The Promotional Cone of Uncertainty: Redemption Rate vs. Incrementality
Retailers and restaurants often measure promotional effectiveness based on redemption rate; but what if high redemption simply comes from existing customers who would have purchased the promoted item at full price anyway? The uncertainty around the incremental profit impact of each promotion is referred to as the "promotional cone of uncertainty," since, as redemption rate increases, organizations are increasingly uncertain about the incremental profit impact. A rigorous Test & Learn process is necessary to identify where each promotion falls within this cone so that future marketers can optimize future promotional strategies.