An investor can receive income from shares in two ways: through an increase in the market value of shares and through dividends.
The investor's main income from shares is the increase in the stock price. If a company is doing well, its revenue and profits are growing, the company is developing, paying dividends, which are also growing, this has a positive effect on the share price, and it is growing. An investor, seeing this state of affairs and assessing the prospects, buys companies. If the company continues to do well, the share price rises, then the investor can sell the shares at a higher price and make a profit.
It consists of an increase in the market value of shares and dividends. The return on shares shows how much income, in percentage or nominal terms, the shares brought. Profitability in a general sense is calculated as the amount of profit divided by the amount of invested funds. Since you can get not only a profit but also a loss on shares, the return can be negative. Let's look at how to determine stock returns.
Dividend yield of shares
Dividend yield of shares is characterized by the ratio of the dividend size to the share price. Dividend yield is calculated using the formula:
d — dividend amount for the year
p — market price of the share
For example, dividends on Gazprom shares for 2013 were equal to 7.2 rubles. The share price is 130 rubles.
Dividend yield is 7.2/130*100%=5.53%
Market (current) stock return
The market return of shares, that is, due to the increase in market value, is calculated using the formula:
P1 - sale price of the share
P0 — share purchase price
The current yield of a stock is also calculated and shows the return that an investor would receive if he sold the stock at the current market price.
If the purchase price of Gazprom shares is 120 rubles, and the sale price is 135 rubles, then the yield is equal to (135-120)/120*100%=12.5%.
Total stock return
Total return consists of dividends and market value growth
Let's take the same numbers as in the previous example: (7.2 + (135-120))/120*100% = 18.5%
Return on shares as a percentage per annum
You can own a share for either less than or more than a year. Therefore, in order to compare the profitability of shares with the profitability of another instrument, for example, a deposit, it must be brought to an equivalent value - the yield as a percentage per annum. To do this, the yield is multiplied by the coefficient k = 365/number of days of holding the share. If the stock was held for 250 days, the return as a percentage per annum is calculated as follows:
(7,2 + (135-120))/120 * 365/250 * 100% = 27,01%
Striving to increase the average bill now is not necessary and even dangerous. Expensive offers and additional sales during a crisis will only scare away. 90% of your efforts should be focused on retaining existing guests and attracting new customers to increase the number of transactions. A competent restaurateur’s arsenal should now consist mainly of “attractive” and “returnable” promotions.
HOW TO ATTRACT NEW GUESTS
The main tools for attracting guests are a discount coupon, a gift with purchase, and a low “entrance” price.
In order to attract new guests, it is possible to temporarily “give up” the average bill and cost. Yes, the check may go down, but the cost may rise. But if you are sure that new guests will actually come to the restaurant as a result of the promotion, then this is a normal and even healthy situation.
HOW TO RETURN GUESTS
There are two types of return mechanics: single return (come back - get it) or multiple return (collect 5 stamps - get it).
- We focus the first type of mechanics on guests who have visited you for the first time: we offer them a significant privilege with the expectation that next time they will come with a company (second coffee as a gift).
- It is advisable to offer multiple return promotions to guests who periodically visit your establishment, with a hint that you would be glad to see them more often. Accordingly, you need to think about ways to promote promotions in order to hit the target.
Promotions are a powerful tool, especially in retail. Many of us have repeatedly puzzled over how to attract new customers, increase the average bill, increase sales turnover, etc. I will talk about methods of planning and forecasting promotions in the following articles. Subscribe to my blog so you don't miss this topic. Today I will tell you how to analyze the effectiveness of promotions using a real example.
Promotions (important to know)
I think every marketing manager has planned or invented a new promotion at least once in their life. As a rule, a promotion in a retail network is a reduction in prices for certain goods from different product groups. The goal is to attract new customers or bring back old ones. And the task of a promotion is not to be unprofitable, moreover, it must be profitable (ROI). Reducing prices on a dozen products should pay for the rest of the products by increasing sales across the entire assortment.
Analysis of the effectiveness of promotions
There are quite a lot of types (communications) of promotions, I will tell you about such communication as “leaflets (with a reduction in the price of a product).” The principle of analysis can be applied to any promotion and in some cases even to analyze the effectiveness of advertising.
And so, we have an assortment for you. You have already chosen which and how many SKUs to send to the flyer. If you haven't chosen it yet, use it. The purpose of selection is the most popular products that overlap with your competitors. But more on this in the following articles (subscribe to the newsletter so as not to miss the methodology for planning and forecasting promotions)
Let’s assume that we offered a discount on promotional items for two weeks. For analysis, we need a weekly sales report. It is logically clear that the analysis period will be two weeks before the leaflet is distributed, and two weeks during the leaflet distribution. If you advertised the promo for only one day, or did not advertise at all, but simply put a pack of leaflets at the checkout, the matter does not change the essence. We take exactly this period. In other words, to analyze the promo, we need the promo sales period and the same period before the promo.
Necessary indicators for analysis
For analysis we need the following sales indicators:
Number of customers (number of receipts)
Sales volume (in pieces)
Turnover (Revenue)
Purchase price
Selling price
And for economic analysis you will need to know the costs of printing and distributing leaflets (or advertising). If you are not able to obtain this data, subscribe to my blog, I will definitely write an article about a simplified analysis of the effectiveness of promotions.
We analyze the effectiveness of the promotion in several stages:
Stock analysis
Analysis of promotions by store
Sales analysis
Conclusion (effectiveness of the promotion)
Now everything is in order. The example is taken from the Smak retail chain, which is no longer operating, so I decided to make this data public.
Stock analysis
We select a product that participated in the promotion and record sales for these items for two periods using the above indicators. It doesn’t matter what database you have, 1C, Axsapta or any other. We need to get the following, where the gross income can be calculated by the formula:
Now let’s calculate the coefficients and changes in the indicators of promotional products. To do this, we add the header of our analysis and enter the necessary formulas for the calculation
I won’t prescribe the formulas; they are quite simple and involve division and subtraction. But for those who find it difficult to imagine, you can download this analysis at the end of the article and view all the formulas or simply use the template.
Here, too, in my opinion, the formulas are not difficult, and as for novice analysts, you know what to do. Right - download this template at the end of the article.
We stretch the formulas throughout the promotional assortment and for now forget about this table and move on to the next one.
Analysis of promotions by store
In principle, we will need the same report as above, but with a breakdown by store.
We also add the table header and enter the formulas. You already know what to do with formulas
We stretch the formulas for all items and move on to the next table.
Sales analysis
Chickpeas couldn't be simpler! We take a sales report and get the following data:
We write down the header of the report and enter the formulas in % ratio:
Well, we have received the necessary data, now we can analyze it and draw conclusions.
Conclusion (Effectiveness of the promotion)
We make several signs that will show the results of the effectiveness of the promotion. We insert into these tables the data obtained from the calculations that we made with you. For what formulas to use, see the template, which you can download at the end of the article.
Well, the analysis is ready! What conclusions can be drawn? Is the effectiveness of the event visible? Everything is obvious and simple.
The cost of the promotion cost 64,571 rubles, taking into account the discount and printing and distribution costs. This figure is not always negative. It can also be made positive, but this depends on many other factors, for example, on the purchasing department.
Yes, we spent money, but what did we get in return?
An increase in all indicators, we see that the number of customers has increased, the number of purchases has increased, and the sales volume has increased across the entire assortment, and not just promotional products.
I hope this article will help you in analyzing your activities. Good luck and more buyers!
This article will focus on assessing the effectiveness of marketing campaigns and the relationships between indicators. The following questions will be considered:
- the impact of the size of the discount and variable costs on sales growth and marginal profit;
- accounting for clients additionally attracted through the promotion in the results of the promotion;
- taking into account seasonality indicators to obtain net growth indicators;
- taking into account related products to assess the overall effect of the promotion.
EFFECTIVENESS OF MARKETING ACTIONS
By marketing promotion we mean a fixed percentage discount on a group of products.
In our opinion, the goal of a marketing campaign is one - to increase profits, and there may be several reasons for its implementation:
- sale of illiquid goods. A good example is sales of old collections by clothing stores. The sale is needed to free up part of the sales floor for a new collection and not write off old goods;
- reduction of losses. An example is discounts on goods with a low remaining shelf life in grocery chains. If we accept the fact that the trade margin on a product is on average 25%, then the loss of one unit at cost is equal to the marginal profit received from four units of the product. Therefore, selling part of a product for which there is a high risk of loss at cost may be a more profitable solution than maintaining a regular price for it;
- increase in sales. This type of promotion means that we have no problems with promotional items. By launching a promotion, we want to increase sales and make additional profits.
Let's dwell on the last point and consider the option of providing a discount on the entire range. For example, let's take the following conditions:
- product price without discount - 1000 rubles;
- sales - 1000 pcs.;
- variable costs - 80% of the price;
- discount - 15%.
Revenue:
- before the promotion:
1000 rub. × 1000 pcs. = 1 million rubles;
- during the promotion period:
1000 rub. × (100% - 15%) × 1000 pcs. + (100% + sales increase in units/%).
In order for revenue during the promotion period to be no less than before the promotion, you need to ensure an increase of 17.6% of sales in units:
1000 rub. × (100% - 15%) × 1000 pcs. × (100% + increase in sales in units/%) = 1 million rubles.
1000 pcs. × (100% + increase in sales in units/%) = 1 million rubles. / 850
100% + increase in sales in units/% = 1000 / 850
Sales increase in units ≈ 17,6 % .
Let's consider what increase in sales in units is necessary for the promotion to pay off in terms of marginal profit.
Marginal profit:
- before the promotion:
(1000 rub. - 800 rub.) × 1000 pcs. = 200 thousand rubles;
- during the promotion period:
(1000 rub. × (100% - 15%) - 800 rub.) × 1000 pcs. (100% + increase in sales in units/%).
Let us equate to the marginal profit before the promotion, simplifying the left side of the equation:
50 rub. × 1000 pcs. (100% + increase in sales in units/%) = 200 thousand rubles.
100% + increase in sales in units/% = 4
Increase in sales in units/% = 3 units. = 300%.
Figure 1 shows the relationship between the increase in sales in units and the increase in revenue and marginal profit as a percentage for a given discount amount and the share of variable costs in the original price.
Let's compare how the break-even point of a stock changes with changing parameters of the discount percentage and margin (Fig. 2). Calculations for other discount parameters and the share of variable costs in the price are similar to the calculations given above.
.PNG)
As can be seen in Fig. 2, when the share of variable costs in the price changes from 80 to 50% and a discount of 15%, the promotion becomes profitable with an increase in sales in units from 40 to 50%.
With a similar share of variable costs and an increase in the depth of the discount to 30%, an increase in sales in units is required by 150%, or 2.5 times.
Conclusion: The higher the share of variable costs in the price, the greater the increase in sales in units required to pay off the promotion. From this point of view, this mechanic is more suitable for the service industry, where the share of variable costs is lower than for a business with a high share of product costs.
Important point: When analyzing stock performance, two additional points must be taken into account:
- Attraction of new clients;
- purchase of related products.
INFLUENCE OF ATTRACTING NEW CLIENTS ON THE EFFECTIVENESS OF THE PROMOTION
An increase in sales in units is possible in two cases:
- purchases by customers attracted by the promotion;
- an increase in the number of purchases by customers who would have come without the promotion.
While a product business can count on increased consumption by existing customers, this corresponds to a lesser extent to the service industry (you can’t get a haircut twice in a hairdresser).
NOTE
The number of new customers who came during the promotion period is easy to determine if the retail network operates loyalty cards.
If there is our promotion and there are no other promotional activities, to determine the number of new clients you can use the following indicator:
New promotional clients = New T 1 - Total T 1× (New T 0/Total T 0),
where New – new clients;
Total - total clients;
T 1 - promotional period;
T 0 — period before the promotion.
Let us explain the calculation of this indicator using an example.
Let’s say that during the promotion period 60 new clients came to us, in the period before the promotion there were 25. It would seem that we can subtract 25 new clients from the 60 new clients during the promotion period and get 35 new clients for the promotion. However, this way we do not take into account the seasonality of our sales.
To take into account the seasonality of sales We will adjust the increase in new clients to the increase in clients during the promotional month. Let’s say that in the period before the promotion there were 250 clients, during the promotion period there were 300.
The share of new clients in the period before the promotion is 10 % (25 / 250). Thus, we can assume that without the promotion, the share of new customers would be the same 10%, but already from 300, that is, 30.
If you go deeper into the numbers, this calculation should be solved by searching for solutions.
If we say that out of 300 clients we additionally attracted 30, then the number of clients who would have come without the promotion will be not 300, but 270. With 270 clients who came without the promotion, we additionally attract 33 clients, etc.
Important point: with minor fluctuations in the seasonality of sales, you can simply use the difference to determine the number of new customers, and in the case of large deviations, you can adjust it for the share of new customers.
In some areas, the very indicator of the share of new clients may be seasonal, so for the calculation it may be necessary to subtract the increase in the shares of new clients of the promotional period compared to the pre-promotional period last year.
Examples of such businesses include fitness clubs, which have seen an influx of new clients who have promised themselves to start exercising after the New Year holidays.
Knowing how many new customers the promotion has attracted, you can calculate what marginal profit we will receive from additionally attracted customers during the period customer life cycle (life time value, LTV).
Using the customer life cycle, we predict how much income we will receive from one customer during the period of using the services. If the customer lifecycle is long enough, then it seems reasonable to use a one-year timeframe for stock valuation. For example, a female client will come to a beauty salon for a haircut on average four times a year. Let’s say the income from each visit is 500 rubles.
To assess the increase in margin during the promotion period, we take into account the indicatorLTV:
Promotion effect = Marginal profit of the promotional period - Marginal profit of the pre-promotional period + LTV of additionally attracted clients during the promotional period.
To take into account seasonality, the difference in the marginal profit of the promotional and pre-promotional periods must be adjusted to the indicators of the same period last year.
P. M. Cheglakov, Excel expert, leading analyst
The material is published partially. You can read it in full in the magazine
Organizing any promotion requires a lot of resources - time, financial, intellectual. And any manager who decides to hold an action asks the question: how feasible and successful will it be? After all, the price of the issue in some cases is very high.
Basic or key performance indicators
In order to evaluate an event, there is such a thing as main performance indicators. Their number varies - depending on the company's approach, its strategy and objectives. But in most companies, efficiency is measured by three main points:
- total number of targeted contacts made
- volume and number of purchases made during the promotion
- effect, which is commonly called “communication”
The basis of success is a clear statement of the task
The task should be as specific as possible. Clear and understandable wording is very important. If these conditions are met, you can count on further competent work. Otherwise, it will be difficult, and often impossible, to evaluate the stock.
It has been verified that the ideal formulation of the problem should be based on the correct indicator of consumer coverage (identified as a result of research, statistics and other data). The next point is the desired percentage of people who make a purchase during the promotion, directly reacting to the marketing step.
By carrying out promotions aimed at influencing the end consumer, it is possible to fairly correctly predict the number of contacts. To do this, you need to take into account indicators such as:
- traffic in a specific retail outlet;
- number of contacts with consumers (average value per promoter);
- the ratio of both information contacts and tastings to the number of purchases made.
Attracting target consumers
It is with them in mind that the concept of a promotional event is built. Target consumers include the following categories: loyal consumers of competing brands, as well as people who have not yet decided on a preference for one brand or another. Another category is consumers who are already loyal to the brand.
Non-target consumption: pros and cons
Any promotion attracts a certain number of so-called non-target consumers. Sometimes, especially if the promotion is interestingly organized and accompanied by valuable prizes, the number of non-targeted contacts increases sharply, which entails significant sales data. But, be that as it may, in the long term, non-target contacts are much less important for the brand (manufacturer). That is why it is important to isolate the percentage of target consumers from general statistics.
The share of non-target contacts can start from 10-15% and reach up to a third of the total. These indicators vary greatly and depend both on the product and on the promotion mechanism and the value of the bonuses (prizes) offered. While these numbers are quite impressive in a given period, the performance of non-target participants often distorts the main indicators of the effectiveness of promotions. Often - significantly. For example: if in a campaign carried out two-thirds of the actions are taken by non-target participants, then its result is reduced several times.
Necessary conditions for assessing effectiveness
Firstly, this is the method of counting contacts. At the same time, you need to count all contacts with consumers, and do this at each outlet hourly
Secondly, the methodology for determining target and non-target consumers, quantity and ratio
Thirdly, tactics for correctly cutting off unwanted visitors
What mechanics does the algorithm for measuring the nature of any contact contain? This is, first of all, complex sampling, when the consumer needs to prove the fact of purchasing a competitor’s brand. But this is a rather complicated mechanism; in other cases, working with spontaneous, non-target consumers is difficult. In most cases, the promoter simply does not have the ability to refuse contact to any consumer or clearly calculate its value.
The problem of cutting off unwanted contacts can be solved in different ways. For promotions by tobacco companies, the promoter’s task is simpler: you need to ask whether the consumer smokes or not. In cases where the promotion is aimed at women buying certain products, the promoters take into account age and appearance, etc.
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