Baseline Sales Analysis
Consumer Packaged Goods
The Challenge
The Client is a leading manufacturer of cosmetics, skincare and haircare products. They approached Management Science Associates, Inc. (MSA) wanting us to analyze the performance of their trade promotions. One of their reasons for coming to MSA was that they were specifically not satisfied with the base vs. incremental sales volume estimates they were receiving from their syndicated sales data provider. These baseline sales estimates were often higher than total sales volume, resulting in unrealistic, negative incremental sales estimates.
Members of their Trade Promotions Team felt they were wasting a lot of time on trying to come up with alternative calculations for better estimates of base sales volume. They knew more accurate baseline vs. incremental sales volume estimates would result in better ROI calculations of their trade promotion investments.
What Did MSA Do
MSA’s goal was to provide the Client with a consistent, accurate approach for measuring sales volume driven by trade promotions (i.e., incremental), while excluding brand marketing and temporal factors (i.e., base).
MSA tested and compared the results of several modeling methodologies to determine which approach would be best for the three years’ worth of weekly data available for the Client.
In the end, MSA used a model-based approach that decomposed sales into short-term incremental volume vs. base volume driven by loyalty/momentum, seasonality and marketing factors. For the modeled baseline estimates, MSA also considered trend and cyclical patterns, as well as factors related to distribution and competition. The models produced estimates by sub-brand and account.
The Results
- MSA shared the modeled results with the client, who compared them against estimates from a syndicated sales data provider.
- The client found MSA’s baseline estimates to be more consistent over time.
- The client also felt MSA’s results were more intuitive and easier to understand.
- MSA’s modeling solution is highly flexible, allowing “baseline” and “incremental” definitions to be customized by industry and product category, such as including FSIs in incremental volume alongside trade promotions.
For more information on this MSA solution, please contact Kevin Mason (kmason@msa.com), Vice President.
