Giant Consumer Products Frozen food division (FFD) is the key contributor to Giant Consumer Product's (GCP) profits

which have successfully grown over the past 30 years. The company has two main products lines, Italian frozen dinner DinardoTM, and organic frozen foods Natural mealsTM . However, recently FFD has encountered a shortfall in sales volume and gross revenues. Now, Allan Capps the CEO of GCP is hesitant about running a trade sales promotion with retailers. And if so, which brand should the marketing funds be allocated to? 1. Using the data in exhibits 1 & 4 (may use spreadsheet), develop solution templates in case exhibit 3 for Sanchez. How would this help in solving his problem?

Promotional Budget: There are some ways in which companies set their promotional budgets: 1. They set the figure at what they spent last year, plus a little bit more for inflation and any expected market growth. 2. They set it as a fixed percentage of turnover, established over time for the company and industry. 3. They set it to be the same as, or in ratio to, what major competitors spend. 4. They set it as the amount needed to achieve the defined marketing objectives that is, what is needed, no more, no less. Timing & Communication:

Sales promotions are often run to meet short-term market needs. They must also work with the lead times of intermediaries and suppliers. This makes timing a critical issue and thee following time constraints need to be taken into account:

when the promotion is needed to impact on the consumer; how long should promotion last; how that relates to the purchase frequency of your product or service; what lead times intermediaries require; how long you have for print and merchandise delivery; when you need your promotional concepts ready.

Every promotion success is lies on successful mass communication to reach the customers effectively.

2. Do you advise Sanchez to run a national sales promotion? If so, which one of the items the funds be allocated: Dinardo 32, dinardo 16 or natural meals? Yes, it is recommended to run national sales promotion. The fund should be allocated to Natural meals based on the workout below, which gives 165% on ROMI Total Brand Impact from Promotion on Top-line Revenue Total Effect of D32 Promotion Total Effect of D16 Promotion Total Brand Impact from Promotion on Marketing Margin Total Effect of D32 Promotion Total Effect of D16 Promotion ROMI $ 2,576,012. 75 $ (879,443. 14) -20% $ (1,197,278 .37) $ 2,775,636 .96

71%

Brand Awareness campaign Natural Meals Average Monthly Incremental Volume for Natural Meals Average % Store Promoting for Natural Average Monthly Incremental Volume /Promo Point Incremental Volume from 25% Promo Points Revenue change from promotion Variable Cost change from promotion Promotion Cost change from 705,252 7.61 92,674 2,316,859 $ 6,718,892 $ 2,085,173 $

promotion Marketing Margin Change from promotion ROMI

4,125,425 $ 508,294 165%

When comparing Dinardo 16 viz a viz Dinardo 32, we can arrive at the following: Promoting Dinardo 32 marketing margin is increased by almost 3 Millions in comparison with Dinardo 16 which increased Marketing Margin by almost 1 million on promotion. Calculating brand impact on top line revenue, Dinardo 32 is decreasing the revenue and Dinardo 16 has positive impact on it. Dinardo 32 has a larger negative impact on Marketing Margin, which is actually the return on marketing investment. Dinardo 16 has smaller impact as compared to Dinardo 32. It shows that Dinardo 16 is not cannibalizing Dinardo 32 on promotions but promoting Dinardo 32 means cannibalizing the other brand For brand awareness of Natural meals, Giant should also consider like : Coupon Offering Pay for Performance In-store Product Placement Repackaging for Natural Meals 32 oz portions Brand Recognition/Brand Loyalty

3. Prepare Sanchez for additional strategic/ tactical questions that he anticipates from Flatt given at the end of case. A) Would the promotion end up being a Win for not only FFD, but also for retailers and consumers? The promotion will expectedly have 3 impacts Increase in overall growth (market growth), Purchase time acceleration (stockpiling) and Brand switching (potentially including switching from GCPs products too).

These three points in themselves explains the interest of three parties i.e. firm, retailers and customers. Start with the firm, as promotions will improve the possibility of brand switching this implies that there is a long term incentive in it in the shape of a greater customer base. Stockpiling at lower cost than regular days means an increased chance of saving money on favourite products and will leave customer better off at the end of a shopping day. And as the market will grow the retailers will have an increased traffic for FFDs product line and increased traffic means increase in their own revenue. Retailers can attract more traffic on promotion and FFD can earn a marketing margin on promotion on Dinardo 16 and Natural Meal. FFD s popularity makes it in a strong position to influence retailers to promote their desired brand, retailers on the other hand have sensed a upward trend in the sails of GCPs products. Promoting these products will intern increase traffic in their areas and will increase their sales. And as for customers, they can stockpile things at lower rates than regular days and save valuable dollars. This might cannibalize sales of FFDs other products but this opportunity cost will be little as compared to the customer this promotion will get who before will be using some other companys product. In the short run this promotion will just give increased ROMI to the company but in the long run these increased ROMI can be used to build brand image in a better way than now by ways such as advertising, packaging enhancements and new product introduction. To get the best from this promotion the company should promote Dinardo 32 because by promoting that FFD can attain their required

targets without cannibalizing sales of Dinardo 16 and Natural Meals. That might to some extent reduce margins of other FFD products but the increases in total sale they will bring are worth this opportunity cost. Therefore promotion at this instance will be a win situation for all parties.

B) How should FFD structure the promotion? Should FFD go with the off invoice pricing that retailers often prefered having the manufacturer tempora rily reduce the price-to-retailer (PTR) of a given item for a specified time so that retailers could purchase it in the quality desired or should FFD stick with the pay-forperformance approach? Under the pay-for-performance approach, retailers were compensated only for the actual amount that they should, retailers were compensated only for the actual amount that they sold during the promotional period, as verified by registered scanner data.) Alternatively, should FFD compensate retailers only if they hit some pre-estabilished target? Identifying a joint market involves thinking about your customers in broader terms, both in relation to other people who are trying to sell to them and in relation to people you are trying to reach who are already customers of someone else. The key to planning a joint promotion is an accurate profile of your existing customers. The key elements in this profile are:

demographic data age, sex, social class, geographical distribution; their relationship to you how often they buy, at what price level, with what degree of loyalty; their needs, interests and aspirations other things they buy, what they want from life.

Promotion start with Off-the-Shelf Offers and them increase to Price promotions and Prize promotions. The optimum strategy here will be pay-for-promotion. Retailers should only be compensated only for the actual sales during the promotion period. This will increase the sails and retailers will indirectly help in increasing sales because increased sales mean increased compensations for them. Therefore it will create a win-win situation for both parties and consumers will get their favourite products at reduced price. Compensation should not be based on set targets instead they should be given on the total sales a retailer makes.