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Dynamic cross-sales effects of price promotions: Empirical generalizations

Author

Listed:
  • 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.

Suggested Citation

  • B. Vindevogel & D. Van Den Poel & G. Wets, 2004. "Dynamic cross-sales effects of price promotions: Empirical generalizations," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 04/276, Ghent University, Faculty of Economics and Business Administration.
    • Handle: RePEc:rug:rugwps:04/276
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    References listed on IDEAS

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    1. 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.
    2. 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.
    3. David J. Hand & Heikki Mannila & Padhraic Smyth, 2001. "Principles of Data Mining," MIT Press Books, The MIT Press, edition 1, volume 1, number 026208290x, December.
    4. 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.
    5. 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.
    6. Evans, Lewis & Wells, Graeme, 1983. "An alternative approach to simulating var models," Economics Letters, Elsevier, vol. 12(1), pages 23-29.
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