Evaluating promotion

Revenue and profit

Evaluating promotion means deciding whether a campaign was worth its cost. Promotion can increase sales revenue by raising sales volume: more customers buy, so revenue rises. It can also support a higher price if it makes the product seem more desirable, so each sale brings in more revenue.

However, revenue is not profit. Promotion costs, plus any extra staff time, materials or discounts, are taken from the extra revenue. A campaign can raise sales and still reduce profit if it is expensive or ineffective.

For example, a bike repair service spends £600 on a local campaign. It gains 50 extra repairs at £25 each.

The extra revenue is £1,250, but after £450 of extra parts and mechanic time and the £600 campaign cost, profit rises by only £200. The campaign worked, but its cost swallowed most of the gain. An ineffective campaign could add less revenue than it costs, reducing profit.

Objectives and value for money

Evaluate promotion against its objectives. A campaign to launch a new service may aim to raise awareness of it; a campaign to fill a quiet month may aim to increase sales quickly. Success means meeting the objective, not just being noticed.

Value for money compares the cost of a campaign with the extra sales or profit it creates. A £2,000 campaign that adds £8,000 profit can be better value than a £400 campaign that adds £500 profit. A cheap campaign is poor value if it reaches the wrong customers; an expensive one can be good value if it produces strong, measurable results.