Spar InfoTech, Inc.
Impact of Shorter Promotions
Background: An 8-week promotion was typically run in the fall. One year the promotion was started 3 weeks early in August.
Analysis: Total sales for the 8-week promotion were in line with prior years but sales during the first three weeks were at the level of the SPARLINE. The total sales during the promotion were equal to prior years because sales in the last 5 weeks of the promotion were higher than the sales in the last weeks of prior promotions. Therefore, the discount given during the first three weeks didn’t generate any additional volume.
Recommendation: Shorten the promotion to 5 weeks.
Net results: The 5-week promotion generated as much incremental sales and more profits than the 8-week promotions.
Learning: Shorter promotions are usually more profitable than longer promotions since the retailer typically only performs once during the promotion and sales in the remaining weeks are just for normal turn that don’t require a promotional discount.