Giant Consumer Products
Han Zhao
MBA 671
1. Complete Exhibit 3. Provide the answers in a table format.

Exhibit 3 part-1

Average Monthly Volume for:
D32
D16
When that item is ON Promotion
10,460,943
6,210,221
When that item is NOT ON Promotion
6,816,235
3,088,565
When NOTHING is ON Promotion
7,174,739
3,798,942
Incremental Volume from promotion
3,286,204
2,411,279
Revenue change from promotion
$6,901,028.19
$5,787,068.64
Variable Cost change from promotion
$2,431,790.89
$2,001,361.24
Promotion Cost change from promotion
$3,761,117.38
$4,305,342.54
Marketing Margin Change from promotion
$708,119.92
($519,635.13)
ROMI
19%
-12%

Part-2

Average Monthly Volume for:
D32
D16
When the other Dinardo's item is ON Promotion
5,740,724
424,648
When NOTHING is ON Promotion
7,174,738
3,798,942
Volume change from promotion of other item -1,434,014 -3,374,294
Revenue change from promotion of other item
($3,011,428.98)
($8,098,305.60)
Variable Cost change from promotion of other item
($1,061,170.21)
($2,800,664.02)
Promotion Cost change from promotion of other product
$19,122.30
$72,994.00
Marketing Margin Change from promotion of other product
($1,969,381.07)
($5,370,635.58)
Total Brand Impact from Promotion on Top-line Revenue

Total Effect of D32 Promotion
($1,197,277.41)

Total Effect of D16 Promotion

$2,775,639.66
Total Brand Impact from Promotion on Marketing Margin

Total Effect of D32 Promotion
($4,662,515.66)

Total Effect of D16 Promotion

($2,489,016.20)
ROMI
-124%
-58%

Part-3

Average Monthly Incremental Volume for Natural
705,252

Average % Store Promoting for Natural
7.63

Average Monthly Incremental Volume /Promo Point
92,431

Incremental Volume from 25% Promo Points
2,310,786

Revenue change from promotion
$6,701,280.08

Variable Cost change from promotion
$2,079,707.61

Promotion Cost change from promotion
$4,125,425.00

Marketing Margin Change from promotion
$496,147.47

ROMI
12%

2. Describe the concerns Capps raised regarding the use of trade promotions? To what extent should those concerns affect the “go” or “no-go” decisions to field a national sales promotion?
Recently, FFD has encountered a shortfall in sales volume and gross revenues. Allan Capps the CEO of GCP is hesitant about running a trade sales promotion with retailers or not. Believing that this approach might cheapen the brand, he has outlined several concerns: cannibalization, brand equity erosion, forward-buying, pass-through, and consumer stockpiling.
Cannibalization: is promoting one item and having any incremental volume come at the expense of another item. Thus one product may take sales from another product. With cannibalization, there is a reduction in the sales volume or market share of one product in terms of promoting a similar product by the same company. Thus, it is important to measure the ultimate return on a product with effect by cannibalization. For example, if McDonalds wants to open a new franchise in Muncie, the new franchise must take some of the market share or sales from the old franchise. In the case of GCP, Dinardo’s and Natural Meals should not have a serious threat of cross-brand cannibalization because they do not have large amount of cross-customers, and they have very distinctive product characteristics. Dinardo’s is used of high quality ingredients and seasonings that targets at customers who seek conventional palate; while Natural Meal targets more at health-conscious consumers. It has a good reputation in the field of producing natural, organic and low-fat frozen food. Thus, cannibalization in this case is minimal if go a sales promotion. Within the brand of Dinardo’s, there may be some degrees of cannibalization between D16 and D32, since they are same product just with different sizes. When evaluating the sales promotion performance on Dinardo’s, the cannibalization between D16 and D32 should be taken into consideration.
Brand Equity Erosion: is