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The Effect of Price Promotions on Variability in Product Category Sales

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  • Jagmohan S. Raju

    (University of California, Los Angeles)

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    Abstract

    Our objective in this research is to relate variability in product category sales to promotional activity in the product category, and other category specific characteristics. The findings may be relevant from retailers' perspective as retailers' revenues are more closely related to the sales of the product category as opposed to the sales of any particular brand. We analyze data on about 2,000 brands from 25 different SAMI categories, obtained with the cooperation of a major grocery chain. Our data suggest that an increase in the magnitude of discounts increases the variability in category sales but an increase in the frequency of discounts has an opposite effect. Furthermore, categories which are bulky, or categories where the degree of competitiveness is high, exhibit lower variability in sales.

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    File URL: http://dx.doi.org/10.1287/mksc.11.3.207
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    Bibliographic Info

    Article provided by INFORMS in its journal Marketing Science.

    Volume (Year): 11 (1992)
    Issue (Month): 3 ()
    Pages: 207-220

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    Handle: RePEc:inm:ormksc:v:11:y:1992:i:3:p:207-220

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    Related research

    Keywords: price discounts; product category sales; retailing; sales promotions;

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    Cited by:
    1. Srinivasan, S. & Pauwels, K.H. & Hanssens, D.M. & Dekimpe, M.G., 2002. "Do Promotions Benefit Manufacturers, Retailers or Both?," ERIM Report Series Research in Management ERS-2002-21-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
    2. Foekens, Eijte W. & S.H. Leeflang, Peter & Wittink, Dick R., 1998. "Varying parameter models to accommodate dynamic promotion effects," Journal of Econometrics, Elsevier, vol. 89(1-2), pages 249-268, November.
    3. Durham, Catherine A. & Johnson, Aaron J. & McFetridge, Marc V., 2007. "Marketing-Management Impacts on Produce Sales," Journal of Food Distribution Research, Food Distribution Research Society, vol. 38(2), July.
    4. Dang Jha Priya, . "A Review of Theoretical Perspectives Applied to Sales Promotion and a New Perspective based on Mental Accounting Theory," IIMA Working Papers WP2004-03-04, Indian Institute of Management Ahmedabad, Research and Publication Department.
    5. McLaughlin, Edward W. & Perosio, Debra J., 1996. "The Role of the Supermarket Buyer," Research Bulletins 122826, Cornell University, Department of Applied Economics and Management.
    6. Boute, Robert N. & Disney, Stephen M. & Lambrecht, Marc R. & Houdt, Benny Van, 2014. "Coordinating lead times and safety stocks under autocorrelated demand," European Journal of Operational Research, Elsevier, vol. 232(1), pages 52-63.
    7. Putsis, William Jr. & Dhar, Ravi, 2001. "An empirical analysis of the determinants of category expenditure," Journal of Business Research, Elsevier, vol. 52(3), pages 277-291, June.
    8. D. VAN DEN POEL & Jan J. DE SCHAMPHELAERE & G. WETS, 2003. "Direct and Indirect Effects of Retail Promotions," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 03/202, Ghent University, Faculty of Economics and Business Administration.
    9. Walters, Rockney G. & Bommer, William, 1996. "Measuring the Impact of Product and Promotion-Related Factors on Product Category Price Elasticities," Journal of Business Research, Elsevier, vol. 36(3), pages 203-216, July.

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