How to measure and improve promotional effectiveness ...

from 15 per cent in 1978. In Italy,promotional spending increased by 10per cent in 2003 and even further in2004 and 2005, following a dramaticslump in consumption (–2.4 per cent)and retailers’ efforts to sustain sales.

The increased economic relevance ofpromotions is not necessarilyaccompanied by results: according toInformation Resources, in Italy, despite a�1.6 per cent increase in promotional

RELEVANCE OF PROMOTIONSPromotions are used extensively inmarketing, and promotional expenditurehas been slowly but steadily increasingworldwide over the past 20 years.1

Highly competitive market places compelmarketers to increase promotionalspending: in the USA, fast movingconsumer goods (FMCG) manufacturersinvest 25 per cent of their marketingbudget in consumer promotions,2 up

� Palgrave Macmillan Ltd 1479-1862/06 $30.00 Vol. 14, 3, 249–259 Journal of Targeting, Measurement and Analysis for Marketing 249

Target promotions: How tomeasure and improve promotionaleffectiveness through individualcustomer informationReceived (in revised form): 20th October, 2005

Cristina Zilianiis a senior research associate in retailing and a lecturer in direct, database and internet marketing at the Universita degliStudi di Parma, Italy.

Abstract This paper proposes a new approach to measuring the effectiveness ofconsumer promotions, enabled by individual customer information collected via loyaltycards. The paper begins by discussing the complexity associated with measuringpromotional effectiveness and the limits of current methodologies, then sets out todemonstrate that a customer-focused approach to promotion measurement — asopposed to the current product-focused perspective — can expand the measurability ofpromotional effects in three dimensions:

• objectives — in that not only sales volume and market share effects can be tracked,but also customer-specific and assortment-wide effects;

• time — in that promotional effects can be monitored for longer periods of time andthe fulfilment of long-term goals can be measured;

• space — thanks to geo-marketing analysis, sense can be made of the variability ofpromotional response in different retail markets, channels and outlets.

This allows for better promotion planning and marketing effectiveness, withconsequences that extend beyond economic benefits for the retail company itself andreverberate on relationships with suppliers and cooperative promotion decisions.

Cristina ZilianiUniversita degli Studi diParmaFacolta di EconomiaVia J. F. Kennedy 6, 43100Parma, Italy

Tel: �39 (0)521 902012;Fax: +39 (0)521 032393e-mail:[email protected]

measurement, demonstrating that it canovercome the limits of current‘sales-based’ methods, and expand thenumber of measurable objectives.

Finally, the paper will suggestimplications that the adoption of acustomer-focused approach topromotions might have for retailers,suppliers and vertical relationships; theseimplications provide stimuli for furtherresearch.

To address these goals, the followingresearch methods were combined:

• theoretical discussion of the complexityintrinsic to promotion measurement,based on an extensive literature review;

• interviews (from June to October2004) with eight major Italian FMCGretailers and manufacturers, and withfour market information multinationals— ACNielsen, Information Resources,Catalina Marketing Inc. andDunnHumby — to identify limitationsof current methodologies employed forthe measurement of promotionaleffectiveness;

• development and testing of newcustomer-focused measures on a realmarketing database, provided by amajor Italian retailer, and design of theblueprint for a decision support systemaimed at assisting retailers in theirchoice of category and brand forpromotional purposes;

• discussion of preliminary results with aselected group of five Italian retailmanagers.

pressure, and �0.8 per cent increase inmarkdown, in the supermarket industry,the result in terms of sales has been adisappointing �0.3 per cent (Table 1).

Despite their diminishing returns,promotions cannot be disposed of, asthey are permanent competitive‘weapons’ for retailers. Indeed, retailersand manufacturers are likely to increasepromotional spending in the future.

Moreover, promotional strategies areevolving, due to the diffusion of aloyalty/retention culture among retailers.The new focus on retention shiftspromotions from outside the point ofsale to the inside, from mass media todirect media, from one-size-fits-all tocluster marketing, from traffic building toshare-of-wallet building efforts.3,4

Promotional plans grow in complexity, asmassive adoption of loyalty schemesmakes it necessary to integrate continuitypromotions with short-term pricepromotion.

Discussion on how to make thisinvestment more effective is thereforenecessary, and this paper aims tostimulate it.

The first goal of this exploratoryresearch is to discuss the complexity ofmeasuring promotional effectiveness andanalyse the ‘defects’ of methodologiescurrently in use in the industry, such asthose developed by ACNielsen andInformation Resources Inc.

The second and main objective of theresearch is to propose a newcustomer-focused approach to promotion

250 Journal of Targeting, Measurement and Analysis for Marketing Vol. 14, 3, 249–259 � Palgrave Macmillan Ltd 1479-1862/06 $30.00

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Table 1: More pressure does not mean more sales (Italy 2004)

Change over Change overHypermarket previous year (%) Supermarket previous year (%)

Promotional pressure (%) 30.8 �1.5 21.1 �1.6Markdown (%) 24.3 �0.5 24.5 �0.8Effectiveness 59 �0.1 53 �0.3

Source: Information Resources

advertising and trade promotions, aretaking place; increasingly, several typesof promotions (continuity, price andtargeted ones) are run at the sametime, and respective effects are difficultto isolate;

• effectiveness is a ‘jigsaw’, in that itresults from the combination of theeffects of diverse promotional elements:promoted category/brand, target,promotional tool, type of incentive,depth of discount, redemption effort,timing, media, message, testing and soon.

Given such complexity, the problem ofmeasuring promotional effects has usuallybeen solved by limiting the analysis tothe most immediate and measurableaspect of the phenomenon: the so called‘sales effect’ — that is the increase insales volumes (and values) generated bythe promotion.

Three common methodologies areused — alone or combined — tomeasure the ‘sales lift’:

• incremental sales;

LIMITS OF CURRENTMEASURES OF PROMOTIONALEFFECTIVENESSAccording to Busacca and Mauri,5

promotional effectiveness is defined as‘the degree of fulfilment of the goalspursued by the company by means of aspecific promotional action over a givenperiod of time’.

Measuring the degree of fulfilment isdifficult for the following reasons:

• there can be more than one goal to apromotion (Table 2), and goals may gobeyond a simple sales lift on thepromoted item;

• such goals are seldom clearly stated,due to the tactical nature ofpromotions;

• promotional effects before (lead) andafter (lag/stock up) the actualpromotional period can pass unnoticed;

• promotions display intrabrand,interbrand, intracategory, intercategoryand store switching effects that escapeconventional measures;

• consumer promotions are run whileother marketing activities, such as


Promotional effectiveness through individual customer information

Table 2: An overview of promotional objectives

Short term Long term

Sales-related objectives Increase sales and turnover Expand market shareSustain volumes Consolidate market shareRegain lost market share Expand brand's customer baseReact to competitor's move Increase exclusive use of brandGet rid of excess inventory Create entry/mobility barriers

Customer-related objectives Stimulate first trial of product Build loyaltyStimulate repurchase Permanently lift consumed quantity

per customerIncrease quantity usually purchased Increase exclusivity of useIncrease frequency of purchase Suggest new uses for productFocus customers' attention on brand Modify brand positioningUp-sell to larger size of product Support brand image Increase stock in home Expand share of walletStimulate impulse buying –Collect information about consumers –

Trade-related objectives Increase trade inventory of brand Increase number of stores carrying brand

Push product listing by retailers Increase category shareIncrease visibility in store –

Source: Adapted from Busacca and Mauri (1994)

the short term, typically over three- orsix-week periods: Such time spans arestandardised and are often shorter thanthe real repurchase cycle for the item,therefore distorting estimates of leadand stock-up effects and failing tocapture medium- and long-term effectsof promotions. This is a ‘short-sightedmistake’ made by data users(manufacturers and retailers looking atthe data), rather than a pitfall of themethodologies. Market informationcompanies, if requested, can supplycustomers with longer time series foranalysis;

• Intrabrand, interbrand, category and storeswitching effects almost entirely escapemeasurement: This is the most notabledefect of sales-based methods, and themost relevant for retailers, whose goalwith promotions is to sell anassortment, rather than single stockkeeping units, brands or categories.Switching effects can only be trackedand understood when there is acustomer perspective to promotionalanalysis, by looking at shopping basketsover time.

The ‘variation of market share’ method,building on the incremental salesmethod, displays the same pitfalls andwill not therefore be discussed here.

The ‘redemption’ method, typicallyused for coupons, is similarly faulty, inthat the mere amount of redeemedcoupons is no evidence of effectivenessper se. For example, a redemption rate of40 per cent would, at first glance, lead tothe assertion that the promotion was asuccess. But what happens when a closerlook at the purchase records of thosecustomers who took advantage of thepromotion reveals that it was mainlycustomers loyal to the promoted brand(those who would have purchasedanyway) who redeemed the coupon,while no new customer was attracted to

• variation of market share;• redemption.

The incremental sales method is thecommonest: ACNielsen and InformationResources established long ago their ownmethodologies to calculate the ‘baseline’(ie sales that would occur anyway, notattributable to specific marketingactivities) and hence determinepromotional lift. Following interviewswith Italian companies employing thosemethodologies, and with ACNielsen andInformation Resources, who developedthem, such methods were found to sufferfrom several defects, as listed below.

• Assumptions regarding the actual presence ofa promotion: Based on the detection ofprice variations over a four-weekperiod, analysts assume that apromotion is being run when a 10 percent difference (for ACNielsen, 5 percent for Information Resources) inprice level per item is spotted. Thetwo thresholds suggest that the twocompanies account for a differentnumber of promotions, resulting indifferent ‘universes’. Moreover,promotions are not monitored in allstores belonging to ACNielsen andInformation Resources panels, hencelimiting the extensibility of the resultsto the market (market share method).

• Absence of ‘promotion-free’ weeks for certaincategories: The baseline calculationrequires sales data from‘promotion-free’ weeks. However,some categories where promotionalpressure is very high never experiencea promotion-free week during theyear, forcing analysts (when calculatingthe baseline at category level) to makeup a ‘mock’ promotion-free week byadding sales data from differentpromotion-free weeks for each itembelonging to the category.

• Post-promotion effects are only monitored in


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discussion with a group of five retailmarketing managers.

Overcoming the limits of‘sales-based methods’

We mentioned earlier that in addition tosales-related objectives, a wide range ofcustomer-related and trade-relatedobjectives can also be envisaged forpromotions. As far as customer-specificobjectives are concerned (Table 2),loyalty data allow for a substantialadvancement in measurability. Not onlyis the sample significant (the databaseoften contains more than one year ofpurchase behaviour data for thousands ofcustomers), but data reflect actualbehaviour and are timely — a relevantfact, especially for promotion planning, ifone considers that in FMCG preferenceschange quickly.

Most notable is the fact that, byidentifying customers who tookadvantage of a promotion, it is possibleto quantify fulfilment of specificobjectives, such as the extent to whichthe promotion resulted in first trial,repurchase, sales subtraction from otherbrands/categories/stores and so on, asshown in Figure 1. Here, theinformation provided by the incrementalsales method (the ‘lift’) is compared withthat provided by the decomposition ofthe lift according to the customersegments who took advantage of thepromotion (see pie chart in Figure 1).The generic increase in sales can beattributed to new customers (1 per cent),switchers (48 per cent), customers loyalto promoted brand (35 per cent), lightconsumers who were persuaded to buymore (10 per cent) etc, providing theretailer and the manufacturer with amore satisfactory understanding of thepromotion’s effects. It is worth notingthat retailers can keep such additionalinsight to themselves, or share it with

the brand and no light consumers werepersuaded to speed up their repurchasecycle and buy more? Is the promotionstill regarded as effective? Theimportance of setting explicitpromotional goals beforehand, andexpressing them in terms of customerbehaviour, not simply in terms ofsales/volumes/number of couponsbecomes evident.

A NEW CUSTOMER-FOCUSEDAPPROACH TO PROMOTIONMEASUREMENTWhen they were first introduced,scanners produced a major breakthroughin marketing and sales measurement.Before scanners, less reliable, patchy exfabrica data were used. Almost 30 yearslater, it is not surprising that thedominating approach to promotionalmeasures is sales driven; nonetheless, anew era for marketing measurement iscoming, ushered in by a differenttechnology: the customer database.

The third goal of this paper is toillustrate how individual demographicand behavioural customer information,such as that collected by loyalty cards,can be used in conjunction with scanner(sell-out) data to:

• overcome the limits of currentsales-based methods;

• measure the degree of fulfilment ofcustomer-specific, long-term andassortment-wide promotionalobjectives;

• create a knowledge repository which, ifleveraged, can help to design betterpromotions.

The following discussion is based onanalysis of the customer database of anItalian retail chain, and on theoutcome of interviews. The findingswere validated by means of a



manufacturers’ assumptions over purchasefrequency for their products — typicallyderived from market research — differfrom actual behaviour. Moreover,frequency is a ‘learned behaviour’ and itcan differ widely from store to storedepending on the promotional activityadopted (ie the promotional pattern incertain stores might have trainedcustomers to ‘wait for sales’).

Capturing switching effects

As mentioned above, retailers are mostinterested in understanding thecross-elasticity of product demands, asthey are continuously using promotionsto support sales of the whole assortmentof goods. By looking at shoppingbaskets, it is possible to monitor theimpact of promotional actions not onlyon the promoted items, but most notablyon other brands, categories, customersegments and stores. It is possible toestablish how closely oneproduct/brand/category/store is asubstitute for another, with clearimplications for pricing, merchandising,store layout and future promotions.

Table 3 shows substitution dynamics in

the partner manufacturer, depending onthe promotional agreement and therelationship.

Sales-based methods typically measureshort-term promotional effects. With thenew approach, the group of customerswho bought during the promotion canbe monitored over a much longer periodof time. This enables companies to verifythe long-term effects of the promotion:did consumers only buy the promotedgood once, or did they repeat thepurchase after the promotion was over?Have they become loyal to thepromoted item or did they go back totheir favourite brand, and so on (seeFigure 2). Here, the lines show how thepromoted items performed over athree-month period after the promotion,compared with the category they belongto: the increase in category share ‘held’in the long term, in terms of volume,value and number of customers.

Individual customer purchase histories,moreover, enable the calculation of ‘real’product purchase cycles, which can beused to determine the appropriate timespan for measurements of effectiveness,and better estimates of lead and lageffects. In fact, it is often found that


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Figure 1 Measuring customer-specific objectives ‘hidden’ under the veil of promotional lift

0

50

100

150

200

250

300

Regular sales Promotional sales

48%

10%

6%

35%

1%

Switchers

Light consumers

Loyals to other brand

Loyals to brand A

New customers

segments. For example, a retailer mightwant to explore how the ‘top’ segmentof the customer base reacts topromotions, or how the ‘deal conscious’segment — that is, the group ofcustomers who are most interested inpromotions — welcomes a specificaction.

Geo-marketing analysis can help totrack the behaviour of customers whoswitch stores within the same chain forpromotional reasons, and, most notably,it can also help to put the word

the mayonnaise category over a one-yearperiod. In the right-hand column it ispossible to read the average categoryshare of each brand during the year. Theother columns show what happens toeach brand’s share when one or morebrands are promoted — that is, whichbrands are more affected when othersbecome more attractive to customers.This intracategory switching analysis,based on shopping baskets, can beextended to include substitute categoriesand cross-tabulated with customer



Figure 2 Tracking longer term effects of promotions

Table 3: Measuring variation of intracategory brand share over one year

Category shareCategory share Category share when Category share when SMA when KRAFT SMA + KRAFT over year

Brand switching is promoted is promoted are promoted (mean)

SMA share 50.5 35.0 49.8 42.0KRAFT share 20.0 44.3 26.0 31.0CALVE share 29.5 20.7 23.7 27.0

Source: Catalina Marketing Inc.

19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39

May June July August September

Share (value) Share (volume) Share (customers)

Share of promoted items over time

me-too decisions (let’s promote the samecategory as the competitors. . .) and at thesame time serving the retailer’s ownobjectives, not only the partnermanufacturer’s.

When a customer-focused approach topromotions is adopted, new measuresand indicators that help to refinedecisions can be constructed. As anexample, a prototype of category/brandchoice decision support system forpromotions was created (Figure 3); thisreveals differences in potentialeffectiveness for categories that at firstsight seemed equivalent. The value ofinformation such as the percentage of‘gold’ customers who buy the category,the intensity of brand switching, thepromotional proneness of customersshopping within the category isself-evident. This information is all madeavailable by the new approach.

Effectiveness can be increased ex antealso via segmentation and appropriatetargeting of the customer base:segmentation criteria should be definedaccording to promotional objectives. Ifthe goal is to increase share of walletor brand loyalty, for example, customersshould be segmented and targetedaccordingly. One of the mostinteresting applications, in this respect,is segmentation of customers accordingto promotional behaviour, an exercisethat Tesco has been carrying outsuccessfully on their customer database,as DunnHumby explained during theinterview. Needless to say, to exploitthis segmentation to the full,communicate directly with selectedsegments and target them with ad hocpromotions, there needs to be a systemin place. Loyalty card databases canhelp, if information such as address,telephone number and e-mail addressof customers have been captured andupdated over time. For a discussion ofEuropean retailers’ adoption of targeted

‘effective’ into perspective. Indeed, the‘degree of fulfilment’ of any promotionalobjective can be labelled as satisfactory(or not) only if it is compared with thepromotion potential of the category andbrand — a concept well known toretailers — but also the promotionalpotential of the area (the number,spending levels and preferences ofcustomers in the target area affectpromotional results). It emerged from theinterviews that so far this geographicalaspect of promotional potential has notbeen taken into account for promotionaldecisions and evaluations.

Creating more effective promotionsby leveraging the promotionalknowledge base

This returns to the statement thateffectiveness results from the combinationof diverse promotional elements:promoted category/brand, target,promotional tool, type of incentive,depth of discount, redemption effort,timing, media, message, testing and soon. In order to improve the design offuture promotions, it would therefore bevery useful to keep track of pastpromotional decisions regarding eachelement, and their impact/result, byappending information to the database.This study found that, due to the tacticalnature of promotions, their frequencyand the sheer quantity of data that needsto be processed and set aside,promotional information other than salesvolumes is seldom fed into marketinginformation systems.

Effectiveness, however, can be ‘built’into promotions by learning fromaccumulated knowledge. Take, forexample, the decision regarding whatcategory to run the promotion in: thecustomer database can serve as anexcellent information base to choose theappropriate category, avoiding the trap of


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hand, the new customer-focusedapproach introduces retailers to atypically industrial way of reasoning —customer-focused objectives — while theappreciation of intrabrand, interbrand,intracategory and intercategory effectsbroadens the manufacturer’s view of themarket, by definition narrower than thatof the retailer. From this viewpoint,then, the two marketing visions mightmove closer. On the other hand,retailers’ objectives are different fromthose of manufacturers’ — consider themotivation to sell a range, rather thanspecific brands, to retain best customers,or to expand share of wallet; onceretailers are better enabled to measuresuch objectives, they will selectpromotions accordingly, refusing to runand cooperate on promotional activitiesthat hamper fulfilment of their owngoals. A clearer vision of promotionalresults can shake long-establishedpartnerships and conflict might become

promotions and direct media see Zilianiand Bellini (2004).6

Impact on vertical relationships

With this information, and new measuresand tools, retailers can take a moremature and discerning approach topromotional decisions, especially when itcomes to choosing between deals offeredby different manufacturers. Data aboutthe category/brand potential and pastpromotional results can be quicklyaccessed (as shown in Figure 3) andnegotiation influenced accordingly. It islikely that, in the future, a retailer’sevaluation of prospective partners willincorporate elements such as the abilityto discuss and set customer-specific andlong-term objectives.

It is uncertain, however, whether theavailability of customer information andmeasurability of customer-specific andlong-term objectives will bring retailersand manufacturers any closer; on the one



Figure 3 A customer focused decision support system to assist choice of category and brand forpromotions

Is it storable?What is the promotional pressure on the category in the market?What is the category role for the retailer?How many customers purchase the category?

What are these customers worth for the store?Purchase frequencyPurchase value

Number of items purchasedAverage cumulated value of purchases in the category per customer over 1 yera

Share of category leader, brands� shares (value and volume)Number of loyal customers per brand

Proneness to brand switchingPenetration of category among gold customersRetailer�s own customer segments: such as �gold�, �silver�, �tin�Penetration of each brand in different customer segments (gold, silver, tin)

Demographics of each brand�s customer base

Mayonnaise

Promotional responsiveness of each brand�s customer base

Is it storable?What is the promotional pressure on the category in the market?What is the category role for the retailer?How many customers purchase the category?

What are these customers worth for the store?Purchase frequencyPurchase value

Number of items purchasedAverage cumulated value of purchases in the category per customer over one year

Share of category leaderbrands� shares (value and volume)

Number of loyal customers per brand

Proneness to brand switchingPenetration of category among gold customersRetailer�s own customer segments: such as �gold�, �silver�, �tin�Penetration of each brand in different customer segments (gold, silver, tin)

Demographics of each brand�s customer base

Mayonnaise

Promotional responsiveness of each brand�s customer base

• Promotions drain increasing amounts offinancial resources and become morecomplex, while their returns arediminishing; retailers and manufacturerswill therefore strive for ways toimprove effectiveness and to obtainadditional resources by making loyaltyinvestments pay for themselves.

• At the same time, the retention cultureand the availability of individualcustomer information bringcustomer-specific promotionalobjectives to marketers’ attention,urging them to rethink generic sales liftgoals.

• The discovery of customerheterogeneity and the ability tocarefully segment and target thecustomer base, coupled with efficientdirect media such as e-mail, SMS andelectronic coupons, create conditionsto expand the variety of promotionaltools and actions.

• In this scenario, a customer-focusedapproach — as opposed to the currentproduct-focused perspective —increases the possibility of measuringpromotional effectiveness in threedimensions:— objectives, in that not only sales

volume and market share effects canbe tracked, but also increasinglyimportant customer-specific ones(supplier viewpoint) andassortment-wide ones (retailviewpoint);

— time, in that promotional effects canbe traced for longer periods of timeand the fulfilment of long-termgoals can be measured;

— space: thanks to geo-marketinganalysis, sense can be made of thevariability of promotional responsein different retail markets, channelsand outlets.

• One could argue that consumer panelresearch such as Nielsen Home scancan serve the same purpose but,

harsher. Research is therefore needed tofurther explore the impact of improvedpromotional measurement on verticalrelationships.

CONCLUSIONS AND STIMULIFOR FURTHER RESEARCHResearch on retailers’ use of loyalty cardinformation across Europe began severalyears ago. Today, evidence shows that,on the one hand, retailers declare thatcustomer information is vital forcompetitive advantage; on the otherhand, they hesitate to put data to anyuse.7,8 Retailers are seeking ways to makeloyalty investments pay for themselves: inthe literature, at least, there seem to bemany attractive options. With the oftencited exception of Tesco in the UK,however, applications of individualcustomer information in retailing arerather conservative, limited to improvingand running the loyalty scheme, directcommunication and location analysis, asfound by the survey of the Italian marketin 2003 and confirmed on a Europeanscale.9 Several avenues are still to beexplored, where scope for value creationexists, such as segmentation based onshopping baskets, ranging storesdifferently, new product/servicedevelopment, cross-selling acrosschannels.

In order to move from mass toinformation-intensive marketing,however, retailers should not dissipatetheir efforts in many directions, but focuson a few priority areas of intervention,depending on their marketing mix andcompetitive position. This paper suggeststhat one such area is the measurement ofpromotional effectiveness, and theconsequent improvement of promotionaldecisions.

The following points emerging fromthe research would benefit from furtherexploration:


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• The expansion of promotionalexperimentation and variety, however,is likely to be limited by cost factors,complexity of promotional planmanagement, shortage of marketinganalysis skills, cultural factors such asthe long-established practice ofentitling buyers, not the marketingfunction (where knowledge aboutcustomers resides), to decide whichmanufacturer’s promotional proposal toaccept.

References1 Bell, D. R., Chiang, J. and Padmanabhan, V. (1999)

‘The decomposition of promotional response: Anempirical generalisation’, Marketing Science, Vol. 18,No.4, pp. 504–526.

2 Raghubir, P., Inman, J. J. and Grande, H. (2004)‘The three faces of consumer promotions’, CaliforniaManagement Review, Vol. 46, No. 4, pp. 23–42.

3 Hawkins, G. (1999) ‘Building the customer specificretail enterprise’, Breezy Heights Publishing, NewYork, NY.

4 Ziliani, C. and Bellini, S. (2005) ‘Le ciblemarketingen Italie: Tendances et previsions de developpement’,Revue Française de Marketing, Vol. 203, Juillet, pp.3–5.

5 Busacca, B. and Mauri, C. (1994) ‘L’efficaciadell’azione promozionale al consumo’, Finanza,Marketing e Produzione, No. 3, pp. 45–84.

6 Ziliani and Bellini (2004) op. cit.7 Cuthbertson, R. and Laine, A. (2004) ‘The role of

CRM within retail loyalty marketing’, Journal ofTargeting, Measurement and Analysis for Marketing, Vol.12, No. 3, pp. 290–304.

8 Stone, M., Bearman, D., Butscher, S. A., et al.(2004) ‘The effect of retail customer loyalty schemes— Detailed measurement or transformingmarketing?’, Journal of Targeting, Measurement andAnalysis for Marketing, Vol. 12, No. 3, pp. 305–18.

9 Cuthbertson and Laine (2004) op. cit.

generally speaking, such panels aredesigned to answermanufacturer-specific questionsregarding promotions, are based onstatistical generalisation and, in marketssuch as Italy, where the retail market ishighly fragmented, only a few retailerscan find answers regarding their owncustomer base in the panel. Mostbanners go unrepresented. Finally,panel information cannot be useddirectly for targeting one’s owncustomer base.

• Such expanded possibilities will havean impact on vertical relationships:improvements in the three areas abovereverberate on the retailer’spromotional decision-making process,affecting choice of category, brand,timing and partner manufacturer forpromotions. As a result, theconflict/cooperation balance in theretailer’s relationship with suppliers canchange. It is likely that, in the future, aretailer’s evaluation of prospectivepartners will incorporate elements suchas ability to discuss and setcustomer-specific and long-termobjectives. Manufacturers who arequick to adopt the new language ofpromotions and are willing toincorporate customer-specific andassortment-wide objectives and ex-postmeasures in their promotionalagreements (and also categorymanagement agreements) with retailersmight gain an advantage.



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