General Mills normally prices Cheerios at $4.69 for an 18 ounce box at Safeway. The Cheerios cost General Mills $1.00 per box to make, and they normally sell them to Safeway for $3.29. Two Cheerios promotions are run at Safeway: One promotion is a straight discount to $2.99 per box. The second Promotion is: Buy 2 Boxes for $7 In a normal week they sell 100 boxes of Cheerios The first promotion sells 150 incremental units The second promotion sells 130 incremental units. General Mills pays the retailer 90% of the amount of the discount to reduce Cheerios to the promoted price.
Questions:
Which Promotion is the best promotion for General Mills and which is the best for Safeway? Explain why? Based on what metrics? In the ideal world, what other data would you want to make a good decision on promotion effectiveness?
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