Trade spend is typically the second or third largest line in an FMCG P&L, and it is routinely evaluated with a method that guarantees a flattering answer. Fixing the measurement usually reveals that a third of promotional spend is destroying value — which is uncomfortable, and also the most valuable finding available.

The baseline problem

Lift is incremental volume over what would have happened anyway. The trap is estimating "what would have happened anyway" from the immediately preceding weeks, which are contaminated by pre-promotion dips as trade holds back orders.

Build the baseline properly:

  • Use at least 52 weeks of history to capture seasonality.
  • Exclude all promoted weeks and the two weeks either side of them.
  • Fit a seasonal baseline to the remaining non-promoted weeks.
  • Validate by holding out a known non-promoted period and checking the fit.

The four effects you must separate

EffectWhat it isValue
IncrementalGenuinely new consumptionReal
Forward buyingConsumers/trade buying earlier than they would haveZero — it is borrowed from next period
CannibalisationVolume taken from your own other SKUsNegative
Brand switchingVolume taken from competitorsReal, and the only durable win

Reporting gross uplift without netting forward buying and cannibalisation is how a promotion that lost money gets celebrated.

The ROI calculation

Incremental volume  = Actual volume - Baseline volume - Forward buy adjustment
Incremental margin  = Incremental volume x Margin per unit at promo price
Promotion cost      = Trade discount + Display fee + Sampling + Wastage

Promotion ROI       = (Incremental margin - Promotion cost) / Promotion cost

An ROI above zero means the promotion paid for itself in-period. That is a low bar and it is not sufficient on its own — a promotion that pays back but trains consumers to buy only on deal has a long-run cost that does not appear in this equation.

The metric everyone forgets: percentage sold on deal

If more than about 40 per cent of your volume moves on promotion, the promoted price has become the reference price. Consumers no longer perceive the base price as fair, elasticity at base price collapses, and you have structurally lowered your realisable price. Track this number monthly by SKU; it is a leading indicator of brand damage and it is easy to compute.

Designing a promotion that can be measured

  • Hold out a control region. The cleanest measurement available. Choose regions matched on baseline trend, not on size.
  • Vary one mechanic at a time. Simultaneously changing depth, duration and display makes attribution impossible.
  • Fix the duration. Promotions that get extended informally destroy the baseline for the next cycle.
  • Record actual execution. Planned display compliance and actual display compliance differ by 20 to 40 points in most markets, and comparing results without knowing which outlets actually executed is meaningless.

Depth versus frequency

For most categories, a shallower discount run more often produces better ROI than a deep discount run rarely — up to the point where the discount is below the consumer's perception threshold, typically around 10 per cent, where it generates no response at all. The threshold is category-specific and worth establishing empirically once, then reusing.

What good looks like

A mature trade promotion process has a pre-agreed baseline method, a promotion calendar locked one quarter ahead, a post-evaluation completed within four weeks of every promotion, and a live list of mechanics that have been retired for poor ROI. The last one is the hardest culturally and the most valuable financially.