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EG of the effects of deals and promotions June 12, 2007

Posted by jyu in Qualifying.
  1. Temperal retail price reductions substantially increase sales
  2. Higher market share brands are less deal elastic
  3. The frequency of deals change the consumer’s reference price (if a product is promoted heavily – discounted deeply and promoted frequently – the consumer’s reference price of the product decreases.  The consumer will then buy less of the product at regular price because his or her reservation price has decreased correspondently)
  4. The greater the frequency of deals, the lower the height of the deal spike
  5. Cross-promotional effects are asymmetric, and promoting higher quality brands impacts weaker brands (and price label products) disproportionately. (brand 1 can capture significant share from brand 2 – hence the asymmetry – since brand 1 can use promotions more effectively than brand 2.  Brand 2 cannot easily retaliate because of the asymmetry in promotional response.)
  6. Retailers pass-through less than 100% of trade deals (some portion of funds spent by manufacturers to stimulate retailer promotion is pocketed by the retailer to enhance their profits.)
  7. Display and feature advertising have strong effects on item sales
  8. Advertised promotions can result in increased store traffic
  9. Promotions affect sales in complementary and competitive categories


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