The holiday season creates significant sales opportunities for consumer packaged goods (CPG) brands, but it also brings higher advertising costs, more promotions, and greater competition for shelf space. Brands face pressure to increase visibility across physical stores, retailer websites, and shopping apps while competing with seasonal promotions, private-label products, and rival brands.
Higher sales don’t always lead to higher profits. Increased media costs and deeper discounts can quickly reduce the financial return from holiday campaigns. A successful holiday media strategy must account for more than revenue, reach, and return on ad spend (ROAS). It should help brands identify where additional spending will drive profitable growth, which products deserve support, and when the cost of competing outweighs the potential return.
In this white paper, we explore how CPG brands can compete for holiday shoppers, make better media decisions, and protect margins throughout the season.
Why Holiday Shelf Competition Is Getting More Expensive
Holiday competition extends beyond securing space in physical stores. Brands must also compete for visibility across retailer search results, product listings, and sponsored placements.
Several factors make this increasingly expensive.
Higher Retail Media Costs
Retail media networks, including Amazon Ads and Walmart Connect, give brands direct access to consumers as they shop. These platforms can be effective at reaching customers close to a purchase, but competition for premium placements can increase advertising costs during peak shopping periods.
As more brands pursue the same audiences, maintaining visibility may require higher bids or larger budgets. Increased spending can be justified when it generates additional profitable sales. The risk comes when brands pay more to reach customers who would have purchased their products without advertising.
Greater Promotional Pressure
Holiday shoppers expect deals, particularly in categories where competing products are easy to compare. Retailers may also encourage brands to participate in seasonal promotions, special displays, and sponsored campaigns.
These activities can increase sales volume, but discounts and promotional costs reduce the profit earned on each sale. When brands combine aggressive pricing with higher advertising costs, even strong revenue growth may produce disappointing results.
More Competition for Digital Shelf Visibility
The digital shelf includes product search results, sponsored listings, product detail pages, and other placements that influence purchasing decisions on retailer websites and apps. Brands must compete for attention alongside established competitors, emerging products, and retailer-owned alternatives.
Strong digital shelf performance depends on more than paid advertising. Product availability, pricing, reviews, images, and product information also influence whether shoppers choose one brand over another. Paying for more traffic does little to improve results when the product listing itself gives shoppers a reason to choose a competitor.
The Hidden Margin Risk in Holiday Media Spending
A holiday campaign can generate strong sales growth while earning less profit than expected. Consider a simplified example:
A product sells for $10 and has $6 in variable costs, leaving $4 in contribution before advertising. If the selling price drops to $8 and the brand absorbs the full discount, contribution falls to $2 per unit. The brand would need to sell twice as many units to maintain the same total contribution before accounting for additional media costs.
Actual CPG economics are more complex. Retailer margins, trade funding, manufacturer revenue, and promotional agreements affect how discounts influence profitability. Still, the underlying risk remains: lower prices and higher advertising costs can reduce the value of each additional sale.
This makes it important to distinguish between total holiday sales and the sales generated specifically by media and promotions.
Brands should consider:
- How much additional revenue a campaign produces compared with what would have happened without it.
- How discounts, retailer fees, and advertising costs affect contribution profit.
- Whether holiday promotions attract new customers or primarily encourage existing customers to purchase earlier.
- Whether increased sales volume is sufficient to offset lower margins.
A campaign that generates fewer sales at a higher contribution margin may deliver better financial results than one that drives more volume through heavy discounting. The goal is to understand the financial return from incremental sales before increasing investment.
Building a Holiday Media Strategy Around Profitability
Holiday media budgets should reflect differences in product margins, retailer performance, customer demand, and inventory availability. A uniform approach can lead to overspending on products or channels that generate sales without enough profit to justify the investment.
Prioritize Products Based on Profit Potential
Not every product deserves the same level of holiday media support. Brands should assess products based on expected demand, contribution margin, competitive pressure, inventory, and the likelihood that advertising will generate additional purchases.
High-margin products with strong seasonal demand may support greater investment. Lower-margin items may require stricter spending limits, especially when retailers expect significant discounts. Product bundles, larger pack sizes, and premium offerings can also help improve the value of each purchase when they align with consumer needs.
The objective is to direct media toward products that can support both sales growth and profitability.
Evaluate Performance by Retailer and Category
A product that performs well on one retail media network may deliver weaker results elsewhere. Differences in customer behavior, media costs, competitive activity, pricing, and product availability can all affect performance.
Brands should compare retailers based on incremental sales and contribution profit rather than relying solely on platform-reported ROAS. Category conditions also matter. A highly competitive category may require more advertising support, while a product with strong organic demand may need less paid exposure.
These differences should guide budget decisions instead of automatically increasing spending across every retailer.
Coordinate Media with Inventory and Promotions
Holiday advertising should reflect where products are available and when demand is expected to rise. Promoting products with limited inventory can waste spending and frustrate shoppers. Continuing to advertise an item after it sells out can also push consumers toward competitors.
Media teams should coordinate with sales, retail, and supply chain teams to account for:
- Product availability and expected replenishment dates.
- Retailer promotion schedules and pricing changes.
- Regional differences in demand and distribution.
- Seasonal shopping periods when purchase intent is highest.
This coordination helps brands avoid spending on unavailable products and concentrate investment where shoppers can complete a purchase.
Competing Without Relying on Deeper Discounts
Price promotions can be effective during the holidays, but they should not be the default response to increased competition. Brands have other ways to improve visibility and encourage purchases without cutting prices across their entire product portfolio.
Highlight Product Value
Holiday advertising can focus on product benefits that help shoppers justify a purchase at or near full price. Depending on the category, this may include product quality, convenience, gift suitability, premium features, or larger package value.
Creative messaging should connect these benefits to specific shopping needs rather than relying entirely on price reductions. For example, a food brand might promote convenience for holiday gatherings, while a personal care brand could highlight gift-ready packaging.
Make Promotions More Selective
Broad discounts can reduce margins across purchases that might have occurred at full price. A more selective approach focuses promotional spending on products, retailers, regions, or periods where a discount is more likely to generate additional demand.
Brands can evaluate past promotions to identify where price reductions produced enough incremental sales to justify their cost. They should also consider whether limited-time offers, bundles, or targeted retail media provide a better financial return than category-wide discounts.
Improve Product Listings Before Increasing Advertising
Retail media performance depends partly on what shoppers see after clicking an advertisement. Incomplete product descriptions, weak images, limited reviews, or inconsistent product information can reduce the likelihood of purchase.
Improving these elements may help brands convert more shoppers without increasing media spending. This is particularly important during the holidays, when shoppers often compare multiple products quickly and may choose a competing option if the information they need is missing.
Aligning Retail Media with the Broader Holiday Media Mix
Retail media plays an important role in holiday sales, but it should not operate independently from other advertising channels. Streaming television, online video, social media, and other channels can introduce products and build demand before shoppers visit a retailer. Paid search and retail media can then help capture that demand closer to purchase.
When each channel is managed separately, brands risk investing too heavily in the final stages of the buying process while giving insufficient credit to earlier advertising. They may also count the same sale across multiple platforms, making campaign performance look stronger than it is.
A coordinated media strategy assigns each channel a clear role and evaluates how the combined investment affects sales and profit. For example, an increase in retail search conversions may reflect demand created by earlier video or social campaigns. Looking only at retail media results could lead a brand to overinvest in sponsored listings while reducing the advertising that helped generate the demand.
Independent measurement can help identify these relationships and support better decisions about where to increase or reduce spending.
Using Data to Guide Holiday Media Investments
Holiday demand changes quickly. Media budgets need enough flexibility to respond to sales trends, competitive activity, inventory changes, and rising advertising costs. Data and forecasting can help brands anticipate these shifts rather than reacting only after performance declines.
Forecast Demand and Promotional Response
Historical sales, pricing, promotional results, seasonal demand, and media performance provide a starting point for holiday planning. Predictive models can help estimate how products may respond to changes in advertising investment, discounts, or retailer activity.
These forecasts are most useful when they account for factors outside advertising, including competitive pricing, distribution, and broader consumer demand. They can also help brands test different spending scenarios before committing their budgets.
Establish Profit-Based Spending Limits
Advertising performance should be evaluated against the profit available from each additional sale. A campaign with a high ROAS may still be unprofitable if product margins are low or discounts absorb too much revenue.
Brands can use contribution margins and expected incremental returns to establish spending limits for specific products and retailers. These limits provide a financial basis for deciding whether higher media costs are justified.
Adjust Budgets as Conditions Change
Campaign performance can shift throughout the holiday season as shoppers respond to promotions, products sell out, and competitors change their spending.
Brands should regularly review media costs, sales trends, inventory, and profitability to identify where budgets need to change. That may mean shifting investment to a better-performing retailer, reducing spending on a heavily discounted product, or supporting an item experiencing stronger-than-expected demand.
Frequent adjustments should be guided by business results rather than reacting to short-term changes in platform metrics alone.
Measuring Holiday Performance Beyond ROAS
ROAS is widely used to evaluate advertising efficiency, but it does not show whether advertising generated sales that would not have occurred otherwise. It also does not account for product margins, promotional costs, or differences in retailer economics.
To determine whether holiday spending delivered profitable growth, brands need a broader view of performance.
Measure Incremental Sales and Profit
Incremental sales represent purchases generated by a campaign beyond what would have occurred without it. Incrementality testing can help distinguish new demand from purchases that advertising simply received credit for.
Brands can then evaluate the contribution profit associated with those additional sales after accounting for relevant product costs, discounts, and media spending. This helps identify campaigns that create financial value rather than simply reporting attributed revenue.
Evaluate Media and Promotions Together
Media spending and promotions often influence the same purchase. A customer might respond to an advertisement because a product is discounted, making it difficult to determine which activity drove the sale.
Marketing mix modeling (MMM) can help evaluate the contribution of different media channels while accounting for promotions, seasonal demand, pricing, and other factors. Combined with incrementality testing, this provides a more complete understanding of how media and promotional investments affect overall sales.
Because holiday demand can change quickly, brands should also recognize the limits of historical models and use current testing and sales data to support in-season decisions.
Track Metrics That Reflect Business Value
The most useful holiday performance metrics connect advertising activity to financial results.
| Metric | What It Helps Measure |
| Incremental sales | Additional sales generated by media or promotions |
| Incremental contribution profit | Profit from additional sales after relevant costs |
| Contribution margin | The amount available to cover advertising and other expenses |
| Incremental ROAS | Additional revenue generated for each advertising dollar |
| Product-level profitability | Which products deliver the strongest financial returns |
| Retailer-level profitability | Where media investment creates the greatest value |
No single metric provides a complete picture. Together, these measures help brands compare the financial impact of different campaigns, products, and retailers. They also provide a stronger basis for future holiday budget planning.
How MatrixPoint Helps Brands Protect Holiday Margins
Holiday competition creates pressure to spend more on media, promotions, and retail visibility. Without a clear view of profitability, these investments can increase sales while reducing margins.
MatrixPoint helps CPG brands evaluate media performance in the context of product economics, promotional activity, and broader business goals. Through media planning, marketing mix modeling, incrementality testing, predictive analytics, and independent performance measurement, we help brands identify which investments drive additional profitable sales and where spending may be less effective.
Our approach connects media decisions with retail performance so brands can respond to changing demand, reduce wasted spending, and make more informed budget decisions.
Want to improve holiday media performance without sacrificing profit margins? Contact MatrixPoint to learn how our media and measurement expertise can help you make smarter investments.