Module: The Post Promotion Effect¶
Executive summary¶
Post promo effect is a term that describes a sale decrease due to market saturation after a promo activity finishes. The market has been saturated during a promo activity, when there were better conditions for buyers. Post promo effect size is influenced by the portfolio elasticity to a price change. The more our customers react to a price change, the more the sales drop after a promo activity is finished. Portfolio expiration dates also influence post promo effect. The longer the durability of the goods is, the better possibility the customer has for a stock level increase and sales decrease will last longer after a promo activity is finished.
The main reason to evaluate a post promo effect is to define a real impact of a promo activity and sales baseline cleaning, co that the negative influence of the promo activity is diminished and forecast uses cleaned data as an input.
Functional description¶
When evaluating the post-promo effect we are interested in:
- duration of the decrease
- volume of the decrease
The calculation of the post promo effect duration may be switched off. In that case a default duration is selected - this settings is set during implementation phase of the project.
In cases when post promo effect duration is calculated, the sales volume in a day is evaluated against an usual non-promo day. If the sale is lower than an usual sale, it is considered to be still a part of a post-promo effect period. In case that another promo activity starts within this time period, post promo effect is not valid for this time period.
The post promo effect size is calculated from sale decrease in the time period of the post promo effect duration. It is a negative number and its value cannot be (in absolute numbers) higher than the value of an increase thanks to a promo activity.