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Duration of price promotion and product profit: An in-depth study based on point-of-sale data

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  • Li, Zhen
  • Yada, Katsutoshi
  • Zennyo, Yusuke

Abstract

Anecdotal evidence has shown that retail price promotions can help small and medium-sized retailers enhance their sales, and thus profits. However, most marketing managers usually stop a promotion after a certain duration. This study aims to explain why these retailers discontinue their price promotion. Our approach posits that overall contributions of a price promotion to the product profit progressively diminish with time. In this study, we present a theoretical framework to explain the relationship between duration and profit effects of price promotion and propose statistical models to empirically examine this framework using point-of-sale (POS) data. Our findings provide empirical support that the effect of price promotion on the product profit has a downward trend with elapsed time. The results are helpful for marketers to understand how price promotions dynamically influence product profit and when the promotion should be terminated.

Suggested Citation

  • Li, Zhen & Yada, Katsutoshi & Zennyo, Yusuke, 2021. "Duration of price promotion and product profit: An in-depth study based on point-of-sale data," Journal of Retailing and Consumer Services, Elsevier, vol. 58(C).
    • Handle: RePEc:eee:joreco:v:58:y:2021:i:c:s0969698920312856
    DOI: 10.1016/j.jretconser.2020.102277
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