The impact of promotions on
sales is usually short-term and is assessed via analysis of baseline
sales and sales gains, and metrics such as discount elasticity of
demand, and discount cross elasticity of demand (cannibalization).
Baseline sales or base volume is the
expected sales volume in the absence of short-term causal influences such as
promotions. It is a function of manufacturers’ marketing actions such as
regular price, advertising and distribution, and other factors including
competitor activities. Also as previously mentioned, the baseline is influenced by
the historical levels of promotions. If a brand has a history of recurring
promotional activity, consumers lie in wait for the deals, leading to the
lowering of the baseline.
Sales gain/loss or incremental volume
is the sales volume above the baseline. It is the gain or loss in volume on
account of short-term causal factors, including temporary price reductions
(discounts), displays, features, distribution fluctuations (stock outs for
instance), seasonal factors and competitor activities, during that time
period.
