In-store liquor, beer, and wine promotions can be an effective marketing tool to improve sales; however, calculating sales lift and understanding the exact impact of a promotional campaign can be difficult. Consumer Packaged Goods (CPG) brands spend up to 20% of their total revenue on trade promotions. That is a significant investment, which makes it even more important to be able to measure which campaigns are successful. Calculating sales lift for alcohol brands may look different according to the type of campaign and specific business goals but there are some basic strategies that can be implemented.
Strategies for Measuring Retail Lift
Measuring promotional sales can be pretty straightforward. Essentially, you look at the sales numbers for the promoted item over the duration of the promotional period. The real challenge is understanding the starting baseline. There are three different ways to approach this problem.
- Sales Prior to Promotion
By comparing alcohol sales before the promotion to sales during the promotion, you can get a basic idea of baseline sales. While this approach is relatively easy and doesn’t require any complex calculations, it doesn’t take into account seasonal trends. This means that you can start measuring an item right when it is experiencing a lift due to seasonal trends, which would distort your perception of the baseline.
- 52 Week Sales Average
Another approach is to calculate an average number over an entire year of business. The potential problem with this method is that you will have to identify which items were promoted and then take these numbers out of the equation. For retailers who promote an average of 2,000 products per week, this can result in some tricky calculations. In addition, this method is not ideal for measuring new items because there is simply a lack of data. The only solution would be to compare like items to establish a probable baseline.
- Seasonal Average for Last Year
With this approach, there isn’t as much data involved and it does take into account seasonal variations. The main challenge for retailers is categorizing beer, wine, and spirits according to seasons and taking regionality into consideration since seasons can vary widely across the country.
Ultimately, there is no single best method. The key is to be sure to establish a baseline in order to more accurately calculate sales lift.
Calculating Sales Lift
Once a sales baseline has been established, you can begin to calculate lift in sales in order to understand the effectiveness of in-store promotions and make better marketing and advertising decisions. While a lift calculator can be used to measure different metrics, perhaps the easiest way to think about sales lift is in actual monetary sales. The equation is simple:
Actual Sales – Baseline Sales = Sales Lift
Measuring Effective Sales Promotions
When measuring the effectiveness of a sales promotion, there are a few different categories to consider. With presence measures, you simply track and record merchandising conditions. For example, if there was a temporary price reduction or added display, these sales would be considered promoted. All other sales are counted as non-promoted. Examining these numbers can give you an idea of how the promotions affected sales for your alcohol brand.
You can also look at impact measures, which tend to be more complicated. First, you have to look at historical data and come up with an estimate of the base volume. This gives you an idea of what sales might have been without the promotion. Next, the estimate is compared to the actual volume, which will give you incremental volume.
Total Volume – Base Volume = Incremental Volume
Keep in mind that only incremental and base sales can provide you with insight into what would have happened without the promotion. It is also important to keep in mind that this is a simplified version of measuring the effectiveness of sales promotions. Things can get more complicated once you begin looking at data for an entire market over a long period of time.
In-store promotions, such as point of purchase displays or tasting events, can be an effective way to boost sales on certain alcohol products, but you don’t want to blindly invest time and money into promotions. Calculating sales lift will provide you with the information you need to continue to implement effective marketing efforts. Crunching the numbers can be complex, but it is an essential part of any promotional strategy.
Why is calculating sales lift important?
Calculating sales lifts lets brands know whether or not their promotional efforts have been successful. This information is key to developing an effective marketing strategy and investing in the right tools.
How is retail lift measured?
Measuring retail lift starts with taking a look at the sales over the promotional period. This number is then compared to the baseline sales to establish retail lift.
How do you calculate sales lift?
Actual Sales – Baseline Sales = Sales Lift
How do you measure effective sales promotion?
You can measure impact or presence. To understand how sales would have been without the promotion, you will want to look at base sales. Total Volume – Base Volume = Incremental Volume.