In this short note, we list the different types of promo mechanics commonly applied in FMCG/CPG categories, along with their effective discount rates. This should assist in calculating predicted revenues in conjoint analysis.
FMCG/CPG Common Promo Types
In the below table, $Y means the original price per item.
| Name | Description | Effective discount rate |
|---|---|---|
| Special X% off | A percentage discount on the advertised price | X% |
| Special $X off | A fixed amount discount on the advertised price | X/Y × 100% |
| Everyday low price (EDLP) | Not really a promotion, but rather a permanently lowered price relative to another retailer, previously used pricing, or an advertised RRP | 0% |
| Buy One Get One Free (BOGO / BOGOF) | A multibuy promo where the consumer buys one item and becomes entitled to get the second one free. It does not necessarily mean that they will take the second item, but in most cases will. | 50% |
| Buy 1 Get Second Half-Price (BOGSHP) | A multibuy promo where if the consumer buys 2 items, they will pay 1.5 × $Y instead of 2 × $Y | 25% |
| Buy 2 for $X | A multibuy promo where if the consumer buys 2 items, they will pay $X instead of 2 × $Y | (1 - X/2Y) × 100% |
| Buy 3 for 2 | A multibuy promo where if the consumer buys 3 items, they will pay 2 × $Y instead of 3 × $Y | 33.(3)% = ⅓ |
| Buy 2 Get 1 Free (B2G1F / B2GOF) | A multibuy promo where if the consumer buys 2 items, they become entitled to get the third one free. It does not necessarily mean that they will take the second item, but in most cases will. | 33.(3)% = ⅓ |
| Free shipping | Removes the shipping cost | Depends on the structure of shipping costs |
| Pre-pricing | Refers to the practice of stamping the price of the product on the pack itself, thus creating perception that the manufacturer is making it harder for retailers to justify higher pricing | 0% |
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