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Dynamic cross-sales effects of price promotions: Empirical generalizations

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  • B. VINDEVOGEL

    ()

  • D. VAN DEN POEL

    ()

  • G. WETS

Abstract

In this research we use the framework of market-basket analysis and techniques from modern multivariate time-series analysis to measure and explain the dynamic impact of a price promotion on the sales of a complementary product. The large scale of this research enables us to derive empirical generalizations. We contribute to the literature in drawing the following conclusions: Firstly, we illustrate that using an intense promotion strategy, characterized by deeper and more frequent price promotions, has a negative impact on the cross-price effect. Secondly, we show that using the same brand name (umbrella branding) for two complements has a beneficial influence on the cross-price effect. Finally, we show that price levels of the products are important moderators in explaining persistent cross-price effects.

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File URL: http://www.feb.ugent.be/nl/Ondz/wp/Papers/wp_04_276.pdf
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Bibliographic Info

Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 04/276.

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Length: 26 pages
Date of creation: Nov 2004
Date of revision:
Handle: RePEc:rug:rugwps:04/276

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Keywords: Empirical generalizations; market-basket analysis; cross-price elasticities; promotion strategy; multivariate time-series techniques; retailing.;

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  1. Evans, Lewis & Wells, Graeme, 1983. "An alternative approach to simulating var models," Economics Letters, Elsevier, vol. 12(1), pages 23-29.
  2. B. Vindevogel & D. Van Den Poel & G. Wets, 2004. "Why promotion strategies based on market basket analysis do not work," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 04/262, Ghent University, Faculty of Economics and Business Administration.
  3. Magid M. Abraham & Leonard M. Lodish, 1993. "An Implemented System for Improving Promotion Productivity Using Store Scanner Data," Marketing Science, INFORMS, vol. 12(3), pages 248-269.
  4. G. Dekimpe, Marnik & Hanssens, Dominique M. & Silva-Risso, Jorge M., 1998. "Long-run effects of price promotions in scanner markets," Journal of Econometrics, Elsevier, vol. 89(1-2), pages 269-291, November.
  5. 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.
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