Are Your Promotions Really Profitable? Measuring True ROI in FMCG Trade Promotions

mamta Devi
Feb 9
4 min read

In the fast-moving consumer goods (FMCG) world, trade promotions — discounts, in-store deals, schemes, special pricing, and retailer incentives — are treated as essential levers to drive sales, shelf space and market share. But here’s the hard truth: many of these promotions don’t actually boost profits — and in some cases, they lose money outright. Measuring true ROI is no longer optional — it’s strategic survival.

Let’s unpack why, how, and what leading players are doing to re-engineer trade promotion profitability.

The Hard Data: Promotions Often Don’t Break Even

Despite heavy investment, a large body of evidence shows that most FMCG trade promotions fall short of profitability:

Figure 1: FMCG Trade Promotions: Profitability and ROI

According to historical Nielsen data, around 59–60% of trade promotions in key FMCG markets do not break even — meaning brands spend more than they earn back from increased sales.
Global FMCG companies spend roughly 20–23% of their revenue on trade promotions, making it one of the largest P&L expenses after the cost of goods sold.
Trade promotions are often the second-largest cost for FMCG firms, yet only about 22% of companies can measure ROI accurately at the individual promotion level.

The implication? Volume spikes don’t automatically translate to profitable growth.

So, Why Do Promotions Fail?

The reasons behind poor ROI results are many — and often interconnected:

Figure 2: Reasons for Promotion Failure

1. Lack of Analytics & Data-Driven Decisions

Many FMCG firms still use spreadsheets and disconnected systems to plan promotions, leading to guesswork rather than evidence-based decisions.

2. Ignoring Incremental Profit vs. Sales Volume

A bumped-up sales figure during a promotion might look good on paper, but if most of that lift cannibalizes future full-price sales or squeezes margins with deep discounts, ROI plummets.

3. Misalignment with Retailer Priorities

Promotions are often negotiated without shared data on shopper behaviour, inventory positions, or local demand — resulting in inefficient allocation of trade funds.

4. Poor Execution in the Field

Even well-designed plans can fail at the point of sale due to stockouts, poor display execution, or lack of retailer engagement — all of which destroy promotional ROI.

Retailer & Brand Examples: What Works (and What Doesn’t)

Successful Examples

Some brands do stand out:

Kellogg’s sports-themed retail promotions increased engagement by linking offers with fan interests, generating meaningful shopper data and deeper brand interaction.
Ferrero Kinder’s WhatsApp receipt promotions used localized execution and easy participation processes to increase customer interaction and visibility at point of sale.

These cases harness data capture, customer insight and ease of redemption — factors strongly correlated with higher ROI.

Instances of Poor ROI

Generic “Flattened Discounts” like deep BOGO offers or blanket price cuts often fail the profitability test:

Industry practitioners estimate that promotion schemes like buy-one-get-one pricing — while generating volume — can easily produce negative ROI, because incremental margins don’t outweigh the discount cost.

How to Measure True ROI: The Right Metrics

To move beyond vanity metrics like uplifted sales, modern FMCG companies adopt a profit-centric view of promotions. Key measures include:

Incremental Profit ROI

Reflects the net profit earned from a promotion relative to its cost (not just sales lift). Formula: ROI (%) = (Incremental Gross Profit – Promo Cost)/Promo Cost × 100

Promotion Effectiveness Index

Evaluates whether sales increases came from new buyers vs. shifted or accelerated purchases.

Out-of-Stock & Stock Rotation Rates

Missing inventory during promotions kills potential sales — effectively lowering ROI.

Retailer Cooperation Index

Assesses the quality of in-store execution, display compliance, and data sharing — higher cooperation correlates with higher ROI.

Boosting ROI: What Leading FMCG Players Do

Figure 3: Boosting FMCG ROI with Data and Digital

1. Data Analytics & Predictive Planning

Brands using advanced analytics and AI frameworks see *5–15% uplift in ROI by forecasting demand more accurately and aligning promotions with consumer buying habits.

2. Shopper-Centric Campaign Design

Modern on-pack digital offers — QR codes, app integrations, gamification — can jump redemption rates and tie promotions to measurable customer behavior. In India, digital on-pack promos have delivered 15–25% short-term sales boosts and ~10–15% higher ROI.

3. Cross-Channel Attribution

Linking retail sales, e-commerce behaviour, and loyalty program data gives a clearer picture of true incremental value — helping companies distinguish real growth from transient volume spikes.

Conclusion: Profit Over Activity

Too often, FMCG brands celebrate sales without asking whether those sales earned money. The reality is sobering: 50–60% of trade promotions historically do not deliver positive ROI, even as they consume a large share of revenue.

Measuring true ROI requires robust metrics, data-driven planning, tight retailer cooperation, and promotion designs rooted in consumer insights — not just habit or gut feel. As competition tightens and margins come under pressure, brands that elevate ROI measurement from an afterthought to a core competency will win the shelf and the bottom line.

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