Integrated Marketing Communication

Assignment
GIANT CONSUMER PRODUCTS: THE
SALES PROMOTION RESOURCE
ALLOCATION DECISION

Analyses of questions are in below mentioned pages:

Using the data available in Exhibit 1 & 4 (available in excel spreadsheet in case
supplementary material folder) develop solution templates in the case exhibits 3 for
Sanchez. How would this help in solving his problem?...............................................2
Do you advise Sanchez to run a national sales promotion? If so, which one of the
items should the funds be allocated to: Dinardo 32, Dinardo 16 or Natural Meals?. . .4
Prepare Sanchez for additional strategic/ tactical questions that he anticipates from
Flyatt given at the end of the case.............................................................................5

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Using the data available in Exhibit 1 & 4 (available in excel

spreadsheet in case supplementary material folder)
develop solution templates in the case exhibits 3 for
Sanchez. How would this help in solving his problem?

Table 1
Dinardos 32

Dinardos 16

Average Monthly Volume

for:
When The item is ON Promo 10,460,942.5
tion

6,210,220.4

When the item is NOT ON

Promotion

6,816,235

3,088,564.63

When nothing is on
promotion

7,174,738.6

3,798,942.4

Incremental Volume from

Promotion

3,286,203.9

2,411,278

Revenue change from

promotion

6,901,028.19

5,787,067.2

Variable cost change from

Promotion

2,431,790.89

2,001,360.74

Promotion cost change from 3,757,213.25

Promotion

4,307,862.57

Marketing Margin change

from Promotion

(522,156.11)

712,024.06

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The first part of the Sanchezs solution (Table 1) shows an increase in marketing
margin for D32 promotion, and a fall for D16 promotion.
But, a consideration of inter-brand cannibalization (Table2) helps us understand the
real picture. Cannibalization of D16 can be noticed when D32 is being promoted.
This results in a drop of overall revenues and margins.

Table 2
Dinardos Dinardos
32
16
Average Monthly Volume
When the other Dinardos items is on promotion

5,740,724.2

424,648

When nothing is on promotion

7,174,738.6

3,798,942.4

Volume change from promotion of other item

(1,434,014.24)

(3,374,294.4)

Revenue change from promotion of other item

(3,011,430,24)

(8,098,306.56)

Variable cost change from promotion of other (1,061,170.66)

item

(2,800,664.35)

Promotion cost change from promotion of other (5,099.28)

product

74,210.57

Marketing Margin change from promotion of (1,945,160.3)

other product

(5,371,852.77)

Total Brand impact from promotion on TopLine Revenue

Total effect of D32 promotion
Total effect of D16 promotion

(1,197,278.37)
2,775,636.96

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Total Brand impact from promotion on

Marketing Margin
Total effect of D32 promotion

(4,659,828.72)

Total effect of D16 promotion

(2,467,316.41)

Thus, promotion of either of Dinardos 32 or Dinardos 16 is a bad idea for Sanchez

hence it should not be suggested to GCP.
On the contrary, promotion of Natural Foods (Table 3) leads to increase in revenues
and marketing margin. This may be a good option for Sanchez to recover some of
the loss numbers from previous Dinardos promotional activities.

Table 3
Impact of Natural Foods Promotion
Average monthly Incremental Volume

705,251.96

Average % Store promotion for Natural

7.61

Average Monthly Incremental

Volume/Promo Point

92,643.94

Incremental Volume from 25% Promo

Points

2,316,098.39

Revenue change from Promotion

6,716,685.32

Variable Cost change from Promotion

2,084,488.55

Promotion Cost change from Promotion

4,125,425
506,771.77

Marketing Margin change from Promotion

Integrated Marketing Communication

Do you advise Sanchez to run a national sales promotion?

If so, which one of the items should the funds be allocated
to: Dinardo 32, Dinardo 16 or Natural Meals?
Based on the historical data provided, National promotions on Dinardos 32 and
Dinardos 16 have hurt the overall top line and marketing margin numbers.
Promotions on these brands also cause significant cannibalization of the other
brand.
A peak in the total sales figure for one product is associated with a sharp fall of the
other product. Also as per given data Natural Meals sales is growing at a constant
pace and is not affected by activities related to the Dinardos brand.
Hence, neither D32 nor D16 must be promoted, as the resulting revenue increase
does not substantiate the expenses on marketing and promotions.
As mentioned earlier, the customer base for Natural Meals is insulated from any
changes to the Dinardos brand. We also know that this is a niche segment and GCP
is concerned about brand dilution and brand equity erosion. Hence, promotional
activity for GCPs products may not be a good option for the long run.
Further, GCPs major competitor Daft may increase the incidence and/or depth of its
promotional activities in case GCP fielded any promotional activities. Hence, GCP
should look at other avenues, such as ATL advertising, for marketing and promoting
Dinardos and Natural Meals and thereby driving growth over the long run.

Prepare Sanchez for additional strategic/ tactical

questions that he anticipates from Flyatt given at the end
of the case.
I feel it is a win situation for FFD and customers only, not to the retailers because
retailers have to take care of getting rid of the inventory, before the date of expiry,
failing which they will have to bear the cost of the product themselves. As unsold
products went into the problem zone of the retailers, they were not at a side of
benefit, despite the larger incentive they had on selling each product. The
customers had a benefit as the product was available in many shapes and sizes as a
whole, even with a newer type of variant as Natural Meals which was for a niche
market though, but very quickly gaining popularity.
FFD promotional structure should only be focused on pay for performance,
although this included more amount of scanning during the promotional period, but
it still would be better in giving more genuine results for the given period of

Integrated Marketing Communication

promotion, with a clear specification of the inventory sold during the period. The
other approach of off the invoice printing involved a major problem of stockpiling,
with the retailers, as they were sold at a lower cost to the retailers, so it involved a
larger incentive for larger retailers to stockpile the inventory and offload it when the
real time came into the market, cashing on a larger margin on limited sale offer
product, dispatched by FFD at a lower cost.