1)Using data in Exhibits 1 & 4 develop solution templates in Exhibit 3 for Sanchez.
From the table above, it is clear that the impact of a promotion cannot be considered in isolation. On the whole, the promotion has resulted in a loss instead of a profit for the Dinardo range of products. Considered in isolation a promotion on Dinardo 32 may look attractive but overall it’s a loss-making proposition.
2)Do you advise Sanchez to run a national sales promotion? If so, which one of the items the funds be allocated: Dinardo 32, dinardo 16 or natural meals?
Sanchez can run a sales promotion for Natural meals. This is the only profitable option as can be seen from Solution template Part-3 in the table above.
3)Prepare Sanchez for additional strategic/ tactical questions that he anticipates from Flatt given at the end of case.
a)The promotion of Natural Meals would be a win for FFD, the retailer as well as the consumer. FFD gains due to a positive increase in marketing margin due to the promotion. For the retailer, the benefit will be on account of the increased spending by FFD for promotional activities. The margins on Natural Meals are higher for retailers and an increase in volumes would directly have a positive impact on retailers’ revenues. The consumer benefits due to the reduced prices from the promotion.
b)FFD should go with the pay for performance approach for promotion of Natural Meals. The price on the box of the product should not be reduced and instead a discount must be offered at the time of billing. The retailer should then be reimbursed for the discounts offered to customers. This would help retain the premium positioning of FFD’s products and avoid customers from looking at the products to be available at a deal during subsequent purchases.