable cost change from promotion of other (1,061,170.66) item

(2,800,664.35)

Promotion cost change from promotion of other (5,099.28) product

74,210.57

Marketing Margin change from promotion of (1,945,160.3) other product

(5,371,852.77)

Total Brand impact from promotion on TopLine Revenue Total effect of D32 promotion Total effect of D16 promotion

(1,197,278.37) 2,775,636.96

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Total Brand impact from promotion on Marketing Margin Total effect of D32 promotion

(4,659,828.72)

Total effect of D16 promotion

(2,467,316.41)

Thus, promotion of either of Dinardo’s 32 or Dinardo’s 16 is a bad idea for Sanchez hence it should not be suggested to GCP. On the contrary, promotion of Natural Foods (Table 3) leads to increase in revenues and marketing margin. This may be a good option for Sanchez to recover some of the loss numbers from previous Dinardo’s promotional activities.

Table 3 Impact of Natural Foods Promotion Average monthly Incremental Volume

705,251.96

Average % Store promotion for Natural

7.61

Average Monthly Incremental Volume/Promo Point

92,643.94

Incremental Volume from 25% Promo Points

2,316,098.39

Revenue change from Promotion

6,716,685.32

Variable Cost change from Promotion

2,084,488.55

Promotion Cost change from Promotion

4,125,425 506,771.77

Marketing Margin change from Promotion

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Do you advise Sanchez to run a national sales promotion? If so, which one of the items should the funds be allocated to: Dinardo 32, Dinardo 16 or Natural Meals? Based on the historical data provided, National promotions on Dinardo’s 32 and Dinardo’s 16 have hurt the overall top line and marketing margin numbers. Promotions on these brands also cause significant cannibalization of the other brand. A peak in the total sales figure for one product is associated with a sharp fall of the other product. Also as per given data Natural Meals sales is growing at a constant pace and is not affected by activities related to the Dinardo’s brand. Hence, neither D32 nor D16 must be promoted, as the resulting revenue increase does not substantiate the expenses on marketing and promotions. As mentioned earlier, the customer base for Natural Meals is insulated from any changes to the Dinardo’s brand. We also know that this is a niche segment and GCP is concerned about brand dilution and brand equity erosion. Hence, promotional activity for GCP’s products may not be a good option for the long run. Further, GCP’s major competitor Daft may increase the incidence and/or depth of its promotional activities in case GCP fielded any promotional activities. Hence, GCP should look at other avenues, such as ATL advertising, for marketing and promoting Dinardo’s and Natural Meals and thereby driving growth over the long run.

Prepare Sanchez for additional strategic/ tactical questions that he anticipates from Flyatt given at the end of the case. I feel it is a win situation for FFD and customers only, not to the retailers because retailers have to take care of getting rid of the inventory, before the date of expiry, failing which they will have to bear the cost of the product themselves. As unsold products went into the problem zone of the retailers, they were not at a side of benefit, despite the larger incentive they had on selling each product. The customers had a benefit as the product was available in many shapes and sizes as a whole, even with a newer type of variant as Natural Meals which was for a niche market though, but very quickly gaining popularity. FFD promotional structure should only be focused on ‘pay for performance’, although this included more amount of scanning during the promotional period, but it still would be better in giving more genuine results for the given period of

Integrated Marketing Communication promotion, with a clear specification of the inventory sold during the period. The other approach of ‘off the invoice printing’ involved a major problem of stockpiling, with the retailers, as they were sold at a lower cost to the retailers, so it involved a larger incentive for larger retailers to stockpile the inventory and offload it when the real time came into the market, cashing on a larger margin on limited sale offer product, dispatched by FFD at a lower cost.