End the promotion or just shrink it? A 5-question decision guide
You are reviewing next year's promo calendar and looking at a long list of events that do not earn their cost. The temptation is to swing the axe and kill them all, and the fear is that the retailer pushes back, your baseline cracks, and your shoppers walk. Most calendars need a mix of moves. Some promotions should be ended cleanly because they are not doing any real work. Others need to be shrunk in depth, in frequency, in duration, or in mechanic, because the promo window itself is load-bearing for the category or for the retailer relationship even when the current design is bad. This guide walks you through the five questions that split the two paths before you commit the calendar for another year.
It is the annual calendar review. Finance has pushed back on the trade-spend number for the third year running. Your promo Return on Investment (ROI) dashboard shows about half your events running below your cost of capital, and a handful running clearly negative. Your key-account team has a list of events the retailers are loud about keeping. Your brand-equity team has a list of mechanics that they think are training shoppers to wait for a deal. Somebody has to decide, for each event, whether to end it or just shrink it before the calendar gets locked.
Same money in, very different outcomes
You remove the event from the calendar. No display, no feature, no price cut, no bonus-pack. The Stock Keeping Unit (SKU) sits at its baseline shelf price in that window.
- What happens to your sales
- A short-term dip of 5 to 15 percent on the affected SKU in the window the promo used to run, followed by baseline recovery over 2 to 4 cycles as shoppers re-anchor to the regular price. If your cannibalisation rate on the old promo was above 70 percent, the dip is small because most of the uplift was pulled from future baseline anyway. If cannibalisation was genuinely low and the event was finding new shoppers, the dip is larger and slower to recover.
- What shoppers notice
- Depends on how frequent the old promo was. A monthly event gone missing is noticed within one cycle. A quarterly event can take two or three cycles before regular shoppers even realise it is not coming back.
- How easy it is to undo
- Fully reversible. If you regret the call next cycle, you can add the event back with no structural damage. The cost of the experiment is one window of baseline softness.
- What your retailer does
- Objects in Joint Business Plan (JBP) talks, especially if the event sat on their feature calendar or filled a shelf-ad window. Expect a push to replace the lost visibility with something else, usually a smaller off-invoice display pool or a different SKU in the same window.
- What it does to your profit
- Best upside of the two options. The full trade-spend line item for that event drops straight to your gross margin, minus the short-term baseline softness. For an event running below cost of capital, annualised profit lift typically lands in the +25 to +50 percent range versus keeping the event going.
Use this option when the event's promo ROI is clearly negative, when cannibalisation from your own baseline is above 70 percent, when the category has not built strong reference-price decay around the event, when the event is not specifically retailer-demanded in the JBP, and when the category is not structurally dependent on promo visibility for shopper trial or habit.
You keep the event in the calendar but reshape it. Cut the discount depth from 30 percent to 15 percent. Cut the frequency from eight windows a year to four. Cut the duration from four weeks to two. Or switch the mechanic from a Buy One Get One (BOGO) to a single price cut that costs you less.
- What happens to your sales
- A smaller sales dip than ending the event cleanly, usually 2 to 8 percent on the affected SKU across the reshaped window. You keep most of the habit and trial benefit while dropping the marginal cost. The trade-off is that you also keep most of the cannibalisation.
- What shoppers notice
- A shallower mechanic or a less prominent window. Heavy loyalists may notice the change in week one. Occasional shoppers usually take one or two cycles to notice, and many do not notice at all if the mechanic change is from one offer type to another of similar visual weight.
- How easy it is to undo
- Fully reversible within a cycle. If the shrunk version is leaving money on the table, you can restore the original depth next window. Easier to reverse than ending the event entirely.
- What your retailer does
- Tolerates it. The event is still on their calendar, the feature slot is still filled, the JBP optics are preserved. They may push back on the depth reduction, but the reshaping is a much easier conversation than removal.
- What it does to your profit
- Moderate upside. Typically captures 30 to 60 percent of the savings you would have got from ending the event, while keeping the habit / trial / retailer-relationship benefits. ROI improvement is real but less dramatic than killing the event outright.
Use this option when the event is retailer-demanded in the JBP, when reference-price decay has already set in (pausing a single cycle drops baseline by more than 10 percent), when the category is habit or trial driven and needs ongoing promo visibility, when cannibalisation is high but not extreme (say, 40 to 70 percent), or when you want to test the shrunk version before committing to a full removal.
5 questions to ask before you decide
What is this event's incremental promo ROI over the last 12 to 24 months?
Pull the rolling 12 and 24 month incremental profit contribution for the event, divided by the total trade spend the event consumes (on-invoice slice plus off-invoice pool plus display and feature fees). Compare it to your corporate cost of capital, usually 8 to 12 percent. If the ROI is clearly negative or sits below cost of capital across both windows, you have a candidate for action. If the ROI is strongly positive, leave it alone and spend this review cycle on something else.
How much of the promo volume is cannibalised from your own baseline?
Cannibalisation means volume you would have sold anyway at full price, now sold at the promo price. If your cannibalisation rate sits above 70 percent, the event is mostly a baseline discount with extra steps and you should end it. Between 40 and 70 percent, genuine incrementality exists but the event is not earning its keep on its current shape. Shrinking is the safer move because it preserves some of the incrementality while cutting the cannibalisation cost. Below 40 percent, the event is actually doing work and you need a very strong ROI reason to touch it.
Has reference-price decay already set in around this event?
Reference-price decay is what happens when frequent deep promos train shoppers to anchor their expected fair price at the promo price, so that the regular shelf price starts to look expensive even though it has not moved. You can test for decay by pausing one cycle of the event and watching the baseline in the window. If baseline drops by more than 10 percent in the pause cycle, decay is live and ending the event cold will cause structural volume loss. Shrink gradually across 2 to 4 cycles instead. If baseline holds within 3 percent in the pause, decay is mild and a clean ending is safe.
Is the event retailer-demanded in your JBP, or brand-initiated?
Some events exist because the retailer made them a condition of feature-share commitments, event-calendar participation, or a volume-tier threshold. If the event is tied to a retailer contract line, ending it unilaterally will cost JBP goodwill and may trigger retaliation on unrelated SKUs. Shrink depth or frequency so the window stays on the retailer's calendar while your costs fall. If the event is purely brand-initiated (your team added it because it was on the calendar last year and nobody took it off), ending it is clean.
Does this category rely on promo visibility for trial, habit refresh, or seasonal occasions?
Some categories are structurally promo-dependent. Ice cream builds its summer. Beer rotates around public holidays. Confectionery lives off gifting seasons. Entry-tier SKUs across many categories use promo windows as the main trial engine. If your category fits one of these patterns and the event sits in a habit or trial window, shrinking is safer than ending. If the category is a steady weekly-shop item with no seasonal or trial dependency (household cleaners, personal care staples), ending is fine.
Walk these 5 questions in order
A YES on any question takes you straight to the verdict on the right. A NO sends you down to the next question. Order matters. Earlier questions carry more weight than later ones.
Worked exampleOne concrete scenario, walked through the tree
One concrete scenario, walked through the tree
The same biscuit brand used in earlier playbooks. You are reviewing the next year's promo calendar for your Tier 2 chocolate-biscuit SKU at a top 3 mainstream grocer. The event in question is a quarterly BOGO (Buy One Get One free, so an effective 50 percent price cut on the paired purchase) that runs for four weeks each time, giving a total of 16 weeks of BOGO across the year. Rolling 24 month incremental profit is negative $85,000 against total trade-spend of $540,000 on this event alone. Baseline cannibalisation has been measured at 78 percent across the last three cycles. When your team paused the Q2 event last year, baseline dropped by 3 percent in the pause window and returned to normal by the end of the following month. The event is not a specific JBP contract line for this retailer, but it is one of the four slots they call out in the feature-ad calendar. The biscuit category is a weekly-shop item with mild seasonal spikes but no strong trial dependency on this SKU.
- Node 1YESIs this event's rolling 12 to 24 month promo ROI below your cost of capital (usually 8 to 12 percent)?
Incremental profit of negative $85,000 on $540,000 of trade spend is an ROI of roughly negative 16 percent, well below any defensible cost of capital. The event is a clear candidate for action. Move to Q2.
- Node 2YESIs baseline cannibalisation from this event above 70 percent?
Measured cannibalisation of 78 percent puts the event clearly above the 70 percent threshold. Most of the BOGO volume would have sold at full price anyway. **The rubric says end the event.** Stop walking the tree and apply the ending logic. Consider how to replace the feature-ad slot with the retailer (Q4 context) even though Q2 has already decided the event fate.
- Node 3Not reachedWhen you pause one cycle, does baseline drop by more than 10 percent in the pause window?
Q2 produced the verdict. For completeness: the paused-cycle baseline test last year showed only a 3 percent drop, which is well under the 10 percent decay threshold and would have confirmed a clean ending anyway.
- Node 4Not reachedIs this event tied to a retailer JBP commitment (feature share, event calendar, volume-tier threshold)?
Q2 produced the verdict. For completeness: the event is on the retailer's feature-ad calendar but it is not a contractual JBP commitment. Your key-account team should approach the retailer with a proposal to replace the slot with a smaller display-only programme on your Tier 1 SKU, where the incrementality is real, before the calendar locks. That conversation is the follow-up to the decision, not a reason to keep the event.
- Node 5Not reachedDoes the category structurally rely on promo visibility for trial, habit refresh, or seasonal occasions?
Biscuits are a steady weekly-shop category. No structural trial or habit dependency on the Tier 2 SKU to protect. Q5 would have confirmed the ending.
The verdict: end the event. Reshape the feature-ad slot with the retailer before the calendar locks.
The math is clean. The event was consuming $540,000 of trade-spend per year and producing negative $85,000 of incremental profit against it, a total drag on the brand Profit and Loss (P&L) of $625,000 annualised ($540,000 of spend plus $85,000 of negative incrementality). Ending the event directly reclaims the $540,000. The short-term baseline softness in the four windows is expected to cost you about 1.5 to 2.5 percent of baseline volume across the year, which at your Tier 2 SKU gross margin works out to roughly $40,000 to $65,000 of foregone contribution. Net annualised benefit lands between $475,000 and $500,000, against the $625,000 total drag you were carrying before.
Reinvestment is where the real upside sits. A reasonable split of the reclaimed spend is 40 percent back into a tighter display programme on your Tier 1 SKU (where measured incrementality runs at roughly 2.5 times the Tier 2 BOGO), 30 percent into above-the-line brand advertising (the long-term equity builder that the BOGO was eroding), and 30 percent held back to Finance as margin recovery. The Tier 1 display reinvestment alone typically pays back 1.5 to 2.0 times its cost, so the $215,000 you send there is reasonably worth $325,000 to $430,000 of incremental gross profit. Combined annualised profit improvement against the old BOGO is in the range of $770,000 to $900,000.
The retailer conversation is the part your key-account team needs to rehearse. Go into it with the replacement proposal fully built, not as a pushback on the retailer's calendar. A four-week end-of-aisle display on Tier 1 in the same window, tied to a photo-audit compliance metric and a $60,000 off-invoice pool, is a credible replacement that keeps their feature-ad narrative intact and delivers cleaner ROI to you. If the retailer refuses the replacement and insists on keeping a promotional window in that slot, fall back to Option B: shrink the BOGO to a 25 percent price cut (still a feature-worthy mechanic) for two weeks rather than four. You lose some of the savings but the ROI on the shrunk version lands above zero, which is still better than the status quo.
Revisit in 12 months. If the ended event was not missed by the retailer, leave it dead and move the reinvestment to permanent. If it was missed and the replacement is struggling, you can always reinstate the BOGO at a shallower depth next year.
Kraft Heinz, 2019 to 2023: the portfolio reset that separated events worth keeping from events to kill
February 2019, Pittsburgh. Kraft Heinz took a $15.4 billion writedown on its two flagship brand portfolios, Kraft and Oscar Mayer. The stock dropped 27 percent in a single session. The public diagnosis at the time was that a decade of aggressive cost-out under the prior ownership group had starved the brands of marketing support and that the company had over-indexed on deep promotional pricing to drive quarterly volumes, building a cannibalisation problem that eventually swallowed the equity.
June 2019, new Chief Executive. Miguel Patricio, formerly Chief Marketing Officer at AB InBev, was appointed Chief Executive. His public commentary across 2019 and 2020 named the problem directly. Promotional activity had drifted toward the wrong shape. Too much depth, too much frequency, not enough measurement. He committed to cutting promotional intensity across the portfolio and reinvesting the savings into brand advertising and renovation.
2020 to 2022, the rebuild. The rebuild happened event by event, not by a blanket edict. Some promotional programmes were ended cleanly (low-incrementality BOGOs and deep-depth price cuts on brands where cannibalisation had been measured above 75 percent). Other events were shrunk rather than ended (retailer-facing feature programmes where the window mattered but the depth did not). The portfolio view, rather than a company-wide policy, is what made the reset commercially defensible inside the retailer conversations.
The numbers the company reported publicly across that window. Kraft Heinz's consolidated gross margin rose from 32.0 percent in 2019 to 33.6 percent in 2022, against a category that was itself absorbing input-cost inflation of 10 to 15 percent over the same period. Brand-equity scores on Heinz, Philadelphia, and Kraft Mac & Cheese stabilised and then recovered through 2021 and 2022 on the standard tracking studies. Unit volumes held within 2 percent of prior year on the flagship SKUs even as net revenue grew in double digits, which is the signature of a portfolio where the promo discipline has taken hold: the price side of the bridge does more work, the promo side does less, and the net lands higher. In the UK, Heinz Beans were relaunched in 2022 with reduced promotional frequency and a list-price rise, and the company reported that brand-contribution margin recovered meaningfully across the following cycles.
The trade-off was visible. Volume share in some categories softened during the rebuild, particularly where retailers retaliated on unrelated SKUs or where competitors filled the feature windows Kraft Heinz had vacated. The company accepted that as the cost of the reset. The alternative, which was to keep firing unmeasured promotional spend in defence of share, had already been tried and had led to the 2019 writedown.
Kraft Heinz did not end all its promotions, and it did not just shrink them either. It walked an event-by-event decision tree that separated the ones mostly cannibalising baseline (ended) from the ones tied to real retailer relationships or real trial dynamics (shrunk). Questions 2 (cannibalisation rate) and 4 (retailer-demanded or not) carried most of the decisions. The company ate 18 to 24 months of retaliatory share pressure to get through the reset, and the brand-margin recovery that followed validated the approach. The playbook teaches the same sequence, only earlier, before a writedown forces it.
Run these before you commit
- Trade Promotion OptimisationPromo ROI CalculatorThe starting tool for Question 1. Build the event's rolling 12 and 24 month incremental profit and ROI, separated out from the surrounding calendar. The calculator surfaces the events sitting below your cost of capital and ranks them by profit drag so you know which candidates to walk through the full rubric first.Open the tool
- Trade Promotion OptimisationSource-of-Volume DecomposerThe tool behind Question 2. Decomposes the promo uplift into the portion cannibalised from your own baseline, the portion pulled from forward-buying, the portion switched in from competitors, and the genuinely new shoppers. The cannibalisation rate is the single number that decides whether the event is a discount in disguise or a real demand generator.Open the tool
- Trade Promotion OptimisationPromo Baseline EstimatorThe tool behind Question 3. Models the baseline under different reference-price-decay assumptions so you can stress-test what happens in the window if the event is paused or shrunk. If the modelled decay-adjusted baseline holds within 3 percent across the pause cycle, a clean ending is safe. If it cracks by more than 10 percent, shrinking is the safer move.Open the tool
The lessons behind this guide
- Trade Promotion Optimization · Lesson 1Free previewPromo ROI FundamentalsThe single number that tells you whether a trade promotion is making you money or destroying it.
- Trade Promotion Optimization · Lesson 2Free previewSource of VolumeWhere your promo sales actually come from: new shoppers, more usage, switching from rivals, or stockpiling.
- Trade Promotion Optimization · Lesson 3Sign up to unlockBaseline vs. IncrementalTelling apart the sales you would have made anyway from the sales the promo actually added.
- Trade Promotion Optimization · Lesson 4Sign up to unlockPromo Performance GridSorting every promo into BEST, GOOD, REVIEW, or STOP. The four-box scorecard every trade plan should clear.
- Trade Promotion Optimization · Lesson 5Sign up to unlockPromo MechanicsChoosing between price cuts, multibuys, displays, and features. Which one fits which goal, and which to retire.
- Trade Promotion Optimization · Lesson 6Sign up to unlockCustomer Value AssessmentA profitability lens on your top retailers, so you can see where promo investment earns its return.
- Trade Promotion Optimization · Lesson 7Sign up to unlock13-Lever TPO OptimizationThe full set of 13 things you can change on a promo plan before signing the year-end deal.
- Trade Promotion Optimization · Lesson 8Sign up to unlockPromo Calendar OptimizationSpacing, depth, and rhythm. The promo calendar as the operating system for your trade plan.
- Trade Terms · Lesson 1Free previewTrade Terms AnatomyAll the layers of a retailer trade deal: discounts on the invoice, off-invoice rebates, listing fees, and the rest.
- Trade Terms · Lesson 2Free previewGross-to-Net BridgeThe full waterfall from your list price down to what actually lands in your pocket.
- Trade Terms · Lesson 3Sign up to unlockCustomer TieringEarn-and-keep tiering. The fix for when flat trade terms quietly subsidise your worst customers.
- Trade Terms · Lesson 4Sign up to unlockTrade Investment EfficiencyHow to tell which trade-spend dollars are working and which are wasted, with the audit trail to prove it.
- Trade Terms · Lesson 5Sign up to unlockTrade Terms OptimizationSame total trade spend, better structure. How to recover money without renegotiating headline rates.
- Trade Terms · Lesson 6Sign up to unlockCustomer Profitability and Profit PoolThe retailer-by-retailer profit picture, as the buyer sees it. The view you need before you negotiate.
- Trade Terms · Lesson 7Sign up to unlockTrade Terms NegotiationWalking into the room with the maths, not just opinions. A simulator that turns your numbers into negotiating moves.
How often, and what should make you re-decide
Re-walk this guide on every annual promo-calendar review, and mid-year on any event whose rolling ROI drops below cost of capital for two consecutive quarters. The cannibalisation number and the reference-price-decay number are the two inputs that move fastest as competitor behaviour and retailer programmes shift.
- An event's rolling 12 month promo ROI drops below cost of capital for two quarters in a row. Walk the full rubric before the next calendar lock.
- A retailer changes feature-ad or event-calendar commitments in the JBP. Re-walk Q4 for every event touched by the new commitments.
- A new competitor enters the category with aggressive promo depth. Re-check Q3 for reference-price decay across your own calendar before matching.
- Category baseline drops by more than 5 percent year-on-year. Investigate Q3 for system-wide reference-price decay rather than individual-event misbehaviour.
- Finance flags total promo intensity as above guided plan. Rank all events by ROI, walk the rubric on the bottom quartile first, save the rest for the next cycle.
See the full Trade Promo Optimization and Trade Terms course
This guide is one slice of a deeper lesson set. RGM Academy walks you through every commercial decision in the same hands-on format, with an AI Strategist coaching every move you make.
Sign up free. 12 lessons included.