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The Effect of Price Promotions on Variability in Product Category Sales


  • Jagmohan S. Raju

    (University of California, Los Angeles)


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.

Suggested Citation

  • Jagmohan S. Raju, 1992. "The Effect of Price Promotions on Variability in Product Category Sales," Marketing Science, INFORMS, vol. 11(3), pages 207-220.
  • Handle: RePEc:inm:ormksc:v:11:y:1992:i:3:p:207-220

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    References listed on IDEAS

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    Cited by:

    1. McLaughlin, Edward W. & Perosio, Debra J., 1996. "The Role of the Supermarket Buyer," Research Bulletins 122826, Cornell University, Department of Applied Economics and Management.
    2. 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.
    3. David R. Bell & Jeongwen Chiang & V. Padmanabhan, 1999. "The Decomposition of Promotional Response: An Empirical Generalization," Marketing Science, INFORMS, vol. 18(4), pages 504-526.
    4. Koen Pauwels & Shuba Srinivasan & Philip Hans Franses, 2007. "When Do Price Thresholds Matter in Retail Categories?," Marketing Science, INFORMS, vol. 26(1), pages 83-100, 01-02.
    5. Kurata, Hisashi & Liu, John J., 2007. "Optimal promotion planning--depth and frequency--for a two-stage supply chain under Markov switching demand," European Journal of Operational Research, Elsevier, vol. 177(2), pages 1026-1043, March.
    6. Dang Jha Priya, 2004. "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.
    7. Vincent R. Nijs & Shuba Srinivasan & Koen Pauwels, 2007. "Retail-Price Drivers and Retailer Profits," Marketing Science, INFORMS, vol. 26(4), pages 473-487, 07-08.
    8. Vincent R. Nijs & Marnik G. Dekimpe & Jan-Benedict E.M. Steenkamps & Dominique M. Hanssens, 2001. "The Category-Demand Effects of Price Promotions," Marketing Science, INFORMS, vol. 20(1), pages 1-22, September.
    9. repec:pal:jorsoc:v:56:y:2005:i:11:d:10.1057_palgrave.jors.2601972 is not listed on IDEAS
    10. 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.
    11. Koen Pauwels & Shuba Srinivasan, 2004. "Who Benefits from Store Brand Entry?," Marketing Science, INFORMS, vol. 23(3), pages 364-390, July.
    12. 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.
    13. Shuba Srinivasan & Koen Pauwels & Dominique M. Hanssens & Marnik G. Dekimpe, 2004. "Do Promotions Benefit Manufacturers, Retailers, or Both?," Management Science, INFORMS, vol. 50(5), pages 617-629, May.
    14. 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.
    15. Puneet Manchanda & Asim Ansari & Sunil Gupta, 1999. "The “Shopping Basket”: A Model for Multicategory Purchase Incidence Decisions," Marketing Science, INFORMS, pages 95-114.
    16. Alvi, Mohsin & Mirza, Mohammad Haris & Khan, M. Mubashir Q. & Aqeel, Beenish & Ikram, Midra, 2016. "Analyzing the Factors for Creating Competition among Products," MPRA Paper 71894, University Library of Munich, Germany.
    17. 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.
    18. Peter J. Danaher, 2002. "Optimal Pricing of New Subscription Services: Analysis of a Market Experiment," Marketing Science, INFORMS, pages 119-138.
    19. Csilla Horváth & Dennis Fok, 2013. "Moderating Factors of Immediate, Gross, and Net Cross-Brand Effects of Price Promotions," Marketing Science, INFORMS, vol. 32(1), pages 127-152, July.
    20. 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.
    21. van Donselaar, K.H. & Peters, J. & de Jong, A. & Broekmeulen, R.A.C.M., 2016. "Analysis and forecasting of demand during promotions for perishable items," International Journal of Production Economics, Elsevier, vol. 172(C), pages 65-75.
    22. 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 University Rotterdam.
    23. Deleersnyder, B. & Dekimpe, M.G. & Steenkamp, J.E.B.M. & Koll, O., 2007. "Win-win strategies at discount stores," Other publications TiSEM 34fbe624-0ee7-4c52-b640-7, Tilburg University, School of Economics and Management.
    24. Venkatesh Shankar & Ruth N. Bolton, 2004. "An Empirical Analysis of Determinants of Retailer Pricing Strategy," Marketing Science, INFORMS, vol. 23(1), pages 28-49, May.


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