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Do Promotions Increase Store Expenditures? A Descriptive Study of Household Shopping Behavior

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  • Xavier Drèze
  • Patricia Nisol
  • Naufel J. Vilcassim

Abstract

An important question for retailers is whether promotions induce households to increase their in-store expenditures or merely reallocate a predetermined shopping budget. Should expenditures be fixed, retailers might decrease their profitability when running promotions by displacing expenditures from high margin to lower margin products. Using household level store receipts and an extended AIDS model, we provide evidence that while household expenditures do increase with promotions, there is also a significant reallocation of expenditures among the different categories. This implies that retailers have to choose carefully which products are promoted, if promotions are to increase profits.

Suggested Citation

  • Xavier Drèze & Patricia Nisol & Naufel J. Vilcassim, 2004. "Do Promotions Increase Store Expenditures? A Descriptive Study of Household Shopping Behavior," Quantitative Marketing and Economics (QME), Springer, vol. 2(1), pages 59-92, March.
    • Handle: RePEc:kap:qmktec:v:2:y:2004:i:1:p:59-92
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    Citations

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    Cited by:

    1. Pradeep K. Chintagunta & Harikesh S. Nair, 2011. "Structural Workshop Paper --Discrete-Choice Models of Consumer Demand in Marketing," Marketing Science, INFORMS, vol. 30(6), pages 977-996, November.
    2. Leeflang, Peter S.H. & Parreño Selva, Josefa & Van Dijk, Albert & Wittink, Dick R., 2008. "Decomposing the sales promotion bump accounting for cross-category effects," International Journal of Research in Marketing, Elsevier, vol. 25(3), pages 201-214.
    3. Dogbe, Wisdom & Revoredo-Giha, Cesar, 2022. "Industry levy versus banning promotion on soft drinks in Scotland: A distributional analysis," Food Policy, Elsevier, vol. 106(C).
    4. Peter Ebbes & Dominik Papies & Harald J. van Heerde, 2011. "The Sense and Non-Sense of Holdout Sample Validation in the Presence of Endogeneity," Marketing Science, INFORMS, vol. 30(6), pages 1115-1122, November.
    5. Revoredo-Giha, Cesar & Akaichi, Faiçal & Leat, Philip M.K., 2015. "Retailers' Promotions: What Role Do They Play in Household Food Purchases by Degree of Food Access in Scotland?," 2015 Allied Social Sciences Association (ASSA) Annual Meeting, January 3-5, 2015, Boston, Massachusetts 189695, Agricultural and Applied Economics Association.
    6. G Baltas, 2005. "Modelling category demand in retail chains," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 56(11), pages 1258-1264, November.
    7. Yu, Annie Pei-I & Chuang, Shih-Chieh & Cheng, Yin-Hui & Wu, Yi-Chin, 2020. "The influence of sharing versus self-use on the preference for different types of promotional offers," Journal of Retailing and Consumer Services, Elsevier, vol. 54(C).

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