Measuring Marketing

Chapter 56 Promotion Profit

Measurement Need

Measuring the profit resulting from marketing’s promotional campaigns.

Solutioni

The formula for promotion profit is:

$PP=\left\{U_{id}\times \left(M_r-D\right)\right\}+\left\{U_i\times M_r\right\}-\left\{U_{bd}\times D\right\}=C_p+\left(\pm CE\right)$

Where

PP = promotion profit

Uid = incremental units sold on deal

Mr = margin r

D = discount

Ui = undiscounted incremental units sold

Ubd = base units sold on deal

Cp = promo costs

± CE = positive versus negative carryover effects

The first group of variables, {Uid × (Mr – D)}, measures the additional profit made from incremental sales due to the promotional discount. The second group, {Ui × Mr}, measures the incremental sales of units at the regular price. The third group, {Ubd × D}, measures baseline ...