Why CPG Promotions Destroy Value (And the Three Metrics That Prove It)

The scorecard that hides the hole

Walk into most trade-promotion reviews and you will see the same chart: volume during the promotion against volume before it, a reassuring spike, and a return number underneath. The spike is real. The return number is usually fiction, because it counts every unit sold at the deal price as if the promotion caused the sale.

It did not. A large part of any promotional bump is volume you would have banked anyway, pulled forward from next month or switched in from your own other packs. The academic decomposition that still anchors the field broke the bump into three roughly equal thirds: genuine category expansion, brand switching, and cross-period pull-forward.¹ Only the first third is new money. Report the whole spike as incremental and you have not measured a result, you have measured your own optimism.

This is not a marginal accounting quibble. Trade promotion is one of the largest lines a consumer-goods company spends, commonly cited at 15 to 25% of gross sales, around 20% of revenue on McKinsey's read.⁶² A measurement gap on the biggest discretionary line on the profit and loss account is not a rounding error. It is the hole.

Why 2026 raises the stakes

For three years the hole was survivable because price was carrying growth and retailers were absorbing it. Both have changed. Retailers now push back hard on price, Carrefour pulled PepsiCo brands including Doritos and Quaker from shelves across France, Italy, Spain, and Belgium in January 2024 over price increases, and the trade money that used to smooth those negotiations is under the same scrutiny.⁷ At the same time the majors are pivoting to volume: Nestle moved to cut US prices by 1% in early 2025 to hold its shoppers, and Unilever has said that "topline growth with strong volume contribution is, and will be, our absolute priority."⁸⁹ Volume that has to be defended with promotion makes the quality of that promotion the whole game. And the tooling to measure it has arrived, with AI-enabled revenue-growth platforms now live at the big consultancies and inside companies like Reckitt.¹⁰ The excuse that the data was too hard is expiring.

Metric 1: the incrementality rate

The first number is the share of the promotional uplift that was genuinely new demand rather than borrowed or subsidised. It is the metric the gross scorecard hides, and it is the one that most often turns a celebrated event into a loss.

A practical minimum that practitioner teams hold to is simple: a healthy event clears more than 50% incrementality.⁵ Below that line, more than half the discount is funding sales you already had. Given that the academic baseline puts genuine category expansion at only about a third of the bump, clearing 50% takes a well-chosen mechanic on the right pack at the right depth, not a blanket feature.¹

Metric 2: the net incremental profit bridge

The second number turns incremental volume into money, and it is where most events quietly die. Start from the gross profit on the genuinely incremental units. Then subtract the cost you carry on the whole promoted base: the discount you funded on the units that were never incremental, the trade allowance, the listing and display fees. What survives is net incremental profit, the only figure that belongs in a profit conversation.

The reason the bridge matters is that the subsidy scales with the baseline, not with the incremental volume. A deep cut on a high-baseline product can post a huge uplift and still lose money, because you paid the discount on a mountain of volume that was always going to sell to win a molehill of new demand. The bridge makes that visible in a way the uplift chart never will.

Metric 3: a return built on profit, not volume

Only now does a return number mean anything, because it sits on net incremental profit rather than gross promoted sales. Build it that way and the spread across a portfolio is brutal. McKinsey found that best-in-class promotions returned five times more than the least efficient ones, and that 59% of promotions lose money globally, a figure that climbs to 72% in the United States.⁴² NielsenIQ put it more bluntly still: over half of all trade promotions deliver little to no sales lift, which means much of the spend is simply wasted.³

Four quadrants, one hard conversation

Put every event on a 2x2 of return against incrementality and a portfolio sorts itself into four groups. Top right, high return and high incrementality, is where you want the money: keep and scale. High return but low incrementality is efficient subsidy, profitable but borrowed, so review the mechanic. Low return but high incrementality is genuinely building the category at a loss, sometimes worth it as an investment, usually a depth problem. And bottom left, negative on both axes, is the quadrant that should not exist: events that lose money and do not even buy you new shoppers.

That worst quadrant is rarely empty. On a large UK grocery promotion library of roughly 1,600 events, close to a fifth landed there, negative return and negative incrementality at once. Those are not underperforming promotions to optimise. They are promotions to stop. The conversation nobody enjoys, with the customer who has come to expect that event every year, is the single highest-return hour in the trade-planning calendar.

Six steps to a calendar that pays

The fix is a sequence, not a slogan. First, measure incrementality on every major event, not uplift; if you cannot, that is the project before any other. Second, build the net incremental profit bridge for your top events so the subsidy on baseline volume is visible. Third, place everything on the grid and name the stop quadrant out loud. Fourth, stop or rebuild the bottom-left events, accepting the short-term volume dip as the price of removing a loss. Fifth, move the freed money into the scale quadrant and into base demand, brand, distribution, pack, that grows volume you do not have to rent. Sixth, take the rebuilt calendar into the joint plan as a shared-profit case, not a depth concession. Done in order, portfolio return rises while the trade total stays flat.

The two ways to over-correct

Two failure modes wait on the other side. The first is cutting the trade budget across the board, which kills the scale-quadrant events along with the stop-quadrant ones and hands volume to the retailer's own label. The discipline is reallocation, not subtraction. The second is treating the grid as a one-time purge rather than a standing process; events drift across quadrants as competitors and shoppers move, so a portfolio that was clean last year is not clean now. Measure every cycle, or the hole reopens quietly while the scorecard keeps smiling.

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