Changing Sales to Consumption

The output from all systems to evaluate Trade Promotions is Incremental Sales during the Promotion Period.  But Incremental Sales usually includes either (or both) Trade Forward Buying and Pantry Loading.  If you are using Scanner Data then it is only Pantry Loading.  If Factory Shipments are used then both Pantry Loading and Trade Forward Buying are included in the Incremental Sales during the promotion.  But Incremental Sales is not Incremental Consumption.  Sales during a promotion can come from:


  1. Additional consumption from loyal buyers.
  2. Pantry loading.
  3. Consumers who normally buy the product but switch Chains due to the Promotion.
  4. Consumers who normally buy in this Chain but switch Brands due to the Promotion. 
  5. Consumers who normally purchase the Brand on Promotion but normally buy a different size. 
  6. Consumers who normally buy another Brand owned by the Supplier and switch due to the Promotion. 
  7. New users to the Category. 
  8. Occasional users who buy on Promotion. 


To understand the value of a Promotion to a Retailer and/or a Supplier consumption needs to be calculated.  The allocation of Incremental Volume between these various buyers will vary greatly by the category and type of Promotion.  For example, a Price Promotion in a Retail Chain for a highly consumable product (e.g. Soft Drinks, Candy, Snacks) will be heavily weighted toward Incremental Consumption from Loyal Consumers.  Incremental consumption from Loyal Buyers would be low for an Advertised Promotion for a Category where Incremental Consumption is not likely (e.g. baby food, diapers, soap but Chain Switching and Pantry Loading would be high.  Incremental Sales can be the same for a soft drink Promotion and a baby foods promotion.  But for soft drinks much of the Incremental Sales will be Incremental Consumption while for baby food most of the Incremental Sales come from Brand Switching, Chain Switching and Pantry Loading and very little from Incremental Category Consumption.


The allocation is important because some of these consumers generate Increment Consumption (which is included in Incremental Sales) and some don’t.  Consumers who switch Chains to buy on a Promotion are Incremental Volume for the Retail Chain but are not Incremental Volume for the Supplier since that Consumer would have purchased the Suppliers Product but in a different Chain.  If the Incremental Volume comes from Brand Switching in the store than it is Incremental Volume for the Supplier but not Incremental Volume for the Retail Chain.  Each Group of Consumers generates Incremental Volume for the Retailer or the Supplier or both.


  1. Incremental Sales from Loyal Buyer that result in Incremental Consumption -This is incremental volume to both the Retailer and the Supplier. 
  2. Incremental Sales from Loyal Buyers that result in Pantry Loading -This is not Incremental Volume for the Retailer or the Supplier since this is just sales during the promotion that lowers future sales. 
  3. Incremental Sales from Chain Switching - Incremental for the Retailer but not for the Supplier. 
  4. Incremental Sales from Brand Switching - Incremental for the Supplier but not the Retailer. 
  5. New and Occasional Buyers-Incremental to both the Retailer and Supplier.  New Consumers also have an intangible value to the Supplier since a New User has a value for repeat purchases. 
  6. Brand Switching from other Brands owned by the Manufacturer-Neither Incremental Volume for the Retailer or the Supplier.


All systems for evaluating Trade Promotions calculate Incremental Volume.  But if the Source of that volume is not considered many Promotions that appear to be profitable based just on Sales volume will actually be unprofitable.  If the Source of the Incremental Volume is from Pantry Loading running more promotions can be a bad decision.  After generating the Incremental Sales Volume from a Promotion the Source of that volume needs to be allocated by type of Consumer to get the best insight into a strategic Promotion plan.