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Price promotions in emerging markets

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  • Mathur, Sameer
  • Sinitsyn, Maxim

Abstract

How should price promotion strategies be modified in an emerging market (e.g., India, China) compared to those employed in developed markets (e.g., USA, Canada)? Specifically, how should the presence of middle-class consumers with limited ability to pay, prevalent in an emerging market, influence the depth and frequency of price promotions offered by competing firms? Lay intuition suggests that firms should promote more frequently and offer deeper discounts in emerging markets, in order to effectively sell to limited income, middle-class consumers. We construct a theoretical model that investigates the effect of the middle-class segment on firms' price promotion strategies. Contrary to lay intuition, our analysis reveals precisely the opposite results. First, price promotions offered in an emerging market (with middle-class consumers) are shallower than those offered in a developed market (without middle-class consumers). Second, relatively deep price promotions occur less frequently in an emerging market, compared to a developed market. These theoretical findings are consistent with the empirical evidence we gathered from the supermarkets in India and in Canada.

Suggested Citation

  • Mathur, Sameer & Sinitsyn, Maxim, 2013. "Price promotions in emerging markets," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 404-416.
  • Handle: RePEc:eee:indorg:v:31:y:2013:i:5:p:404-416
    DOI: 10.1016/j.ijindorg.2013.07.001
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    References listed on IDEAS

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    Cited by:

    1. Zhu, Xiaoyan & Jiao, Can & Yuan, Tao, 2019. "Optimal decisions on product reliability, sales and promotion under nonrenewable warranties," Reliability Engineering and System Safety, Elsevier, vol. 192(C).
    2. Mehmet Gümüş & Philip Kaminsky & Sameer Mathur, 2016. "The impact of product substitution and retail capacity on the timing and depth of price promotions: theory and evidence," International Journal of Production Research, Taylor & Francis Journals, vol. 54(7), pages 2108-2135, April.
    3. Sinitsyn, Maxim, 2022. "Price leadership with promotions," International Journal of Industrial Organization, Elsevier, vol. 82(C).
    4. Naseer Ahmad & Ali Raza Elahi, 2023. "The Effectiveness of Promotion through Brochure Advertising on Merchandise Sales: A Case Study of Multiple Retail Stores of Pakistan," Journal of Policy Research (JPR), Research Foundation for Humanity (RFH), vol. 9(2), pages 732-740.

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    More about this item

    Keywords

    Mixed strategies; Price promotions; Price competition; Emerging markets;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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