Identifying demand factors for promotional planning and forecasting: a case of a soft drink company in the UK

Abstract

In recent years, promotions have become a common practice in many retail outlets. Usually these promotions are planned collaboratively by manufacturers and retailers, who jointly agree on the products on promotion, the types of promotions, the price reduction and the timing of promotions. But, the sales can also be influenced by other factors such as weather, holiday periods and festivals, which are sometimes overlooked. In this research, we identify a set of demand factors influencing the sales of a leading soft drink company in the UK. We relate the demand factors with the company's actual sales to gain more insight into the underlying demand structure. We use structural equation modelling for this purpose. The results confirm the role of the promotional factors in the sales uplift for all products. However, the other demand factors are found influential only for some products. Our results suggest different demand structures for different product families, and our findings confirm the importance of collecting and exchanging the proper supply chain information. Our approach may also assist managers to better plan, forecast and promote different products in collaboration with other supply chain partners.