Monday, 24 September 2007

Smart Bridge INDEXES IN SQL Neeraj Nathani Smart Bridge Trading Solutions



INDEXES IN SQL

Indexes are special lookup tables that the database search engine can use to speed up data retrieval. Simply put, an index is a pointer to data in a table. An index in a database is very similar to an index in the back of a book.
For example, if you want to reference all pages in a book that discuss a certain topic, you first refer to the index, which lists all topics alphabetically, and are then referred to one or more specific page numbers.
An index helps speed up SELECT queries and WHERE clauses, but it slows down data input, with UPDATE and INSERT statements. Indexes can be created or dropped with no effect on the data.
Creating an index involves the CREATE INDEX statement, which allows you to name the index, to specify the table and which column or columns to index, and to indicate whether the index is in ascending or descending order.
Indexes can also be unique, similar to the UNIQUE constraint, in that the index prevents duplicate entries in the column or combination of columns on which there's an index.
The CREATE INDEX Command:
The basic syntax of CREATE INDEX is as follows:
CREATE INDEX index_name ON table_name;
Single-Column Indexes:
A single-column index is one that is created based on only one table column. The basic syntax is as follows:
CREATE INDEX index_name
ON table_name (column_name);
Unique Indexes:
Unique indexes are used not only for performance, but also for data integrity. A unique index does not allow any duplicate values to be inserted into the table. The basic syntax is as follows:
CREATE INDEX index_name
on table_name (column_name);
Composite Indexes:
A composite index is an index on two or more columns of a table. The basic syntax is as follows:
CREATE INDEX index_name
on table_name (column1, column2);
Whether to create a single-column index or a composite index, take into consideration the column(s) that you may use very frequently in a query's WHERE clause as filter conditions.
Should there be only one column used, a single-column index should be the choice. Should there be two or more columns that are frequently used in the WHERE clause as filters, the composite index would be the best choice.
Implicit Indexes:
Implicit indexes are indexes that are automatically created by the database server when an object is created. Indexes are automatically created for primary key constraints and unique constraints.
The DROP INDEX Command:
An index can be dropped using SQL DROP command. Care should be taken when dropping an index because performance may be slowed or improved.
The basic syntax is as follows:
DROP INDEX index_name;
You can check INDEX Constraint chapter to see actual examples on Indexes.
When should indexes be avoided?
Although indexes are intended to enhance a database's performance, there are times when they should be avoided. The following guidelines indicate when the use of an index should be reconsidered:
  • Indexes should not be used on small tables.
  • Tables that have frequent, large batch update or insert operations.
  • Indexes should not be used on columns that contain a high number of NULL values.
  • Columns that are frequently manipulated should not be indexed.


Indexes have three main uses:
  • To quickly find specific rows by avoiding a Full Table Scan
We've already seen above how a Unique Scan works. Using the phone book metaphor, it's not hard to understand how a Range Scan works in much the same way to find all people named "Gallileo", or all of the names alphabetically between "Smith" and "Smythe". Range Scans can occur when we use >, <, LIKE, or BETWEEN in a WHERE clause. A range scan will find the first row in the range using the same technique as the Unique Scan, but will then keep reading the index up to the end of the range. It is OK if the range covers many blocks.
  • To avoid a table access altogether
If all we wanted to do when looking up Gallileo in the phone book was to find his address or phone number, the job would be done. However if we wanted to know his date of birth, we'd have to phone and ask. This takes time. If it was something that we needed all the time, like an email address, we could save time by adding it to the phone book.
Oracle does the same thing. If the information is in the index, then it doesn't bother to read the table. It is a reasonably common technique to add columns to an index, not because they will be used as part of the index scan, but because they save a table access. In fact, Oracle may even perform a Fast Full Scan of an index that it cannot use in a Range or Unique scan just to avoid a table access.
  • To avoid a sort
This one is not so well known, largely because it is so poorly documented (and in many cases, unpredicatably implemented by the Optimizer as well). Oracle performs a sort for many reasons: ORDER BY, GROUP BY, DISTINCT, Set operations (eg. UNION), Sort-Merge Joins, uncorrelated IN-subqueries, Analytic Functions). If a sort operation requires rows in the same order as the index, then Oracle may read the table rows via the index. A sort operation is not necessary since the rows are returned in sorted order.

Partitioned Tables And Indexes

Maintenance of large tables and indexes can become very time and resource consuming. At the same time, data access performance can reduce drastically for these objects. Partitioning of tables and indexes can benefit the performance and maintenance in several ways.
  • Partition independance means backup and recovery operations can be performed on individual partitions, whilst leaving the other partitons available.
  • Query performance can be improved as access can be limited to relevant partitons only.
  • There is a greater ability for parallelism with more partitions.
All the examples shown here use the users tablespace for all partitions. In a real situation it is likely that these partitions would be assigned to different tablespaces to reduce device contention.
Related articles.


Source: Wikipedia.

Wednesday, 19 September 2007

Thursday, 13 September 2007

Big Data Technology Evaluation Checklist Neeraj nathani


Big Data Technology Evaluation Checklist

Anyone who’s been following the rapid-fire technology developments in the world that is becoming known as “big data” sees a new capability, product, or company founded literally every week. The ambition of all of these players, established and newcomer, is tremendous, because the potential value to business is enormous. Each new arrival is aimed at addressing the pain that enterprises are experiencing around unrelenting growth in the velocity, volume, and variety of the data their operations generate.
What’s being lost, however, in some of this frothy marketing activity, is that it’s still early for big data technologies. There are vexing problems slowing the growth and the practical implementation of big data technologies. For the technologies to succeed at scale, there are several fundamental capabilities they should contain, including stream processing, parallelization, indexing, data evaluation environments and visualization.
When evaluating big data technology, it can be valuable to ask companies about their ability to deliver some of these fundamental capabilities. If you get an unsophisticated answer, you may find that the company is not as serious or capable as you might have expected. (For my research on this topic please see: Designing a Scalable and Agile Big Data Platform.)
In this article, we examine some of the big data requirements that are partially defined or in early stages of maturity. Any big data vendor worth considering should be able to address these requirements now or in the near future, or confidently explain their position. We sat down with Mike Driscoll, CTO of Metamarkets, a big data company that delivers predictive analytics solutions for digital media, to develop a checklist for evaluating new solutions and their fit criteria against the challenges of big data:
Some general questions to begin the evaluation process:
  • Does the solution allow for stream processing, and incremental calculation of statistics?
  • Does the solution parallelize processing and take advantage of distributed computing?
  • Does the solution perform summary indexing to accelerate queries of huge datasets?
  • What are the solution’s data exploration and evaluation environments that enable a quick understanding of the value of new datasets?
  • How does a solution directly provide or easily integrate with visualization tools?
  • What is the strategy for verticalization of the technology?
  • What is the ecosystem strategy? How does the solution provider fill the gaps in its capabilities through partnerships?
Getting these questions answered will put most vendors to the test and help improve your understanding of the technology you are evaluating.
Stream processing
As the pace of business has increased, and the number of instrumented business processes has expanded, increasingly our attention is focused not on “data sets,” but on “data streams.”
“Decision-makers are interested putting their finger on the pulse of their organization, but to get answers in real time; they require architectures that can process streams of data as they happen,” Driscoll says. “Current database technologies are not well suited to do this kind of stream processing.”
For example, calculating an average over a group of data can be done in a traditional batch process, but far more efficient algorithms exist for calculating a moving average of data as it arrives, incrementally, unit by unit. If you want to take a repository of data and perform almost any statistical analysis, that can be accomplished with open source products like R or commercial products like SAS. But if you want to create a set of streaming statistics, to which you incrementally add or remove a chunk of data as a moving average, the libraries either don’t exist or are immature.
“The entire ecosystem around streaming data is underdeveloped,” says Driscoll.
In other words, if you’re talking to a vendor about a big data project, you have to determine whether this kind of stream processing is important to your project, and if it is, whether they have a capability to provide it. This axiom extends all the way down, to not just the analytical algorithms that run over the streams, but also to the way in which those streams are queued, ingested, managed and ultimately processed Many architectures exist for ingesting and queuing data streams, some of which are proprietary. TIBCO, Esper and ZeroMQ all offer solutions. But those solutions are only about moving packets of data around. Actually doing analysis of the streams requires practitioners to build on a lower level, for which there is another rapidly evolving toolset.
Parallelization
There are many definitions of big data. Here’s a useful one: “Small data” is data that fits in-memory on a single desktop or machine with a capacity of between 1 GB and 10 GB of disk space. “Medium data” fits on a single hard drive of 100 GB to 1 TB in size. “Large data” is distributed over many machines, comprising 1 TB to multiple petabytes.
“If you want to work with distributed data, and you expect to have any hope of processing that data in a reasonable amount of time, that requires distributed processing,” Driscoll says.
Parallel processing comes to the fore in distributed data. Hadoop is one of the better-known examples of distributed or parallelized processing. Hadoop can do more than distributed processing. It can also conduct distributed queries, which have been a subject of interest recently for designers of massively parallel processing (MPP) databases, whose object is to take a query and parallelize it across a set of nodes. Each of those nodes does partial work for the query in parallel, and then combines those partial answers into a single unified answer, Driscoll explains. Parallelizing queries is not a simple affair. When something is being analyzed in a parallel stream, each new unit of data must be combined with an existing unit of data in order to produce an answer.
Therefore, if a vendor is trying to sell you a solution for addressing big data at scale, their salespeople should be able to articulate their special secret sauce and strategy for parallelization.
“One of the most important features that current data warehouse vendors must offer is the ability to do parallel copy from Hadoop into their warehouse,” Driscoll says. “So, whether it’s EMC Greenplum offering the ability to do distributed parallel copy from Hadoop to Greenplum, Netezza or Oracle, the ability to parallelize data transfer is a critical feature.”
Hadoop has a massively distributed file system and can support distributed queries on top of it. But it does not inherently support parallelization—running a parallel process on Hadoop without an algorithm for optimizing queries can significantly slow down the process, taking minutes to return an answer. This is acceptable for some queries, but it won’t support real-time analytics in a big data world. The power and speed of that algorithm will be a determining factor of the robustness and cost of the solution, and that should be appropriately scaled to your needs, says Driscoll.
Summary indexing
Summary indexing is the process of creating a pre-calculated summary of data to speed up running queries. The problem with summary indexing is that it requires you to plan in advance what kind of queries you are going to run, so it is limiting.
The most common form of summary indexing is the star schema used to support speedy searches in data warehouses. A star schema prioritizes one master dimension (such as location or product) in advance of running a multi-dimensional data cube, organizing subordinate dimensions in relation to the master. The technique works well, but has one huge problem. If you want to ask a new question, it takes a long time to reconfigure the schema and associated data cubes and recompute them. When we begin to ask questions of all our data, not just the structured data, it is practically impossible to create a star schema to answer every possible question. The problem is not pre-processing; it’s the difficulty of reconfiguring the pre-processing as needed to ask new questions and get a speedy response.
The ideal solution would easily adjust the summaries being created as new questions arose. With a quickly created, summarized form of the data, it would then be possible to use data-analysis tools such as QlikView, Tableau, or TIBCO Spotfire for exploration and analysis. But there is currently a gap in available tools to make this summary creation easier, as many available tools don’t reach down to machine-level data, says Driscoll. The result is that the IT department becomes involved in building a custom query.

Some help is on the way for this problem. Vendors such as Splunk have emerged with a solution based on their search language that makes creating summary indexes far faster than other approaches, like star schemas. The designers of technology like SAP HANA, 1010 Data, and Metamarkets recommend an in-memory approach that completely abandons summarizing, by keeping vast amounts of data in in-memory systems.
But data volumes are growing fast and the need for summarizing will never go away completely. For the short and medium term, vendors must have a strategy for agile creation of summary indexes.
Data evaluation environments
How does your vendor’s solution understand, or allow you to understand the meaning of new datasets and incorporate them into your analysis?
For example, if your business has a retail store, and you are studying transactions, you could pick up the movements of people around the web site, or even around brick-and-mortar stores through opt-in GPS signals and cell-phone tracking. Once you acquire the data:
  • How do you incorporate and understand what that data can tell you?
  • How do you develop a model of the store that will help you analyze customer behavior?
  • How do you understand when those movements become events?
  • How fast can you figure that out—before the customer leaves the store?
To answer these questions, your solution needs to be able to join disparate datasets. Very few vendors have a distinguished capability to join datasets. And, just as the most critical areas of a building are at the joints, the same is true of data architecture. Where data interfaces, tremendous value can be unlocked, Driscoll says.
“The holy grail for anyone in the online retail space is to understand the connection between online impression events that lead to actions, such as clicks, or some level of engagement that eventually lead to purchasing behaviors, which eventually lead to long-term customer adoption,” Driscoll says. “Right now, all of these datasets live in different places. American Express knows where you’ve purchased your Starbucks coffee and Foursquare knows where you checked in at Starbucks, and Yahoo! knows when you clicked on an ad discount for a Starbucks latte on a hot summer day. And yet, people are struggling to thread these various data streams together.”
As enterprises begin to draw in disparate data feeds—particularly mobile data feeds—it’s critical that a vendor has a solution for rapidly joining disparate datasets, because the information they contain is critical for enterprises.
Visualization
There are two broad categories of visualization tools, according to Driscoll.
Exploratory visualization describes tools that allow a decision-maker and an analyst to explore different axes of the data for relationships, which usually involves some kind of visual “mining for insights.” Tools such as Tableau and TIBCO Spotfire, and to a lesser extent QlikView, fit into this category, Driscoll says.
Narrative visualizations are designed to examine a particular axis of the data in a particular way. For instance, if you say want to look at a time series visualization of sales broken up by geography for an enterprise, a format for that visualization can be pre-created. The data can be played back month-by-month for every geography, and is sorted into a pre-cast formula. Vendors such as Perceptive Pixel fit into this category.
In narrative visualizations, “Certain knobs are free to explore the data, but it’s not completely open to ask any question,” Driscoll says. “These visualizations are designed to tell a certain story about the data, just as certain pre-computations or reports are designed to tell a certain story. And some tools are better for the first, ad-hoc exploratory model, and others are better for the second, constrained narrative.”
Mind the Verticals
There are nearly as many types of decision-making needs in different verticals as there are ways to collect, process and analyze data. Vendors should be wary that different decisions makers within an organization and between verticals have different kinds of visualizations that they are accustomed to seeing.

“Any vendor that wants to serve the needs of those decisions-makers ought to be well aware of what those expected narratives are, because that will speed the adoption of that visualization tool,” Driscoll says, citing the preference for candlestick plots in the financial services industry.
Ecosystem Strategy
The largest most successful companies all spend tens of millions creating ecosystems around their products. The ecosystems are supported by product features and business models that allow the product to do its job but also work with other technologies or partners who extend the product or craft it to special uses. If a product doesn’t have an ecosystem strategy, you may find that it is hard to adapt to your needs and that finding expertise to help with implementation and configuration may be hard to come by.
This list of requirements for big data technology is not exhaustive, but it is a good start. Using these topics when evaluating big data technology will only lead to deeper understanding.
Source: Wikipedia.

Thursday, 30 August 2007

Smart Bridge Trading Solutions Neeraj Nathani Trade Promotion Forecasting


Trade Promotion Forecasting

Trade Promotion Forecasting (TPF) is the process that attempts to discover multiple correlations between trade promotion characteristics and historic demand in order to provide accurate demand forecasting for future campaigns. The ability to distinguish the uplift or demand due to the impact of the trade promotion as opposed to baseline demand is fundamental to model promotion behavior. Model determination enables what-if analysis to evaluate different campaign scenarios with the goal of improving promotion effectiveness and ROI at the product-channel level by selecting the best scenario.
Trade promotion forecasting challenges
Trade Promotion spending is one of the consumer goods industry’s largest expenses with costs for major manufacturers ranging from 10 percent to 20 percent of gross sales. Understandably, 67 percent of respondents to a recent survey said they were concerned about the return on investment (ROI) gained from such spending. Quantifying ROI depends heavily on the ability to accurately identify the “baseline” demand (the demand that would exist without the impact of the trade promotion) and the uplift.[1]
In fact, forecast accuracy plays a critical role in the success of consumer goods companies. Aberdeen Group research found that best-in-class companies (with an average forecast accuracy of 72 percent) have an average promotion gross margin uplift of 28 percent, while laggard companies (with an average forecasting accuracy of only 42 percent) have a gross margin uplift of less than 7 percent.[2]
A bottom-up sales forecast at the SKU-account/POS level requires taking into account product attributes, historical sales levels and store specifics. A complicating factor is that the large number of different variables which describe the product, the store and the promotion attributes, both quantitative and qualitative, could potentially have many different values. Selecting the most important variables and incorporating them into a prediction model is a challenging task.[3]
Despite these challenges, two-thirds of companies in the consumer supply chain consider forecast accuracy a high business priority. 74 percent said it would be helpful to develop a bottom-up forecast based on stock-keeping unit (SkU) by key customer.[4]
Traditional trade promotion forecasting methods
Many companies forecast the impact of trade promotions primarily through a human expert approach. Human experts are unable to take into account all the variables involved and also cannot provide an analytic prediction of campaign behavior and trends. A recent survey by Aberdeen Group showed that 78 percent of companies used Microsoft Excel spreadsheets as their primary trade promotion technology tool. The limitations of relying upon spreadsheets for trade promotion planning and forecasting include lack of visibility, ineffectiveness and difficulty in tracking deductions.[5]
Specialized applications have been developed and become more common. 35 percent of companies now use legacy systems, 30 percent use Sales and Operations Planning (S&OP) applications, 26 percent use integrated Enterprise Resource Planning (ERP) modules and 17percent use home grown trade promotion solutions. These applications support the planning process, while still primarily relying on human knowledge and intuition for forecasting. One problem with this approach is that humans tend to make optimistic assumptions when forecasting and planning. The result is that forecasts most commonly err on the optimistic side and that human forecasters also tend to underestimate the amount of uncertainty in their forecasts.[6]
A further issue is that the majority of manufacturers use legacy trade promotion systems that contribute to internal fragmentation of trade marketing data. Many of these companies are currently using assumption-based forecasts with limited accuracy.[7]
Analytic approaches to trade promotion forecasting
TPF is complicated by the fact that campaigns are described by both quantitative (such as price and discount) and qualitative (such as display space and support by sales representatives) variables. New approaches are being developed to address this and other challenges. Most of these approaches attempt to incorporate large amounts of heterogeneous data in the forecasting process. One researcher validated the ability of multivariate regression models to forecast the impact on sales of a product of many variables including price, discount, visual merchandizing, etc.[8]
The term Big Data describes the increasing volume and velocity of heterogeneous data that is coming into the enterprise. The challenge is to combine this data across all of the silos within the organization for a single view. The data can be used to improve trade promotion forecast accuracy because it usually contains real connections and causation that can help to better understand what customers are buying, where they are buying it, why they are buying and how they are buying.[9]
Traditional methods are insufficient to assimilate and process such a large volume of data. Therefore more sophisticated modeling and algorithms have been developed to address the problem. Some companies have begun using machine learning methods to utilize the massive volumes of unstructured and structured data they already hold to better understand these connections and causality.[10]
Machine learning can make it possible to recognize the shared characteristics of promotional events and identify their effect on normal sales. Learning machines use universal approximations of nonlinear functions to model complex nonlinear phenomena. Learning machines process sets of input and output data and develop a model of their relationship. Based on this model, learning machines forecast outputs associated with new sets of input data.[10]
Intelligible Machine Learning (IML) is an implementation of Switching Neural Networks that has been applied to TPF. Starting from a collection of promotional characteristics, IML is able to identify and present in intelligible form existing correlations between relevant attributes and uplift. This approach is designed to automatically select the most suitable uplift model in order to describe the future impact of a planned promotion. In addition, new promotions are automatically classified using the previously trained model, thus providing a simple way of studying different what-if scenarios.[11]
TPF systems should be capable of correlating and analyzing vast amounts of raw data in different formats such as corporate sales histories and online data from social media. The analysis should be able to be performed very quickly so planners can respond quickly to demand signals.[12]
Groupe Danone used machine learning technology for trade promotion forecasting of a range of fresh products characterized by dynamic demand and short shelf life. The project increased forecast accuracy to 92 percent resulting in an improvement in service levels to 98.6 percent, a 30 percent reduction in lost sales and a 30 percent reduction in product obselecense.[13
Source: Wikipedia.

Sunday, 26 August 2007

Smart Bridge Trading Solutions Neeraj Nathani Trade Promotion Management (TPM)


Trade Promotion Management (TPM)



Trade Promotion Management typically refers to one or more software applications that assist companies in managing their complex trade promotion activity. Trade Promotion Management is a challenge faced by most CPG/FMCG companies around the globe. Consumer goods companies spend substantial amounts of time and money—14 percent of revenue, according to an AMR Research study—on promotions with retailers designed to boost revenue or increase/protect market share (or both).[1] Key Account Managers and Category/Brand Managers are responsible for developing and implementing a promotional program that delivers the maximum return on investment and manages the trade off between incremental volume and maintenance of a reasonable level of trade spend.[2]
Gartner
Gartner believes that technologies related to managing trade promotions have never been more relevant, as the average revenue expended by manufacturers for promotions now exceeds 20%. More and more companies are leaving spreadsheets for automated technologies, while others are adding promotion optimization capabilities

Key functions

  • sales forecasting
  • Promotion planning and budgeting
  • Predictive modeling/optimization
  • Promotion execution and monitoring
  • Settlement
  • Post event analysis

Business problems addressed

Historically, there have been many solutions to trade promotion management. Commonly, companies use their accounting systems or spreadsheets, but as the complexity of trade increases software solutions have been developed and implemented to fill the needs of companies in various industries including consumer goods, food manufacturing, food service and others.

 Lack of accurate and timely information to support trade promotion decision-making

Trade promotion decisions are often rushed and based on sub-par data. While sales and marketing managers are surrounded by promotion information, questions on retail commitment and product forecast accuracy can hinder the process. Multiple data sources and conflicting needs from various departments further complicate the issue.

Inability to plan promotions based on analytics

Historical trade promotion data should be analyzed in order to continually improve trade promotions. If a company does not utilize processes and systems that measure trade promotion performance, future trade promotion executions could be less effective than if they’d been planned using past analytical information.

Ineffective organization and partner integration

Lack of integration both internally and with external partners can hinder trade promotion success. Key elements of organizational integration include standardized metrics, regular information sharing, cross-functional department collaboration, and collaborative processes4. Integration with retail partners is important to executing promotions successfully, as well as maintain strong relationships with retailers over time.

Lack of appropriate Key Performance Indicators (KPI)

KPIs tell manufacturers and retailers how trade promotions performed relative to their pre-determined objectives. A lack of understanding on what trade promotion data to measure and how to measure performance can hinder the overall process. Manufacturers and retailers will not know what made a promotion effective or ineffective unless they have predetermined data points to measure and analyze.
Lack of control and the ability to accurately monitor the effectiveness and efficiency of Trade Promotions is the key area of concern. Many companies still utilise vast arrays of fragmented spreadsheet style reports to manage their TPM activities.
The complexities of the typical Trade Promotion Management process can be appreciated in this diagram which is based on just one individual retailer account.
Not all promotions are created equal and there are many ways of looking at a promotion and evaluating the effective and efficient use of trade funds. The characteristics of your product portfolio eg beer, toilet paper, toothpaste and yoghurt will impact on the performance of your trade promotion even if the same promotional strategy is used.
For example: with the same size and display location, toilet tissue wipes up the competition with an 82% display driven lift, with yoghurt a distant second at 28%, beer at 15% and toothbrushes at 14%.
(Source: Nielsenwire “Six Trade Promotion Tips: Why Less Can be More”)
Why Promote?
Promotions are undertaken with the intention of driving an increase in consumer sales. This may be instigated as the Brand Manager has a target/KPI to achieve and the promotion is designed to close the gap between the baseline sales and the target. Generally the manufacturer will sell their products to retailers at a discount to help fund the promotion. This discounting is of no benefit if there are no additional sales as a result of the promotion.
Promax delivers key information that helps Brand Managers answer questions, such as:
  • What to promote?
  • How often to promote?
  • Timing – when to promote?
  • Duration – how long to promote?
  • Promotional level – how much should I offer?
  • Product selection – which bundle of products to select?
  • Are the trade deals aligned with the Brand positioning?
  • What is the level of sales lift during the promotional period?
  • Has the promotion created a long-term impact on base-line consumer sales?
  • What happens if I change the frequency of my promotions?
  • Do my promotions clash amongst various retailers?
  • Are specific promotions cannibalising sales of other products in my portfolio and/or competitor products?
  • What is the optimum scenario in terms of volume and profitability?
  • What impact do these promotions have on customer profitability?
  • How do I communicate and implement these promotions via the salesforce?
There are a number of good reasons why one might choose a simple price promotion:
  • Offensive sales gain – to offset competitive threats. Typically this may mean a situation where the supplier is prepared to forego short term profits.
  • Recover market share – sustaining a nominated loss of contribution to gain a position over competitors
  • Stimulate Sales – without a loss of contribution and hopefully an increase in overall profitability. This is probably the most common rationale for promotions. Implicit in this is that the company will increase sales revenue and thus the total profit from the promotion will be greater than if there were no promotion at all.
  • Reward – for existing brand loyal users. This may be a short-term loss of profitability and may even make money if a lot of brand loyal consumers stock up.
  • Switch – However, if there are a large number of promotions targeted at “deal loyal” users then they will switch brand frequently. When promoting to this group the best course of action is to make sure that the promotion is profitable as there may be no long-term future gains to be had.
  • Gets new users to Trial – for new products every new trial is valuable; this incentive is premised on the assumption that the long-term value of a new user may be worth many times the cost of the initial purchase, so the supplier is prepared to invest heavily to obtain a new consumer. This may justify the high cost of a promotion. Trade promotions of new items often need to be supported by other vehicles such as demonstrations and media advertising.
  • Reward to Trade. This often happens to get a buyer off your back. If however, it is viewed as being good for both parties, there should be a profit opportunity.
  • Because the trade threatens deletion – in many instances buyers have co-op budgets to achieve. There is pressure on suppliers to maintain ranging and promotion of your products in the category ensures support for your brand.
Each of these scenarios has different parameters of cost, price point, mechanic, vehicle and incremental volume gain. In reality the sales team gets a certain amount of money to spend on promotions, some say that these funds are a “cost of doing business”. The more money that is provided the more we will sell. If only this were true! We really need to understand how we can effectively apply the limited trade funds to maximise their efficiency.

Source: Wikipedia.