One Blog |July 23, 2012 | POS Tracking Software
Calculating the Impact and Profitability of POS Marketing Campaigns
POS = Point of Success
If your goal with your Point-of-Sale (POS) Marketing initiatives is “to increase sales and profits” you have two ways to generate that increase at-retail:
Increase the number of transactions by:
- Increasing the number of visits by your current customers to the store, aisle and section where your products are sold
- Attracting new customers
- Converting shoppers, who do not buy, into buyers, or
Increase the size of tractions by:
- Increasing the number of your products purchased per visit
- Increasing the number of your more expensive products purchased per visit (Note 1)
According to POPAI’s 2012 buying habits research report: 76% of buying decisions are made at-retail. This new research validated POPAI’s original 1995 study – which concluded: 70% of buying decisions are made at the point-of-sale – and then some.
While POS Marketing should not be the only marketing to use, it is important to recognize that POS Marketing initiatives are critical to achieving the goal of lifting sales and increasing market share of your brand and products.
Simply put: tracked, measured, and managed POS is a key component for optimizing the media mix for branding and presentation which results in improved sales performance. There are numerous studies demonstrating the financial impact of optimized marketing performance.
Thanks to organizations and publications like POPAI, The Platt Retail Institute, The Coupon Clearing Bureau, GMA (The Grocery Manufacturers Association) and Adweek, among others, we have nearly 20 years’ worth of updated research that concludes:
- 76% of all in-store purchases are not preplanned; they are driven by point-of-sale promotions
An obvious conclusion is that you can increase the sales of your products by the “optimization” of POS materials. Next, it is pretty certain you can’t optimize something if you don’t measure it!
Measurement should include: tracking the total “POS lifecycle” from planning, ordering, production, costing, placement and compliance (“was the POS actually placed?”) all correlated to sales data. The data that is collected from measurement can then be used to determine the Impact and Profitability (ROI) of POS Marketing campaigns.
POS Campaign Sales Impact:
To demonstrate the impact of our POS campaign we can start with this formula:
POS Campaign Sales Impact = (POS Campaign Sales – Pre-POS Campaign Sales) / (Pre-POS Campaign sales x 100)
Using your product margins, seasonality impact and the results calculated by using this formula, you can determine the impact (value) of your POS investment.
POS Campaign Profitability:
After you determine the impact of your POS Marketing in lifting sales, you can calculate the ROI or profitability of the campaign with the following formula:
POS Campaign Profitability (ROI) = (POS Campaign Sales - Pre POS Campaign Sales) / POS Campaign Cost
You will, of course, find that not all POS Marketing Campaigns provide a sales increase; but at least they should be profitable. By measuring the past impact of your past POS initiatives, you will be better able to forecast the expected impact of your future POS campaigns, based on the correlation of campaign data to sales results.
And when you know that the cost of a campaign will far exceed the potential or actual lift in sales, you can decide to pass on the campaign, or ask your customer to buy more products.
Sales forecasts can be made with greater certainty when the impact of POS campaigns is factored into your sales formula. You will also learn that well executed POS marketing activity will increase sales of your products and increase your market share by reducing the sales of competing brands and products that have little or no POS support.
It’s worth repeating:
The financial impact of optimized POS marketing performance is substantial.
Note 1: “POP Measures Up: Learnings from the Supermarket Class of Trade,” Doug Adams, POPAI (2001)