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Direct and Indirect Effects of Retail Promotions

Author

Listed:
  • D. VAN DEN POEL
  • Jan J. DE SCHAMPHELAERE
  • G. WETS

Abstract

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.

Suggested Citation

  • 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.
    • Handle: RePEc:rug:rugwps:03/202
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    File URL: http://wps-feb.ugent.be/Papers/wp_03_202.pdf
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    References listed on IDEAS

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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. Roger Betancourt & David Gautschi, 1990. "Demand Complementarities, Household Production, and Retail Assortments," Marketing Science, INFORMS, vol. 9(2), pages 146-161.
    3. Jagmohan S. Raju, 1992. "The Effect of Price Promotions on Variability in Product Category Sales," Marketing Science, INFORMS, vol. 11(3), pages 207-220.
    4. Robert C. Blattberg & Kenneth J. Wisniewski, 1989. "Price-Induced Patterns of Competition," Marketing Science, INFORMS, vol. 8(4), pages 291-309.
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    Citations

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    Cited by:

    1. B. Vindevogel & D. Van Den Poel & G. Wets, 2004. "Why promotion strategies based on market basket analysis do not work," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 04/262, Ghent University, Faculty of Economics and Business Administration.
    2. Juan C. Gázquez-Abad & Manuel Sánchez-Pérez, 2009. "Factors influencing olive oil brand choice in Spain: an empirical analysis using scanner data," Agribusiness, John Wiley & Sons, Ltd., vol. 25(1), pages 36-55.
    3. Sandro Shelegia, 2008. "Pricing Interrelated Goods in Oligopoly," Working Papers 014-08, International School of Economics at TSU, Tbilisi, Republic of Georgia.
    4. D. Thorleuchter & D. Van Den Poel, 2012. "Protecting Research and Technology from Espionage," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 12/824, Ghent University, Faculty of Economics and Business Administration.
    5. D. Thorleuchter & D. Van Den Poel, 2013. "Weak Signal Identification with Semantic Web Mining," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 13/860, Ghent University, Faculty of Economics and Business Administration.
    6. B. Vindevogel & D. Van Den Poel & G. Wets, 2004. "Dynamic cross-sales effects of price promotions: Empirical generalizations," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 04/276, Ghent University, Faculty of Economics and Business Administration.
    7. Martin Natter & Thomas Reutterer & Andreas Mild & Alfred Taudes, 2007. "—An Assortmentwide Decision-Support System for Dynamic Pricing and Promotion Planning in DIY Retailing," Marketing Science, INFORMS, vol. 26(4), pages 576-583, 07-08.

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