Spar InfoTech, Inc.
Impact of Retailer Profit Margins
Background: During promotions this product generated significant incremental volume and profits. But between promotions OOS increased, distribution dropped, and sales were generally low as the items was being treated as a specialty in and out product.
Analysis: Only during promoted period were the retail margins high enough to be acceptable to the retailers.
Recommendation: Change the overall positioning of the product so that margins could be maintained during non-promoted periods and then promote at a level to allow both the retailer and consumer to benefit from incremental promotional monies.
Net results: The product was repackaged with new pricing to allow the retailer to maintain margins during non-promoted periods.
Learning: Sometimes promotions appear to be very successful when measured against a normal level of sales. But if the normal level of sales is too low then the it may be the problem is not with the promotions but with the low levels of sales between promotions. Raising the level of sales between promotions will make the promotions less successful but overall can make the product line more profitable.