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A framework and model to evaluate promotions: A restaurant cross-promotion in-market study

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  • Tim Norvell

    (The Love School of Business, Elon University)

  • Alisha Horky

    (The Love School of Business, Elon University)

Abstract

This article presents a framework and a model to evaluate the impact of promotions on company revenue and profit based on the examination of empirical findings from a restaurant cross-promotion in-market study. Promotions are difficult to evaluate because firms do not know to what extent the promotion creates incremental transactions or to what extent it simply provides discounts to existing customers who would have paid full price. To properly measure the impact, a firm must be able to determine the following: (i) the percentage incremental versus replacement transactions, (ii) the percentage incremental transactions from new versus existing customers, and (iii) the extent to which the promotion affected their overall spending behavior. This information can be combined with the discount amount of the promotion and the firm’s profit margin to arrive at the financial impact of the promotion. To maximize this effect, the company must first market the promotion to a similar but different customer base to minimize cannibalization. Second, they can institute an aggressive upselling program to counteract the consequence of discounting existing customers.

Suggested Citation

  • Tim Norvell & Alisha Horky, 2017. "A framework and model to evaluate promotions: A restaurant cross-promotion in-market study," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 16(4), pages 345-356, August.
    • Handle: RePEc:pal:jorapm:v:16:y:2017:i:4:d:10.1057_rpm.2016.14
    DOI: 10.1057/rpm.2016.14
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    References listed on IDEAS

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    Cited by:

    1. Gunasti, Kunter & Baskin, Ernest, 2018. "Is a $200 Nordstrom Gift Card Worth More or Less Than a $200 Gap Gift Card? The Asymmetric Valuations of Luxury Gift Cards," Journal of Retailing, Elsevier, vol. 94(4), pages 380-392.
    2. McColl, Rod & Macgilchrist, Renaud & Rafiq, Shuddhasattwa, 2020. "Estimating cannibalizing effects of sales promotions: The impact of price cuts and store type," Journal of Retailing and Consumer Services, Elsevier, vol. 53(C).
    3. Mohit Tyagi & Nomesh B. Bolia, 2022. "Approaches for restaurant revenue management," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 21(1), pages 17-35, February.

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