next previous Impacting the Forecast with Planned Promotions

Promotions are widely used to stimulate additional demand for a product or service. Sales demand patterns for promoted products can take on very wide swings in the data. Prior to an announced promotional campaign, the demand for a product might fall below expected levels due to the drop in demand as consumers anticipate the advantage of a promotional price. The promotional ‘blip’ resulting from the demand for the product during the promoted period and the ‘pull-ahead’ for demand that would have been there eventually. After the close of a promotional campaign, demand might drop again below normal levels for a short period as the ‘forward buy’ dissipates and demand returns to ‘normal’ patterns. These patterns differ across promotions as to type, intensity and duration.

As part of the statistical baseline forecasting process, PEER Planner takes into account the impact of scheduled promotions and automatically incorporates the effect into future promoted periods. The effect of a promotion takes on several stages over and above the normal pattern of demand. Adjustments for off-invoice and special ‘substitution type’ promotions are handled in the system prior to running the Batch Forecaster. Promotion impacts are automatically compensated for with user-supplied promotion calendar. How this works will be shown for weekly forecasts, but monthly forecasts are similar:

Promotion Management

  1. Based on the customer and product choices made on the Batch Forecasting screen, demand records are selected for promotion analysis and adjustment.
  2. Processing is done to determine when promotions were in effect during the demand periods. Reductions are made to the demand to adjust for the estimated promotional impact during on the electronic calendar period stored for the promotions.
  3. Processing is also done to determine which forecast periods will have promotions present. Adjustment amounts are calculated and saved for later processing.
  4. The forecasting engine is invoked and it forecasts for each customer grouping (entity)/prime SKU code combination.
  5. The forecasts are reviewed and each is prorated to the low level customer/SKU combinations based on the last N (13 for weekly, 3 for monthly) periods of demand. Combinations with zero demand during the last N periods would not receive any proration. Any off-invoice promotion adjustments are then made.

The PrePrice and BonusPak promotions involve the substitution or replacement of one SKU number for another.

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