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Introduction

In: Collaborative Promotions

Author

Listed:
  • Daniela Wiehenbrauk

Abstract

Promotions are at the same time beloved and feared by both traditional food retailers and branded goods manufacturers in today’s competitive retail environment. While retailers use promotions to attract customers and retain their market position against discounters, the branded good manufacturers see potential to win the price competition against private labels. Promotions are beloved due to their large, measurable and immediate effect on a brand’s sale (Blattberg et al. 1981). Despite only serving the loyal customer segment, promotions allow the retailer to additionally serve smart customers, who switch between retailers and stockpile in order to find the best deal. Promotions are feared because they come along with the cost of excess inventory in the supply chain. The demand of the smart customers does not only depend on the price of a retailer but also on the prices of the competitors and thereby is highly volatile. Hence, the customer demand in the case of promotions is difficult to forecast and has not yet been mastered, despite few first success stories (Arminger 2003). The associated forecast error of demand during promotion periods increases the inventory required to support a promotion and therefore counteracts the prospected profit gains from increased sales.

Suggested Citation

  • Daniela Wiehenbrauk, 2010. "Introduction," Lecture Notes in Economics and Mathematical Systems, in: Collaborative Promotions, chapter 0, pages 1-4, Springer.
    • Handle: RePEc:spr:lnechp:978-3-642-13393-0_1
    DOI: 10.1007/978-3-642-13393-0_1
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