Not all sales bumps are created equal: Examining the sales bump decomposition of different types of price promotions

Temporary price reductions (TPRs) and coupons are heavily used by manufacturers to promote their products to consumers. Other types of promotions, such as volume deals and multi-item promotions (MIPs) may provide alternatives. But can we consider these different types of promotions to be exchangeable? In this paper, we argue that not all sales bumps are created equal. We focus on four commonly used price promotions, i.e., TPRs, coupons, volume deals, and MIPs, and rely on product uncertainty-related literature to argue for differences in the sales bump sizes and their relative decompositions. We use data from a large household panel for three product categories and find that the sales bumps from TPRs and coupons are larger and predominantly due to current period brand switching, while the sales bumps from volume deals and MIPs are smaller and mainly due to consumption. In support of our product uncertainty explanation, we further confirm that volume deals and MIPs perform particularly poorly for consumers with low brand and category experience. Implications for manufacturers and retailers are explored.