IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/93047.html
   My bibliography  Save this paper

Duration of Price Promotion and Retail Profit: An In-depth Study Based on Point-of-Sale Data

Author

Listed:
  • 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, retail 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 the promotion’s overall contributions to the total retail profit progressively diminish with time. We present a theoretical framework to explain the relationship between duration and profit effects of price promotions and propose a statistical model to empirically examine this framework using point-of-sale (POS) data. Our findings provide empirical support that the overall profit effects of price promotions have a downward trend with elapsed time, upholding the hypothesis. The results are helpful for marketers to understand how price promotions dynamically influence retail profits and when the promotion should be terminated.

Suggested Citation

  • Li, Zhen & Yada, Katsutoshi & Zennyo, Yusuke, 2019. "Duration of Price Promotion and Retail Profit: An In-depth Study Based on Point-of-Sale Data," MPRA Paper 93047, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:93047
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/93047/1/MPRA_paper_93047.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Wee, Hui-Ming, 1999. "Deteriorating inventory model with quantity discount, pricing and partial backordering," International Journal of Production Economics, Elsevier, vol. 59(1-3), pages 511-518, March.
    2. Gadi Fibich & Arieh Gavious & Oded Lowengart, 2007. "Optimal price promotion in the presence of asymmetric reference-price effects," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(6), pages 569-577.
    3. Viswanathan, S. & Wang, Qinan, 2003. "Discount pricing decisions in distribution channels with price-sensitive demand," European Journal of Operational Research, Elsevier, vol. 149(3), pages 571-587, September.
    4. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    5. Ailawadi, Kusum L. & Beauchamp, J.P. & Donthu, Naveen & Gauri, Dinesh K. & Shankar, Venkatesh, 2009. "Communication and Promotion Decisions in Retailing: A Review and Directions for Future Research," Journal of Retailing, Elsevier, vol. 85(1), pages 42-55.
    6. Mulhern, Francis J. & Leone, Robert P., 1990. "Retail promotional advertising : Do the number of deal items and size of deal discounts affect store performance?," Journal of Business Research, Elsevier, vol. 21(3), pages 179-194, November.
    7. Weathers, Danny & Swain, Scott D. & Makienko, Igor, 2015. "When and how should retailers rationalize the size and duration of price discounts?," Journal of Business Research, Elsevier, vol. 68(12), pages 2610-2618.
    8. Panle Jia, 2008. "What Happens When Wal-Mart Comes to Town: An Empirical Analysis of the Discount Retailing Industry," Econometrica, Econometric Society, vol. 76(6), pages 1263-1316, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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).
    2. Jidong Zhou, 2011. "Reference Dependence and Market Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(4), pages 1073-1097, December.
    3. Arieh Gavious & Oded Lowengart, 2012. "Price–quality relationship in the presence of asymmetric dynamic reference quality effects," Marketing Letters, Springer, vol. 23(1), pages 137-161, March.
    4. Kim, Young-Joo & Hwang, Hark, 2008. "Incremental discount policy for taxi fare with price-sensitive demand," International Journal of Production Economics, Elsevier, vol. 112(2), pages 895-902, April.
    5. Martín-Herrán, Guiomar & Taboubi, Sihem, 2015. "Price coordination in distribution channels: A dynamic perspective," European Journal of Operational Research, Elsevier, vol. 240(2), pages 401-414.
    6. Guan, Xu & Wang, Yulan, 2022. "Quality disclosure in a competitive environment with consumer’s elation and disappointment," Omega, Elsevier, vol. 108(C).
    7. Tangari, Andrea Heintz & Burton, Scot & Smith, Ronn J., 2015. "Now that's a Bright Idea: The Influence of Consumer Elaboration and Distance Perceptions on Sustainable Choices," Journal of Retailing, Elsevier, vol. 91(3), pages 410-421.
    8. Feng, Cong & Fay, Scott, 2022. "An empirical investigation of forward-looking retailer performance using parking lot traffic data derived from satellite imagery," Journal of Retailing, Elsevier, vol. 98(4), pages 633-646.
    9. Liliana Pérez-Nordtvedt & Susanna Khavul & David A. Harrison & Jeffrey E. McGee, 2014. "Adaptation to Temporal Shocks: Influences of Strategic Interpretation and Spatial Distance," Journal of Management Studies, Wiley Blackwell, vol. 51(6), pages 869-897, September.
    10. Ran Spiegler, 2012. "Monopoly pricing when consumers are antagonized by unexpected price increases: a “cover version” of the Heidhues–Kőszegi–Rabin model," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 51(3), pages 695-711, November.
    11. Hunneman, Auke & Verhoef, Peter C. & Sloot, Laurens M., 2021. "The impact of hard discounter presence on store satisfaction and store loyalty," Journal of Retailing and Consumer Services, Elsevier, vol. 59(C).
    12. Gázquez-Abad, Juan Carlos & Martínez-López, Francisco J., 2016. "Understanding the impact of store flyers on purchase behaviour: An empirical analysis in the context of Spanish households," Journal of Retailing and Consumer Services, Elsevier, vol. 28(C), pages 263-273.
    13. Bies, Suzanne, 2022. "Examining the effectiveness of activation techniques on consumer behavior in temporary loyalty programs," Other publications TiSEM ade86df3-4846-4318-938f-a, Tilburg University, School of Economics and Management.
    14. Moutaz Khouja & Jing Zhou, 2016. "The effect of a temporary product distribution channel on supply chain performance," Naval Research Logistics (NRL), John Wiley & Sons, vol. 63(7), pages 505-528, October.
    15. van der Plas, Joep & Dekimpe, Marnik G. & Geyskens, Inge, 2024. "Mind the gap: National brands’ sensitivity to price and line-length differentials at hard discounters versus conventional retailers," Journal of Retailing, Elsevier, vol. 100(2), pages 199-216.
    16. Bogomolova, Svetlana & Szabo, Marietta & Kennedy, Rachel, 2017. "Retailers' and manufacturers' price-promotion decisions: Intuitive or evidence-based?," Journal of Business Research, Elsevier, vol. 76(C), pages 189-200.
    17. Grewal, Dhruv & Janakiraman, Ramkumar & Kalyanam, Kirthi & Kannan, P.K. & Ratchford, Brian & Song, Reo & Tolerico, Stephen, 2010. "Strategic Online and Offline Retail Pricing: A Review and Research Agenda," Journal of Interactive Marketing, Elsevier, vol. 24(2), pages 138-154.
    18. Huang, Yeu-Shiang & Su, Wei-Jun & Lin, Zu-Liang, 2011. "A study on lead-time discount coordination for deteriorating products," European Journal of Operational Research, Elsevier, vol. 215(2), pages 358-366, December.
    19. Shirin Aslani & Soheil Sibdari & Mohammad Modarres, 2018. "Revenue Management with Customers’ Reference Price: Are the Existing Methods Effective?," Service Science, INFORMS, vol. 10(2), pages 195-214, June.
    20. Rainer Olbrich & Hans Christian Jansen & Benedikt Teller, 2016. "Quantifying Anti-Consumption of Private Labels and National Brands: Impacts of Poor Test Ratings on Consumer Purchases," Journal of Consumer Affairs, Wiley Blackwell, vol. 50(1), pages 145-165, March.

    More about this item

    Keywords

    Duration of Price Promotion; Elapsed Time; Retail Profit; Customer Traffic; Product Loyalty; Point-of-Sale Data;
    All these keywords.

    JEL classification:

    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:93047. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.