Evaluating Promotions in Shopping Environments: Decomposing Sales Response into Attraction, Conversion, and Spending Effects

Although price promotions have increased in both commercial use and quantity of academic research over the last decade, most of the attention has been focused on their effects on brand choice and brand sales. By contrast, little is known about the conditions under which price promotions expand short-run and long-run category demand, even though the benefits of category expansion can be substantial to manufacturers and retailers alikeThis chapter studies the category-demand effects of consumer price promotions across 560 consumer product categories over a 4-year period. The data describe national sales in Dutch supermarkets and cover virtually the entire marketing mix, i.e., prices, promotions, advertising, distribution, and new-product activity. We focus on the estimation of main effects (i.e., the dynamic category expansive impact of price promotions) as well as the moderating effects of marketing intensity and competition (both conduct and structure) on short-and long-run promotional effectiveness.The research design uses modern multivariate time-series analysis to disentangle short-run and long-run effects. First, we conduct a series of unit-root tests to determine whether or not category demand is stationary or evolving over time. The results are incorporated in the specification of vector-autoregressive models with exogenous variables (VARX models). The impulse-response functions derived from these VARX models provide estimates of the short- and long-term effects of price promotions on category demand. These estimates, in turn, are used as dependent variables in a series of second-stage regressions that assess the explanatory power of marketing intensity and competition. Several model validation tests support the robustness of the empirical findings.We present our results in the form of empirical generalizations on the main effects of price promotions on category demand in the short and the long run and through statistical tests on how these effects change with marketing intensity and competition. The findings generate an overall picture of the power and limitations of consumer price promotions in expanding category demand, as follows.Category demand is found to be predominantly stationary, either around a fixed mean or a deterministic trend. Although the total net short-term effects of price promotions are generally strong, with an average elasticity of 2.21 and a more conservative median elasticity of 1.75, they rarely exhibit persistent effects. Instead, the effects dissipate over a time period lasting approximately 10 weeks on average, and their long-term impact is essentially zero. By contrast, the successful introduction of new products into a category is more frequently associated with a permanent category-demand increase.Several moderating effects on price-promotion effectiveness exist. More frequent promotions increase their effectiveness, but only in the short run. The use of nonprice advertising reduces the category-demand effects of price promotions, both in the short run and in the long run. Competitive structure matters as well: The less oligopolistic the category, the smaller the short-run effectiveness of price promotions. At the same time, we find that the dominant form of competitive reaction, either in price promotion or in advertising, is no reaction. Short-run category-demand effectiveness of price promotions is lower in categories experiencing major new-product introductions. Finally, both the short- and long-run price promotion effectiveness is higher in perishable product categories.The paper discusses several managerial implications of these empirical findings and suggests various avenues for future research. Overall, we conclude that the power of price promotions lies primarily in the preservation of the status quo in the category.

As consumers are often exposed to price-related advertising in purchase situations and as, among other factors, both prices (Chang and Wildt 1994) and product attitudes (Spears and Singh 2004) affect purchase decisions, it is important to examine possible negative effects of price promotions on product attitudes. Some previous studies provide evidence for positive effects of price promotions on purchase intentions (Ailawadi and Neslin 1998; Grewal et al. 1998), but other studies show that discounts can negatively affect future sales (Kalwani et al. 1990; Lattin and Bucklin 1989). A possible explanation for such opposite findings might be that sales promotions have direct positive effects on purchase intentions but indirect negative effects through more negative product attitudes on purchase intentions (Davis et al. 1992). The objective of this study is to focus on effects of price promotions on product attitudes and to examine in which conditions such effects are more or less negative. This study goes beyond previous studies that analyzed possible negative effects of price promotions (Dodson et al. 1978; Raghubir and Corfman 1999) by considering conditions in which price-related advertising can have more or less negative effects on product attitudes. The conditions are the number of consumers’ ad contacts (1 vs. 5), the saving format used to display the price reduction (percentage off vs. amount off), and the salience of the regular price in the ad (yes vs. no) as well as the perceived levels of discount information credibility (low vs. high). We simultaneously analyze direct and interaction effects of marketer-controlled factors and consumers’ perceptions that play a role in the context of consumers’ responses to price promotions in terms of product attitudes. An analysis of effects of marketer-controlled factors helps marketers to choose the combination of factors that produce the most positive consumer responses. The effects of price promotions on consumers’ attitudes could be moderated by as how credible consumers perceive the price claims displayed in the ad. Perceived ad credibility is the extent to which consumers perceive the claims as believable (MacKenzie and Lutz 1989). When consumers perceive a discrepancy with prior perceptions, they might perceive price claims as less credible (Lutz et al. 1983). The findings provide marketers with insights in which conditions a sales promotion leads to comparatively negative product attitudes and thus enables them to avoid such constellations when launching a sales promotion.

The aim of this research is to determine and analyze directly and indirectly the influence of the effectiveness of digital attractions and promotions on visiting decisions through visiting interest as an intervening variable in the coastal tourist area of Jember Regency. The sample size for this research was 400 respondents. The analysis technique used is Structural Equation Model (SEM) using WarpPLS 7.0. The results of data analysis show that the variable Effectiveness of attractions has a significant influence on interest in visiting, digital promotion has a significant influence on interest in visiting, Effectiveness of attractions has a significant influence on the decision to visit, digital promotion has a significant influence on the decision to visit, interest in visiting has a significant influence on the decision to visit. Indirectly, the effectiveness of digital attractions and promotions has a significant effect on visiting decisions through visiting interest as an intervening variable. The results of data analysis show that the variables of effectiveness of attraction, interest in visiting and digital promotion partially have a significant influence on the decision to visit the coastal tourist area of Jember Regency.

Price promotion represents one of the instruments most frequently used by marketing and sales managers to increase sales. As even for premium brands an increasing use of price promotions can be observed, questions regarding the duality of sales and brand impacts of price promotion activities gain in relevance. A broad variety of studies have investigated sales promotions in general and price promotions in particular. While the general positive sales effects of price promotions have been thoroughly investigated, the negative effects for the brand may be underestimated. Understanding such effects, however, is vital for companies that rely on strong brands, especially manufacturers of premium products. Despite the different arguments about the positive and negative effects of price promotion, current knowledge is based on different objects of research and separated studies, focusing either on sales impact or on brand perception. Furthermore, previous research has often considered price promotion in general or concentrated on one or two specific types. Our study contributes to the existing literature by proposing a framework to distinguish four different price promotion types and by consistently investigating sales as well as brand perception impacts of these specific activities.

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

Purpose: Previous literature shows that a price promotion serves as a negative cue of product quality especially when consumers have no additional information about the product's other attributes. In this research, we explore how the effect of price promotions on consumers' perceptions of product quality changes depending on their ability to compare promoted product attributes with competitive products' attributes. Research design, data and methodology: Specifically, we use a series of scenario-based lab experiments using different types of products and explore if attribute alignability among competing products in a consumer's choice set influences consumers' ability to compare the product attributes and perceived quality. Results: Our study findings show that high attribute alignability among products makes consumers easier to compare the product attributes and thereby focus more on non-price information than price information. We also show that attribute alignability serves as a moderator and decreases perceived quality when the promotion level is higher. Therefore, the attribute alignability weakens the negative impact of a price promotion on consumers' perceived product quality. Conclusions: Our study findings provide new insights on how to implement price promotion strategies while keeping products' perceived quality, by considering the product's relationships with competing products in a choice set.

Academic researchers and marketing managers are interested in investigating two important issues in the consumer goods market. One is the effectiveness of price promotions and the other is the emerging competition between brands belonging to different price/quality tiers (e.g., national brands vs. store private-label brands). The author proposes a conceptual framework to examine the trade-off between frequency and depth of price cuts for high- and low-priced brands, and applies the framework in a numerical simulation. The findings are that high-priced brands benefit from infrequent large price cuts, whereas low-priced brands benefit more from frequent small price cuts. Implications for retailers and manufacturers are discussed.

The impact of different price promotions on customer retention

The purpose of this study is to identify the factors that aid in the measurement of the effectiveness of consumer promotions in brick-and-mortar retail. The already highly competitive landscape of retail is set to undergo a huge transformation post the COVID-19 outbreak, which will inadvertently lead to manufacturing cutting down costs wherever possible to maintain their margins and stay afloat. Advertising spends are bound to go down, and there is a need for a statistical model to measure the effectiveness of the capital spends by a firm towards consumer promotions. For the study, national level sales data of 4 subbrands of a particular toilet soap brand (shower soap bars) was analyzed for a leading retail chain in India from January 2018 to February 2020. Regression analysis was used to do the data analysis. The study focused on price-off consumer promotions only for the designated period for four variants of a popular Indian soap brand. The discount percentage (including both promotion spend by the manufacturer as well as a retailer), the quantity of the particular unit sold on which the promotion was run during the period when the promotion was run, the effective price to consumer per gram, and profitability for the manufacturer in terms of the net contribution percentage were the factors which were found to show a strong correlation and formed the input variables for the regression equation. The regression analysis showed that all the factors, namely: overall discount percentage, quantity sold, the effective price per gram, and the net contribution (profitability), were statistically significant in determining the uplift in sales quantity due to the discount (the effectiveness of the price promotion). The equation provides retailers and manufacturers a model to measure the effectiveness of promotion spending for price promotions that are run every month at a national and state level by giving state-level values as inputs. It also helps arrive at a baseline sales quantity for a particular SKU if no price-off promotion is run.

The recent growth of e‐commerce technologies has disrupted the traditional retail environment, leading to more consumers shopping online. While the manner in which consumers shop is changing rapidly, our understanding of how changing consumer behaviors affect retail supply chain management is lacking. In particular, our understanding of how consumers react to stockouts in an online shopping environment remains unclear. Making the challenge even more difficult is the fact that price promotions are heavily used to attract consumers in an online retail environment where consumer switching costs are low. This research develops a theoretical framework, based on expectation‐disconfirmation theory, to explain the effect of price promotions on consumer expectations of product availability and their reactions to stockouts in an online retail environment. Surprisingly, our findings suggest that consumers are actually less dissatisfied with a stockout of a price promoted item than a nonprice promoted product and are less likely to switch to another retailer's website. These findings may suggest that price promotions actually create a type of switching cost in the online retail environment, leading to interesting implications for researchers and supply chain managers.

Promotions are used in marketing to increase sales and drive profits by temporarily decreasing the price per unit of a good. Some price promotions apply to all quantities (20% off), some have limits on the number of units that can be purchased at a reduced price, and others only offer the discount if the volume purchased is sufficiently high. We develop a model of price promotions in the context of a direct utility model where its effects are incorporated through the budget constraint. Price promotions complicate the estimation and analysis of direct utility models because they induce kinks and points of discontinuity in the budget set. We propose a Bayesian approach to addressing these irregularities and demonstrate the ability of the direct utility model to be used in counterfactual analyses of price promotions. We investigate the stability of utility function estimates for consumers under alternative price promotions, and find that the majority of the effect of a price promotion is through the budget set, not through changes in the utility function. We also investigate the economic value of customized price promotions where the customization includes the value and format of the offer. Data, as supplemental material, are available at http://dx.doi.org/10.1287/mksc.2015.0948 .

Commodity Credit Corporation (CCC) net expenditures for the cotton program exceeded $2 billion in fiscal 1986, decreased considerably over the 1987 to 1991 period, then climbed to $1.4 billion in fiscal 1992. Net expenditures for the cotton program are estimated at $2.2 billion in 1993 and at $1.7 billion for 1994 (1995 PresidentS Budget Summary). Concern about burgeoning U.S. budget deficits continues to place pressure on policy makers to reduce the cost of farm programs (Heflin). Thus, finding alternative, less-costly methods of providing support to cotton farmers is an important undertaking. Export subsidies have been shown to be a possible means of reducing government costs of domestic farm programs (Duffy and Wohlgenant), but little empirical effort has been expended in examining the potential economic effects of non-price export promotion. Accordingly, the purpose of this article is to provide an estimate of the effects of price versus non-price promotion on U.S. cotton price, domestic use of cotton, exports of cotton, and the cost of cotton programs. A comparative static framework will be used, similar to the model used by Duffy and Wohlgenant, to evaluate a price subsidy for exported cotton.

Reference prices, which are extensively used in retail advertisements, have received considerable attention in the marketing literature. The present study looks at the extent to which external reference prices, included in price promotions, affect consumers’ price beliefs. Based on Helson’s Adaptation-Level theory, consumers form internal reference prices, which they use as a basis for evaluating market prices. Researchers then draw from both Adaptation-Level and Assimilation-Contrast theories to explain the process by which external reference prices influence consumers’ internal reference prices. While consumers may assimilate or contrast external reference prices, only assimilated prices have the ability to affect consumers’ internal price standards. To examine the extent to which consumers assimilate external reference prices, we conducted a first experiment, which revealed that the impact of external reference prices on consumers’ internal price standards was surprisingly monotonic. Results from our second experiment showed that the chosen absolute and relative savings presentation formats did not generate changes in subjects’ internal reference prices. We discuss our findings in relation to the measurement of internal reference prices and change thereof, exaggerated external reference prices, and price familiarity.

PurposeIt is important to explore the relationship between humans and chatbots to improve human–robot interaction in the era of artificial intelligence. This study aims to explore the effects of attractions and social attributes of chatbots on users’ media dependency and usage intention of chatbots, as well as the role of users’ para-social interaction and emotional support gained from chatbots.MethodsA total of 1,553 responses were collected based on a cross-sectional online survey. Utilizing the structural equation modeling approach, this study tested the relationships among exogenous variables (social attraction/task attraction, perceived competence/perceived warmth), endogenous variables (usage intention/media dependence), and mediating variables (para-social interaction/emotional support).ResultsThe results show that the attraction and social attributes of chatbots, represented by ChatGPT, enable users to construct para-social interaction and obtain emotional support when chatting with them. Meanwhile, para-social interaction and emotional support can link users’ perceptions of chatbots to their media dependency on and usage intention of them. This study provides theoretical and methodological references for examining the human–robot interaction relationship and offers insights into exploring the human–robot emotional connection.ConclusionsThis study explores chatbots from the perspective of emotional connections, emphasizing how users’ perceptions of chatbot attraction and social attributes facilitate para-social interaction and emotional support. Theoretically, it extends the application of para-social interaction theory and emotional support into the domain of human-chatbot communication, enriching the understanding of affective mechanisms in human-AI relationships. Methodologically, the study employs structural equation modeling (SEM) to test a multidimensional mediation model using large-scale survey data, examining psychological pathways linking chatbot characteristics to users' behavioral responses. These findings offer new insights for the optimization of human–computer interaction applications and the improvement of chatbot design in practice.

Amid prolonged economic instability, consumers often recalibrate their purchasing decisions based on both price sensitivity and brand perception. This study investigates how price promotions influence consumer buying behavior and brand image in Lebanon, a market marked by hyperinflation and financial uncertainty. Grounded in the price sensitivity and price perception literature, the study further explores the mediating role of brand image in this relationship. Using a structured questionnaire, data were collected from 344 Lebanese consumers and analyzed using SmartPLS 4 employing Partial Least Squares Structural Equation Modeling (PLS-SEM). The results reveal that price promotions are significantly associated with consumer purchase decisions and positively shape brand image. Notably, brand image serves as a key mediator, suggesting that symbolic brand value remains influential even in highly price-sensitive contexts. These findings advance research on price sensitivity and promotional effectiveness by highlighting dual-pathway logic, combining economic pragmatism with brand-driven identity reinforcement. The study offers actionable insights for marketers seeking to balance short-term sales activation with long-term brand equity preservation in economically distressed environments.