Should the mulch promotion continue?

A home-improvement retailer is running a seasonal promotion on bagged mulch.

Business context

• Regular price: $3.50 per bag
• Promo price: $2.00 per bag
• Variable cost: $2.40 per bag
• Therefore, the promoted item currently has negative item-level contribution margin .
• The company has 6 weeks left in the spring selling season.

Over the last 4 weeks:

• Weekly mulch unit sales increased from 10,000 to 26,000 bags.
• Management believes the promo may also drive larger baskets and more store traffic.
• However, some of the observed lift may be due to seasonality, weather, competitor pricing, stock-up behavior, or cannibalization of other landscaping products.

You have access to:

• store-day sales,
• transaction baskets,
• loyalty/customer identifiers for some shoppers,
• ad spend,
• inventory and stockout data,
• competitor price checks,
• store region and weather data.

Questions

1. Should the retailer continue the mulch promotion for the rest of the season?
2. What metrics would you use to make the decision, and why is item-level margin alone insufficient?
3. How would you estimate the incremental impact of the promotion rather than relying on raw observed sales lift?
4. If leadership still decides to continue the promotion despite negative item-level margin, what business reasons could justify that decision?

Be explicit about causal inference issues, segmentation, tradeoffs between revenue and profit, and how you would present a persuasive recommendation to a business leader.