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A Retailer Promotion Policy Model Considering Promotion Signal Sensitivity

Author

Listed:
  • J. Jeffrey Inman

    (University of Southern California)

  • Leigh McAlister

    (University of Texas at Austin)

Abstract

Recent research suggests that the signal (e.g., sign or marker) with a point of purchase promotion will stimulate a significant sales increase, regardless of whether or not that signal is accompanied by a price cut. This paper develops a model of retailer profitability that incorporates this “promotion signal sensitivity.” In a field test, the profitability of the promotion policy prescribed by this model is compared to the profitability of two other promotion policy-setting paradigms: a model-based policy that does not consider promotion signal sensitivity and one prescribed by industry experts. The test results support the proposed model. Its policy generates 11% more category profit per unit than the model-based policy and 12% more than the industry experts. Implications for retailers and future research are discussed.

Suggested Citation

  • J. Jeffrey Inman & Leigh McAlister, 1993. "A Retailer Promotion Policy Model Considering Promotion Signal Sensitivity," Marketing Science, INFORMS, vol. 12(4), pages 339-356.
    • Handle: RePEc:inm:ormksc:v:12:y:1993:i:4:p:339-356
    DOI: 10.1287/mksc.12.4.339
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    Citations

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    Cited by:

    1. M. Tolga Akçura & Ram Bezawada & Ajay Kalra, 2012. "The Strategic Role of Private Labels on Retail Competition," Bogazici Journal, Review of Social, Economic and Administrative Studies, Bogazici University, Department of Economics, vol. 26(1), pages 1-25.
    2. Talukdar, Debabrata & Gauri, Dinesh K. & Grewal, Dhruv, 2010. "An Empirical Analysis of the Extreme Cherry Picking Behavior of Consumers in the Frequently Purchased Goods Market," Journal of Retailing, Elsevier, vol. 86(4), pages 336-354.
    3. Noriaki Matsushima & Akira Miyaoka, 2015. "The effects of resale-below-cost laws in the presence of a strategic manufacturer," Quantitative Marketing and Economics (QME), Springer, vol. 13(1), pages 59-91, March.
    4. Willem Boom, 2011. "Price Intransparency, Consumer Decision Making and European Consumer Law," Journal of Consumer Policy, Springer, vol. 34(3), pages 359-376, September.
    5. Eric T. Anderson & Duncan I. Simester, 1998. "The Role of Sale Signs," Marketing Science, INFORMS, vol. 17(2), pages 139-155.
    6. Noriaki Matsushima & Akira Miyaoka, 2013. "Who benefits from resale-below-cost laws?," ISER Discussion Paper 0875, Institute of Social and Economic Research, Osaka University.
    7. Deng, Yiting & Staelin, Richard & Wang, Wei & Boulding, William, 2018. "Consumer sophistication, word-of-mouth and “False” promotions," Journal of Economic Behavior & Organization, Elsevier, vol. 152(C), pages 98-123.
    8. Sang Yong Kim & Richard Staelin, 1999. "Manufacturer Allowances and Retailer Pass-Through Rates in a Competitive Environment," Marketing Science, INFORMS, vol. 18(1), pages 59-76.
    9. Runyan, Rodney C. & Droge, Cornelia, 2008. "A categorization of small retailer research streams: What does it portend for future research?," Journal of Retailing, Elsevier, vol. 84(1), pages 77-94.
    10. Eric T. Anderson & Duncan I. Simester, 2004. "Long-Run Effects of Promotion Depth on New Versus Established Customers: Three Field Studies," Marketing Science, INFORMS, vol. 23(1), pages 4-20, February.
    11. Davis, Scott, 1994. "When Do Price Promotions Make Sense," Promotion in the Marketing Mix: What Works, Where and Why, April 28-29, 1994, Toronto, Canada 279599, Regional Research Projects > NECC-63: Research Committee on Commodity Promotion.
    12. Upender Subramanian & Jagmohan S. Raju & Sanjay K. Dhar & Yusong Wang, 2010. "Competitive Consequences of Using a Category Captain," Management Science, INFORMS, vol. 56(10), pages 1739-1765, October.
    13. Hameed, Irfan & Soomro, Yasir, 2012. "Consumer Buying Behaviour; A Factor of Compulsive Buying Prejudiced by Windowsill Placement," MPRA Paper 57417, University Library of Munich, Germany.
    14. Sigué, Simon Pierre, 2008. "Consumer and Retailer Promotions: Who is Better Off?," Journal of Retailing, Elsevier, vol. 84(4), pages 449-460.
    15. Stephan Seiler & Fabio Pinna, 2017. "Estimating Search Benefits from Path-Tracking Data: Measurement and Determinants," Marketing Science, INFORMS, vol. 36(4), pages 565-589, July.
    16. Eric T. Anderson & Duncan I. Simester, 2001. "Are Sale Signs Less Effective When More Products Have Them?," Marketing Science, INFORMS, vol. 20(2), pages 121-142, March.
    17. 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.
    18. Meghan R. Busse & Duncan I. Simester & Florian Zettelmeyer, 2010. "“The Best Price You'll Ever Get”: The 2005 Employee Discount Pricing Promotions in the U.S. Automobile Industry," Marketing Science, INFORMS, vol. 29(2), pages 268-290, 03-04.
    19. Kumar, V. & Madan, Vibhas & Srinivasan, Srini S., 2004. "Price discounts or coupon promotions: does it matter?," Journal of Business Research, Elsevier, vol. 57(9), pages 933-941, September.
    20. Eric Anderson & Duncan Simester, 2003. "Effects of $9 Price Endings on Retail Sales: Evidence from Field Experiments," Quantitative Marketing and Economics (QME), Springer, vol. 1(1), pages 93-110, March.
    21. Paul Mills & César Zamudio, 2018. "Scanning for discounts: examining the redemption of competing mobile coupons," Journal of the Academy of Marketing Science, Springer, vol. 46(5), pages 964-982, September.

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