Portion sold on promotion that would have been sold anyway. This can be expressed as what percent of promoted was subsidized or what percent of total sales. Calculated as (Promoted Sales – Incremental Sales) / Promoted Sales OR (Promoted Sales – Incremental Sales) / Total Sales. Lower is better. The Efficiency measure is a related measure.
Reference articles: Subsidized Sales: The Missing Link.
Trying to figure out a negative subsidized volume number :
Total dollars = $ 2271
Promo $ = 0
Baseline dollars = $ 2071
Incremental dollars = $ 201
Subsidized dollars = $ – 201
Why does it say neg subsidized, if $201 is incremental ?
Just in terms of the math, you’ll see negative Subsidized Dollars whenever you have positive Incremental Dollars but little or no trade promotion activity. That’s because:
Subsidized Dollars = Promoted Dollars – Incremental Dollars
So now you may be asking “Ok, but how can I have Incremental Dollars when there was no trade promotion? Isn’t Incremental Dollars DUE to trade promotion?”
To review the calculation for Incremental Dollars (which you probably already know):
Incremental Dollars = Total Dollars – Base Dollars
Base Dollars is estimated by IRI/Nielsen based on sales in prior weeks when no promotion was present. Therefore, another way to think about Base Dollars is expected sales without trade promotion, based on a past average.
Given that it’s based on the PAST and it’s an AVERAGE, you can imagine that you’ll have weeks where there’s no promotion but total sales are still higher than base sales. Here are just a few of the reasons that might happen:
1) It’s just a randomly better than average week. There’s going to be some noise on a week to week basis, especially at an individual UPC level for a single retailer.
2) One of your competitors is doing something that is helping your sales (like they had a bunch of out of stocks on a competitive product).
3) You’ve just cranked up a bunch of advertising or other consumer marketing. Your true base sales may actually be higher but the Nielsen/IRI base sales estimate reflects the past and it’s not incorporating this new information yet.
Hope this helps! Let us know if you have additional questions.
First of all, thanks for your website. I recently rediscovered it and its very useful.
My question is about subsidized volume. Above you calculate it as(Promoted Sales – Incremental Sales) / Promoted Sales.
Would it be useful to swap out the dominator with unit sales?
This way we would not see what % was subsidized out of the promoted volume but out of all volume.
Is it useful/accurate to look at it both ways?
Hello,
In your “Subsidized Sales: The Missing Link” article you stated % Subsidized Sales = (Promoted Sales – Incremental Sales) / Total Sales.
In the measure above, it’s calculated as (Promoted Sales – Incremental Sales) / Promoted Sale.
To clarify, should the denominator be Total Sales, or Promo Sales?
Thank you for all your help
Thanks for pointing this out! Either way of calculating it is analytically useful, depending on the context. Do you want to focus just on the promotion universe or look at the subsized sales in respect to all components of total sales? If you have this measure in your database, you should make sure to clarify how it is calculated. Some databases do not have a subsidized sales measure in which case you can opt to calculate it in whatever way is more useful for your analysis.