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Decomposing the Sales Promotion Bump with Store Data

Author

Listed:
  • Harald J. van Heerde

    (Faculty of Economics and Business Administration, Tilburg University, P.O. Box 90153, 5000 LE Tilburg, The Netherlands)

  • Peter S. H. Leeflang

    (Faculty of Economics, Department of Marketing and Marketing Research, University of Groningen, P.O. Box 800, 9700 AV, Groningen, The Netherlands)

  • Dick R. Wittink

    (Yale School of Management, Yale University, P.O. Box 208200, New Haven, Connecticut 06520-8200, and Faculty of Economics, University of Groningen, Groningen, The Netherlands)

Abstract

Sales promotions generate substantial short-term sales increases. To determine whether the sales promotion bump is truly beneficial from a managerial perspective, we propose a system of store-level regression models that decomposes the sales promotion bump into three parts: cross-brand effects (secondary demand), cross-period effects (primary demand borrowed from other time periods), and category-expansion effects (remaining primary demand). Across four store-level scanner datasets, we find that each of these three parts contribute about one third on average. One extension we propose is the separation of the category-expansion effect into cross-store and market-expansion effects. Another one is to split the cross-item effect (total across all other items) into cannibalization and between-brand effects. We also allow for a flexible decomposition by allowing all effects to depend on the feature/display support condition and on the magnitude of the price discount. The latter dependence is achieved by local polynomial regression. We find that feature-supported price discounts are strongly associated with cross-period effects while display-only supported price discounts have especially strong category-expansion effects. While the role of the category-expansion effect tends to increase with higher price discounts, the roles of cross-brand and cross-period effects both tend to decrease.

Suggested Citation

  • Harald J. van Heerde & Peter S. H. Leeflang & Dick R. Wittink, 2004. "Decomposing the Sales Promotion Bump with Store Data," Marketing Science, INFORMS, vol. 23(3), pages 317-334, December.
  • Handle: RePEc:inm:ormksc:v:23:y:2004:i:3:p:317-334
    DOI: 10.1287/mksc.1040.0061
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