The retail and wholesale market in South Africa is very competitive and both channels advertise on a regular basis.  Line selection for promotions generally depends on the market share of the brand and the suppliers who are able to afford the cost to participate and have the capacity to produce.  This makes is difficult to achieve variation as the market leading brands are rotated from one promotion to the next.  Retailer’s invest money in advertising and therefore need to trust that the brands selected will draw enough shopper’s into store to impact business measures.  So, what does this mean for a brand’s profitability?  

Promotional evaluations consider the following influencers:

Primary considerations:

  1. Brand turnover,
  2. Cost to participate,
  3. Impact of discount level and,
  4. Expected volume uplift and expected retained future sales are when doing.  

Secondary considerations:

  1. Promotional campaigns for the brand at the time,
  2. The traffic the promotion will generate to the store and
  3. Competitor brands that will be advertised.

In some instances, the brand might negatively impact the yearly profit by participating in a promotion despite a huge volume uplift due to a longer period at a discounted price.  In other cases, a brand could increase its share of market by engaging with a broader audience that’s available with a major promotion.  The alternative to price discounting is a value added offer which is more cost effective for the brand owner.  It is important for companies to continuously assess their ROI on promotions to strategically drive profitable bottom line growth and ensure that funds are being spent efficiently.

 Written by Emiryl Paul, she is a trade marketing specialist.  She has worked in the FMCG industry for 12 years and has built capabilities with cross functional roles.  She has worked on market leading brands and medium sized brands.  Emiryl has an interest in entrepreneurship having assisted start up companies, within local and Africa markets.