By Wayne Viljoen, Sr. Director RGM and Analytics, MRA LLC
Introduction
In today’s competitive climate, consumer goods companies are facing new challenges and opportunities. Shoppers are more value-conscious than ever, trading down to private label or choosing deals over brands. At the same time, shelf space is tighter, and retailers expect better performance. That means every trade dollar must work harder.
This guide focuses on five key promotional fundamentals that can help deliver profitable growth and improve ROI: Depth, Frequency, Offer Type, Bundle, and Timing. These principles are based on real-world insights from Market Research Alliance (MRA) promotional optimization framework and provide a practical roadmap for smarter promotions.
Table of Contents
A. Promo Strategy: Know Your Product’s Elasticity
B. The 5 Promotion Fundamentals
- Depth: Balancing Discount with Profitability
- Frequency: Avoiding Diminishing Returns
- Offer Type: Matching Mechanics to Mindset
- Bundle: Building Scale Through Responsiveness
- Timing: Capitalizing on Seasonal and Holiday Elasticity
C. Conclusion: Rewriting the Promotional Playbook for a New Era
D. Partner with MRA
A. Promo Strategy: Know Your Product’s Elasticity
Before optimizing promotions, it’s critical to know how your product responds to price changes. Some products are highly responsive to promotions and benefit from deep discounts. Others don’t respond well and are better suited to stable pricing.
As the foundation of your pricing strategy, MRA recommends mapping each product or promoted product group (PPG) by its regular and promo price elasticity. This helps you determine whether to promote, how aggressively, or whether to take a different approach altogether.
Key Takeaway: This framework should be used to inform you about the role of promotions in your overall pricing strategy. Here’s a simple way to think about it:
- Hi-Lo: These products respond well to promotions. They can handle a higher base price but need occasional deep discounts to drive volume.
- Pricing Options: These respond to both regular and promo pricing. You’ll need a careful balance between discounting and base price moves.
- Low Response: These don’t move much with price changes. Promotions likely won’t pay off – focus on base pricing and profitability.
- EDLP (Everyday Low Price): These work best with stable, low prices and minimal promotion, if at all
To deliver a positive return, promotional elasticity usually needs to be stronger – typically more negative than -2.00. That’s because promotions must recover not just the revenue lost from selling at a lower price, but also the extra cost of trade funding that supports the deal.
Understanding these patterns ensures you spend trade dollars where they matter most. Once it has been established that promotions can play a strong role in driving profitable growth, attention should shift to optimization – how to best promote the portfolio.
B. The 5 Promotion Fundamentals
1. Depth: Balancing Discount with Profitability
Deep discounts can erode margins quickly, but shallow ones may fail to engage price-conscious shoppers. The greater the promotional elasticity, the deeper a promotional discount can be. Every PPG has a point where additional depth no longer delivers additional benefits. This is the point of diminishing returns, and it varies by product. Understanding this curve is key to determining the most efficient and profitable level of discounting.
PPG A should not be discounted, while PPG C exhibits strong promotional elasticity, delivering significant incremental profit up to a 37% discount threshold. PPG B is moderate and requires a shallower discount.
Key Takeaway: Identify the point of diminishing returns. Applying analytics to uncover these “efficient frontiers” is essential to protecting margins while remaining competitive.
2. Frequency: Avoiding Diminishing Returns
MRA has observed a steady and consistent year-over-year increase in promotional frequency, across many categories. Unlike popular belief, adding promotional weeks does not always yield growth. Over-promotion leads shoppers to wait for deal deals, which reduces lift and increases subsidization.
So, what then is the sweet spot? When frequency is optimized, it generates material incremental purchases.
Key Takeaway: In a market where every week counts, strategic promotional pacing can significantly enhance ROI. Avoid defaulting to the “1 more week” approach.
3. Offer Type: Matching Mechanics to Mindset
MRA thinks of offer type in two ways, the promotional mechanic, and in-store tactic.
Today, there are more offer types than the sales price (e.g. $3.99) – ranging from ‘buy gets’, ‘x-fors’, ‘save offs’, ‘save % offs’, and so on. What works for one PPG in one retailer, does not necessarily work for another. For example, 3 for $X’ deals may underperform in the face of rising unit prices and smaller baskets.
Additionally, inconsistent field execution can further dilute promotional. While it can be challenging to secure consistent execution of ‘Quality Promotions’ (Feature and/or Display), they are often the deciding factor separating a great promotion from a good one.
Key Takeaway: Use Post-Event Analytics (PEA) to identify the best offer types and ensure quality execution for the key events
4. Bundle: Building Scale Through Responsiveness
Bundling products can help manufacturers scale-up promotions. But not all combinations work. MRA’s post-event analytics show that certain product bundles create natural affinities, improving overall lift, basket size, and executional ease.
MRA’s proprietary modeling looks at lift combinations and cross-purchase (when available) to determine the most complimentary deal bundles.
Key Takeaway: Well-designed promotional bundles can increase overall promotional performance and elevate scale.
5. Timing: Capitalizing on Seasonal and Holiday Elasticity
Not to be confused with promotional frequency and duration, promotional timing is often the most overlooked lever – but one of the most powerful. How does one assign the optimal frequency to the 52 weeks of the calendar? A good promotional plan prioritizes the most important windows first.
The promotional performance of snacking multipacks, for example, can vary significantly between seasonal windows – often delivering much stronger results during the back-to-school period. Similarly, a PPG with winter seasonality may experience heightened demand during peak winter weeks if supported by well-timed promotions – or it may not, as promotions are unnecessary and the demand is already there.
Key Takeaway: Shift planning toward periods with higher responsiveness. Align promotions to when elasticity is peaking, not just based on available budgets or historical habit.
C. Conclusion: Rewriting the Promotional Playbook for a New Era
The path forward demands a strategic rethinking of the role of the 5 promotional fundamentals. In the current economic and competitive environment, success depends on knowing how deep to discount, how often to engage, how to structure offers, pair products, and time activation. Whether you are reassessing annual plans or building retailer-specific programs, the 5 promotional fundamentals outlined here provide a roadmap for smarter investment.
D. Partner with MRA
Market Research Alliance (MRA) partners with consumer goods manufacturers to apply advanced analytics powered by artificial intelligence (AI) and machine learning (ML) across all five promotional fundamentals. We know how to isolate the influence of each fundamental, quantifying its specific contribution to overall promotional performance. MRA delivers insight-driven strategies that improve both efficiency and impact – resulting in better plans.
Contact us today to learn how we can help optimize your promotional approach and deliver lasting results.
