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Direct and Indirect Effects of Retail Promotions

  • D. VAN DEN POEL

    ()

  • Jan J. DE SCHAMPHELAERE
  • G. WETS

In this study, we measure complementary effects of retail promotions for a large number of product pairs. For this, we make use of market basket analysis. We argue that failing to take these cross effects into consideration, may lead retail managers to severely underestimate the impact of promotional efforts. Moreover, we provide guidelines for optimizing promotional strategies. To this end, we introduce lift, a measure for the strength of a complementary relationship, as a moderator in explaining the variation in complementary effects of retail promotions across product pairs. We show that the stronger the complementary relationship (higher lift), the stronger is the cross impact of retail promotions. On the contrary, in case of simultaneously promoting two complementary products, larger promotional impact is seen when weaker product pairs (lower lift) are considered.

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File URL: http://wps-feb.ugent.be/Papers/wp_03_202.pdf
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Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 03/202.

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Length: 21 pages
Date of creation: Nov 2003
Date of revision:
Handle: RePEc:rug:rugwps:03/202
Contact details of provider: Postal: Hoveniersberg 4, B-9000 Gent
Phone: ++ 32 (0) 9 264 34 61
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Web page: http://www.ugent.be/eb

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  1. 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.
  2. Jagmohan S. Raju, 1992. "The Effect of Price Promotions on Variability in Product Category Sales," Marketing Science, INFORMS, vol. 11(3), pages 207-220.
  3. Roger Betancourt & David Gautschi, 1990. "Demand Complementarities, Household Production, and Retail Assortments," Marketing Science, INFORMS, vol. 9(2), pages 146-161.
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