Planning Hair-Care Promotion

A retailer is planning promotion for it’s Hair care category on it’s private label brand. The company is looking at 2 options:
 “3 for 2 Combo-pack” in the month of December
 “Gift with Purchase” in the month of December
Though the promotion would be only for December, the retailer feels that the impact would be felt even afterwards.

“3 for 2 Combo-pack”
This offer would enable consumers to buy the combo-pack of Shampoo, Conditioner and Hair-Gel. The benefit of combo-pack to the customer is that Hair-Gel is available for free. The cost of
communicating this scheme through mailers, flyers is Rs. 10,000. Following give the details of estimated sales during the promotion period and immediately after the promotions.

Expected Sales if "3 for 2"

Expected Sales quantity without promotion is run in Gross
MRP promotions December Margin
Item (in Rs) December January February December January February
"3 for 2" combo
pack 252 150
Shampoo 180 ml 120 143 93 138 109 137 187 12%
Conditioner 180ml 132 47 38 49 35 65 72 18%
Hair Gel 175 ml 97 68 74 72 56 97 102 21%

“Gift with Purchase”

A GWP was an offer in which customers were given a product sample along with a regular purchase. For example, a sample size of conditioner would be packaged with a
regular bottle of shampoo. The cost of communicating this scheme through mailers, flyers is Rs. 10,000. Following give the details of the sample cost and the estimated sales
during the promotion period and immediately after the promotions.

Expected Sales without “GWP” promotions

Expected Sales quantity without promotions

Item MRP in Rs. December January February
Shampoo 180 ml 120 143 93 138
Conditioner 180ml 132 47 38 49
Hair Gel 175 ml 97 68 74 72
Cost of Samples

Sample Cost in Rs
Shampoo Sample 60 ml 48
Conditioner Sample 60 ml 52
Hair Gel Sample 60 ml 38

Expected Sales if "Gift with Purchase" promotion is run in December

Expected Sales if "Gift with Purchase" promotion is run in December

Item December January February
Shampoo 180 ml with
Conditioner 60ml 152
Shampoo 180ml with Hair
Gel 60 ml 62
Conditioner 180 ml with
Shampoo 60 ml 84
Conditioner 180 ml with
Hair Gel 60 ml 8
Hair Gel 175 ml with
Shampoo 60 ml 74
Hair Gel 175 ml with
Conditioner 60 ml 13
Shampoo 180 ml 113 156
Conditioner 180ml 54 49
Hair Gel 175 ml 79 82

1. Calculate the following:

 Revenues and Gross margin for the period December to February without promotions
 Revenues and Gross margin for the period December to February with “3 for 2 combo-pack” promotions.
 Revenues and Gross margin for the period December to February with “GWP” promotions.
2. Evaluate the medium term impact of each promotion scheme.