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00:00:01
Why Your Promotions Aren’t Working (And What to Do About It)
24 Plays1 month ago
Most brands think promotions equal growth—but what if they’re actually scaling a problem? In this episode of the CPG Trade Spend Podcast, Kyle Barnholt breaks down one of the most costly mistakes in CPG: not measuring ROI the right way. Learn how to calculate true promotional ROI using real data, avoid common traps like deep discounts with no lift, and shift from gut decisions to profit-driving strategy. Kyle also shares a real-world cautionary tale and outlines 10 key metrics every brand should be tracking to optimize trade spend. If you're still copying last year's promo calendar, this one’s for you.
To learn more and download our FREE True ROI Calculator, head to this blog post.
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Transcript
Are promotions truly driving growth?
00:00:00
Speaker
Most brands think their promotions are driving growth, but what if they're actually holding you back? If you're not measuring ah ROI at the retailer and item level, you might be pouring fuel on the wrong fire, or as we say, scaling a problem.
Introduction to CPG Trade Spin Podcast
00:00:17
Speaker
Welcome to the CPG Trade Spin Podcast. I'm Kyle Barnholt, and today we're digging into one of the most common and costly mistakes in CPG, not knowing if your promotions are actually working.
00:00:31
Speaker
By the end of this episode, you'll know how to evaluate promotional effectiveness with real data, spot underperformers, and build better events that drive profit, not just volume.
00:00:43
Speaker
Let's go.
Simplifying trade spend complexities
00:00:47
Speaker
Welcome to the CPG Trade Spend Podcast. I'm Kyle Barnholt, and I've spent years helping brands navigate the messy world of trade spend, deductions, and promotions.
00:00:57
Speaker
This podcast is all about breaking down the complexities of trade spend, uncovering hidden insights, and turning data into profitable decisions. Whether you're a finance pro, sales leader, or just trying to make sense of it all, you're in the right place.
00:01:13
Speaker
Let's dive in.
Measuring success with the ROI formula
00:01:19
Speaker
So let's start with the big question. How do you actually know if a promo was successful? Most CPG teams still measure success by sales lift alone, but volume doesn't always equal value.
00:01:33
Speaker
Said another way, revenue doesn't always equal profit. So I've got a simple equation that you can use on your next event or ah ah previous event.
00:01:45
Speaker
that'll allow you to see the true ROI. So we call it the true ah ROI formula. Equation is your incremental gross revenue for this event. How much did you sell above and beyond what you would have sold? So the lift on that event, incremental gross revenue minus your incremental cost of goods sold.
00:02:05
Speaker
So you sold an additional thousand units, what was the incremental revenue on those thousand? And what was the incremental cost of goods on those thousand? and then we divide it by your total event trade spend. So your all-in spend for that event.
00:02:22
Speaker
Now this will spit out an index ratio where anything above one is better than breakeven, and anything below that obviously is going to be less than breakeven.
Ensuring promotions add value
00:02:32
Speaker
So this is a profit metric. It's how much incremental profit did you generate for every one dollar of incremental trade spend? In other words, did I generate enough profit to cover the incremental event cost?
00:02:47
Speaker
The answer is not always going to be yes, and we understand that, nor should it be. And I'll talk about that in a minute. But you do wanna understand how much you're spending and make sure that you're not destroying a ton of value when you run promotions.
00:03:02
Speaker
And if you are, then I'd say something probably is off with your promotion you're always losing money on every event. So this is the foundation for understanding your promotional ah ROI, and it's often overlooked.
00:03:18
Speaker
On the flip side, each event should serve ah purpose. And it's not always gonna be about profit, For example, you might run a ah BOGO versus a dollar off TPR or percent off.
00:03:32
Speaker
And so these different events are going to drive different outcomes from an ah
Purpose-driven promotional events
00:03:37
Speaker
ROI perspective. So the way I like to think about these is you're doing each event with an intended purpose.
00:03:45
Speaker
I've got four kind of common examples of those purposes of why you might run an event. And those four are to drive trial. Right, so maybe you just launched a new product and it's just hitting the shelf.
00:03:58
Speaker
You wanna drive trial on that product with the consumers so that you can get it into their hands, into their mouth, and they can try it and see how awesome it is. Or you might be working to drive repeat.
00:04:10
Speaker
So you run an event that can drive repeat, and this could be after your last event, which drove trial. So you want to drive repeat into the brand, into the product.
00:04:21
Speaker
Third is stealing share. we're We're in a competitive space. We live in a competitive world, and you want to steal share from the competition whether into the category or potentially somewhere else.
00:04:34
Speaker
You're trying to steal share so that more consumers are coming into your brand and buying that product. The fourth one is defending share. And as you can imagine, it's exactly what it sounds like. You're trying to keep those consumers that are loyalist in the brand with your products and continuing to buy products.
00:04:55
Speaker
And so I have an example here, actually a story. And unfortunately, this is ah negative one, but out of, you know, loss or out of situations where it doesn't work in your favor, we tend to learn the most. And that certainly happened for me in this scenario. And I hope it can be something that is helpful for you as you continue on your journey of running effective promotions. And so we launched some new products with a retailer, and anchor account.
00:05:27
Speaker
And we're really excited about having just won this deal, just you know got on the shelf. with the category manager and their recent review.
00:05:38
Speaker
And um it was a perishable product, highly perishable product. So we were very focused on how do we make sure that we delight both our customer, the retailer, and the consumer so that um they'll continue to buy for years and years to come. And so we were very focused on making sure that the product not only gets there on time and in full to the retailer. So it's on shelf for um the launch of the new planogram, but also to ensure that it was fresh since we were dealing with highly perishable product.
00:06:14
Speaker
We had promotions set up, we were ready to go, we had coupons. um So we were prepared, but here's the key. What ended up happening is since we were competing against some large national brands, what ended up happening was they saw that we were being added to the planogram. They of course knew when that planogram was going to be implemented in the store.
00:06:37
Speaker
And um they did in fact run a BOGO. Really, really, really hot deals during the first couple weeks of the launch. we were not able to successfully kind of launch and drive trial because they were also running an event.
00:06:56
Speaker
And I'm not saying you You know, there was a whole lot we could have done different. and I know theyre there was, but I think what this really shows you is how you can use, you know, defending share, defending your share um as a tactic when you think about the four examples of purposes. So hopefully that makes sense and can be something that helps you as you continue on.
00:07:22
Speaker
um But I just wanted to share a real life example of how this played out for me. And so again, just coming back to kind of the key here, right? Not all events we run and promotions we run are intended to drive an ROI.
00:07:40
Speaker
but many of them should. And the key is to make sure you measure. You really know what events are and are not driving ah ROI so that you can make wise decisions going forward.
00:07:53
Speaker
And let me just give you some real quick kind of hot buttons, hot tactics here as you think about doing this
Calculating total trade spend
00:08:00
Speaker
calculation. So when you're calculating the total event trade spend, don't forget to include any of your admin fees, any additional feature or advertising or display fees that went along with that promotional event that you ran. So when we're when we're looking at that equation and we're trying to get the total trade spend for the event, let's make sure it's the all in.
00:08:25
Speaker
The other one that can slip under the radar is if you run an OI and you're doing an overlay scan. so don't forget to calculate the off invoice that you gave to either the distributor or the retailer as well as the scan.
00:08:40
Speaker
So you make sure you capture both. um And then you want to know what your base volume is, right? What is the volume you run when that you have when you're not running a promotion? What's kind of the common average of your units sold during a non-promoted period. And that'll become important when you do your incremental units. So you want to also understand how much lift did I get on this event and units sold.
00:09:09
Speaker
So if my if I sold 12,000 units, as an example on this promotion, and I have 5,000, that's my base volume, 5,000 units,
00:09:19
Speaker
then 7,000 units was my incremental um sales for this event. Okay, so that just those are a couple hot buttons as you think about doing that calculation.
00:09:33
Speaker
And at TrueUp, we help brands calculate ah ROI using real deductions and real shipment data of the brands. So you can access and assess performance by retailer, item,
00:09:49
Speaker
an event. If you want to dig deeper into the process, check out our promo ah ROI calculator. You can download it today for free and easily calculate your true ah ROI.
Common promotional mistakes
00:10:03
Speaker
And so finally, if you're only looking at lift, you're missing the cost side of the equation. Measuring ah ROI correctly changes everything. Let's talk about the traps brands fall into when they're not using data to plan promotions.
00:10:20
Speaker
So some of the most common mistakes that we see day in and day out before people get plugged into the data is they're just copying last year's calendar without question. So maybe it's the sales team um is running and gunning. They've got a bunch of category reviews and Frankly, they just don't have time. So they plug in the same events they had the prior year and off they go.
00:10:43
Speaker
Or maybe they're running promotions without asking for support from their buyers. So they don't really understand which events are working and which aren't. But also they're not asking people for a display.
00:10:57
Speaker
They're not asking for um secondary placement. And this is one of the common mistakes we see that really, if you don't ask, you're not going to get it. So if you do ask, you may not get it, but you could.
00:11:11
Speaker
And so you're the only one who can advocate for your brand and make sure that you're getting the opportunities you deserve. And so without asking, you're not going to get that support. So we always recommend asking and then giving a deep discount with very little lift. So they're not measuring and therefore they are giving a really deep discount and it turns out they're not getting the lift they want.
00:11:36
Speaker
The way you can think about this and, you know, kind of throwing a, Bigger word around here, but I'll explain is your elasticity, right? The category or the brand may not have very much elasticity, which just means the consumer is going to buy it regardless of whether it's on promotion or not, or maybe the price is so high that it really requires a deep discount to move the needle. And so without knowing what's going to move the needle, um you're going to continue to run promotions that are just throwing good money after bad.
00:12:10
Speaker
Using the wrong tactic for the channel or retailer. This is another common mistake we see. So maybe you're running an EDLP at a retailer that will tell you outright they're a high-low retailer, or maybe you're running a high-low, which means you know you're on promotion and off.
00:12:27
Speaker
um and you're running EDLPs at those retailers. So, you know, using the wrong tactic um for the channel or the retailer, that's one of the common mistakes we see. And finally is just skipping your post-promotional event analysis altogether. And I understand we're all so very busy.
00:12:46
Speaker
There's so much going on. But if you're missing doing that post-promotion analysis and looking at what worked and what didn't, then you're really... just doing yourself and your brand and your team a disservice. All right, so I want to just share a story that hopefully helps paint the picture of what I'm talking about when I say some of these common mistakes. And so we had a brand who joined. They weren't doing anything with post-promotion analysis, but they came to us because their trade spend was over budget and
00:13:18
Speaker
They were under budget on revenue, and they really knew that they had an opportunity to get things under control and make better decisions with the data going forward. And so when they joined us, we dove in they dove into their data to really understand the last six events, which I think covered their prior year. And they were able to see that in those events,
00:13:43
Speaker
only one out of the five events actually drove profitability. It actually drove an ah ROI. And what was shocking when they looked at this was that event also performed very well from a revenue perspective.
00:13:58
Speaker
What was surprising for them as well was some of their other events, like like a BOGO they ran actually didn't drive as much lift, which was kind of mind boggling, but they were able to see with the detail in the data that the BOGO didn't drive as much sales.
00:14:16
Speaker
And it also, of course, was not profitable. So with this as an outcome, they were able to walk away and say, okay, I can repeat this event on an ongoing basis.
00:14:28
Speaker
Right. They may still have different reasons to run different events throughout the year, but now they know they want to run that one as much as it makes sense in their strategy, which I think ended up being like three out of five events going forward.
00:14:41
Speaker
And so they were able to turn their trade rates around, grow sales, and really achieve the goals that they were trying to achieve. And you know i think for them, this was the aha moment that you know shooting from the hip and going with the gut was not working.
00:15:01
Speaker
But when they really sat down, reviewed the data, which didn't take a lot of time, and understand which events were driving profitability and ROI, they were ah able to make better decisions going forward.
00:15:15
Speaker
So the takeaway is when you don't evaluate your promotions and we're just running and gunning or we don't have the time, um you end up throwing good money after bad and you're burying the strategies that actually work.
00:15:32
Speaker
So we want to make sure that we're not. And alternatively, that we're actually really leaning into analyzing the trends and understanding our ROI and then making wise choices going forward on what's going to drive the business forward.
00:15:48
Speaker
Okay, let's talk about how to optimize promotions with real data, not just a gut instinct. right You don't need more promotions. You need better promotions.
00:15:59
Speaker
And so what I want to do here is just talk about the 10 metrics that you want to track as an organization, specifically as it relates to an event or a retailer, so that you can begin to get the real data you need to optimize your promotions.
00:16:17
Speaker
So we'll start really basic, which is understanding, and I've talked about this a little bit already, your base units when you're not on promotion. I like to also look at it from a units per store per week.
00:16:31
Speaker
And so what are your base units per store per week? So let's say that could be 5,000 units that you sell overall. That could then come down to maybe five units per store per week.
00:16:45
Speaker
then we want to understand for an event how many units you sold during a promotion, right? So if you sold 5,000 base units on promoted, then you could have sold 10,000 during an event. So just your overall units sold during the event, which then leads to our third metric, which is your incremental unit lift.
00:17:10
Speaker
And that'll be the 10,000 units you sold on promo less your 5,000 for base, which gives you 5,000 in incremental units sold.
00:17:21
Speaker
That's your lift. Next, we want to understand our promo spend per unit. Okay, so I like to talk about this. I gave the OI and scan example.
00:17:32
Speaker
We want to make sure we're getting the total spend per unit, all in, including scan, OI, MCB, any of those to make sure we're capturing that By unit and then what were what are our points of distribution by retailer. So this will help you get that met that metric of units per store per week.
00:17:55
Speaker
So we want to understand how many doors are we in with the retailer in question. what are our points of distribution with the retailer? Sixth is making sure that we're capturing additional admin fees for an event. So retailer fee, distributor fee for said event, making sure we're not overlooking those because there are fees associated with running most of the events that we run.
00:18:24
Speaker
And then seventh We want to understand other event costs that we are going to see um or that we want to make sure we're capturing as we're thinking about our trade costs for that event. And again, that could be ads, could be displays, could be an EDLP that you're overlaying on top of, but making sure we're capturing those additional event costs.
00:18:46
Speaker
We want to make sure that we're understanding. So I talked baseline. um You know, what's your base without when you're not on promotion. This one, number eight, is understanding your baseline, but then ah also looking at what was your post-promotion baseline.
00:19:06
Speaker
Did we see an uptick after the event? Perhaps you drove trial or stole some share.
Key metrics for promotion optimization
00:19:12
Speaker
And understanding this is going to help us make decisions going forward on what events were successful and achieved the outcome, achieved the purpose of promotion.
00:19:24
Speaker
said event. We want to understand the ah ROI of the event. So a lot of these metrics we just talked about can then go into your true ROI calculation and you can understand if that event was above breakeven at breakeven or below.
00:19:40
Speaker
Finally, trade spend by retailer. We want to know at the highest level, um even if we're talking about a distributor, looking at the indirect retailer level and understanding what's my trade spend with them, my revenue,
00:19:55
Speaker
my trade spend dollars, and therefore my rate? Did I have a 10% rate with them, 15, 20, 25? What was my rate from a trade spend perspective with that retailer?
00:20:06
Speaker
So those are the 10 metrics that you're gonna wanna track so that you can start optimizing promotions with real data in hand. And then I just wanted to share a quick example of where I've seen this come in handy. So we had someone join TrueUp who really didn't have this data before joining TrueUp in terms of having their deduction data broken into trade spend data by retailer, by item. um So just not granular.
00:20:38
Speaker
And they would go into their trade shows And they'd come across a couple hundred retailers throughout those trade shows. And the retailers would come in, they'd have all the data in front of them.
00:20:51
Speaker
They'd start negotiating on the next event they wanted to run with this um but this customer, with this brand. And they were on their heels. They didn't know what worked last time, whether or not they wanted to repeat those.
00:21:05
Speaker
They weren't actually sure if They did run the event that the retailer said they did. and I'm telling you, these people were buttoned up. It was just that they didn't have the data at their fingertips and they weren't reviewing it after the event to make sure that it ran the way they wanted it to run.
00:21:23
Speaker
And with TrueUp, they were able to go into that next trade show with the data for, let's say their 80-20 rule, their top five retailers, they knew were going to come through the booth and try to negotiate. And they had all the details right in front of them. The last event they ran at the last show,
00:21:43
Speaker
whether it was a success for them or not. Success in a lot of cases looked like they got an ah ROI. um In other cases, it was getting the display and beating out and stealing share from other ah brands. But at the end of the day, they were able to go into those conversations with the data in their hands.
00:22:04
Speaker
And what they told me as an outcome was they actually sold more product at higher margins. So they drove revenue coming out of the trade show and they made more money, more profit.
00:22:19
Speaker
And for them, this was obviously a win-win for the retailer. This was good because they drove more sales and likely got more profit from those sales. So at the end of the day, this was a win-win and really helped that brand come in and be data driven as they had the conversations in real time at a trade show.
00:22:38
Speaker
So what this tells us is you really want to make sure that you have the clarity, you have the data to be able to shift the spend as needed to drive top line and bottom line.
Measuring for true profitability
00:22:51
Speaker
Making sure that we're not cutting stuff that does work and we're cutting the ones that don't and redeploying that money towards things that are going to drive growth. All right, well, I hope this was helpful for you as you begin to think about or continue to think about how can I optimize my promotions to drive more sales and profit?
00:23:11
Speaker
So a couple takeaways, make sure we ah just touch on what were some of the most important things we talked about. Most brands aren't measuring promotional effectiveness the right way.
00:23:23
Speaker
So we want to make sure we're measuring it with data Looking at sales lift alone or revenue is not good enough. It doesn't tell the whole story. Are we getting the margins at the end of the day? Are we driving profit in the business?
00:23:39
Speaker
We talked about some of the common pitfalls we see brands fall into, like not like copying last year's events or not reviewing the data post-promotion.
00:23:52
Speaker
We talked about what are the right metrics that we want to track. So look back at those 10 metrics we discussed and think about how they can drive a clear ah ROI in your business and help you evaluate which events did drive an ah ROI and what you want to continue to do and what you want to stop doing.
00:24:12
Speaker
We talked about the promo ah ROI framework, which can help you get started right now. We also talked about considering the four examples of the purposes for our event.
00:24:26
Speaker
This will help you and your team calibrate and really understand what is the outcome we're looking for and what's the purpose of the event that we're gonna drive, that we're gonna run with the retailer. Because if we're not thinking about the outcome and the purpose, then we're just doing a promotion for the sake of doing a promotion.
Cutting ineffective promotions
00:24:46
Speaker
The truth is every brand runs promotions. The best ones are ruthlessly measuring what works and cutting what doesn't. This is a highly competitive marketplace.
00:24:58
Speaker
Don't get left in the dust. This can be your advantage. Otherwise, you're gonna be at a disadvantage.
Subscribe for more insights
00:25:06
Speaker
If you're ready to get serious about evaluating your promotions, or reach out on LinkedIn. I'd love to chat.
00:25:12
Speaker
Let's talk.
00:25:16
Speaker
Thanks for tuning in to the CPG Trade Spin podcast. If you found today's episode helpful, be sure to subscribe so you never miss a conversation. And let's keep the conversation going. Follow us on Instagram, Facebook, TikTok, and LinkedIn at CPG Trade Spin podcast for more insights, updates, and behind the scenes content.
00:25:38
Speaker
See you next time.