Cannibalisation and purchases brought forward: the hidden cost of promotions

Two effects that never show up in the sales report and can turn an apparently successful promotion into one that loses money.

• Cannibalisation moves sales between products in your store.
• Purchases brought forward move sales between weeks.
• Ignoring them inflates the effect of promotions and pushes discounts too deep.

Two effects the report cannot see

A promotion does not act on one product in isolation. It moves sales between products and between weeks. If you only look at the product on offer, and only during the offer, you miss two effects that subtract: cannibalisation and purchases brought forward.

Cannibalisation: sales that change product

When you discount one coffee brand, some of the people who buy it would have bought another brand in your store. That sale is not new: it has changed product, often at a lower margin. The more alike the products, the larger this effect tends to be.

Measuring it means looking at the catalogue as a whole: which products drop when another is on promotion, beyond what the season and their own price explain.

Purchases brought forward: sales that change week

With products people store, such as cleaning, drinks or dry food, customers use the discount to stock up. The promotion week sells a lot; the following weeks sell less than usual. If you only count the discount week, you overestimate the effect.

It shows up when the following weeks are compared with their own scenario without the promotion: the gap left behind is the sales that were brought forward.

Why it matters for decisions

With both effects taken out, the ranking of promotions can change: some very visible offers create almost no new sales, while quieter ones do. The right depth changes too: sometimes a smaller discount leaves more profit because it gives away less margin and cannibalises less.

Effecta estimates both effects for every promotion from your own history and takes them off the profit it shows you, both when simulating a promotion and when measuring a past one.