Funnel Analysis
Part of Promotion analysis
Estimating cannibalisation between discounted products
Estimate whether a discounted product displaced nearby items by comparing product and group outcomes against a stated baseline.
A discounted product may gain sales while a substitute loses them. To estimate possible cannibalisation, compare both products and the relevant group with a stated no-discount baseline. A substitute's decline warrants investigation; it is not proof that its buyers switched.
Choose the products before measuring the shift
Identify the discounted item and plausible alternatives with the same use, similar price or overlapping shoppers. Keep accessories usually bought alongside it in a separate complement group. Include variants when size or colour is the choice customers face, and use stable product or variant identifiers where available.
Build a daily view of units, actual selling price, discounts, retained product sales, contribution where costs are complete, and stock availability. Note changes in placement, recommendations, advertising and other offers. A product that was unavailable cannot provide a fair picture of its usual demand.
Shopify defines gross sales as product price multiplied by quantity before taxes, shipping, discounts and sales reversals. If using discount rows, check whether a single order can carry multiple combinable discounts before counting rows as distinct orders.
Compare the whole group
Estimate each item's expected sales without the focal discount using comparable periods or a comparison group that shares demand conditions and was not affected by the offer. Examine the movements together:
- Did the discounted item exceed its expected units?
- Did plausible substitutes fall below theirs?
- Did total group units and contribution improve?
A diagnostic displacement ratio divides the estimated substitute-unit shortfall by the estimated extra units of the discounted item, when both estimates are positive. Show the underlying figures and baseline.
The ratio is sensitive to baseline error and does not identify individual buyers who switched. Products can differ in price and margin, and some customers buy both; assess group contribution separately.
Inspect a follow-up period as well as the sale. A later dip may indicate that purchases moved forward. If several products were discounted at once, this comparison alone cannot isolate the effect of one discount.
Strengthen the next estimate
For a future decision, comparable markets or eligible customers could be assigned different product offers, with an outcome defined for the whole group. Keep other price and placement changes aligned and consider whether customers can cross between groups. A controlled comparison can address shared demand changes more convincingly, provided assignment and implementation hold.
Where the baseline remains uncertain, show a range of plausible displacement and contribution outcomes. The decision is whether the focal discount improves the relevant product group's result enough to justify it, given that uncertainty.
