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Decomposing the sales promotion bump accounting for cross-category effects

Peter S.H. Leeflang, Josefa Parreño Selva, Albert Van Dijk and Dick R. Wittink

International Journal of Research in Marketing, 2008, vol. 25, issue 3, 201-214

Abstract: Extant research on the decomposition of unit sales bumps due to price promotions considers these effects only within a single product category. This article introduces a framework that accommodates specific cross-category effects. Empirical results based on daily data measured at the item/SKU level show that the effects of promotions on sales in other categories are modest. Between-category complementary effects (20%) are, on average, substantially larger than between-category substitution effects (11%). Hence, a promotion of an item has an average net spin-off effect of (20−11=) 9% of its own effect. The number of significant cross-category effects is low, which means that we expect that, most of the time, it is sufficient to look at within-category effects only. We also find within-category complementary effects, which implies that competitive items within the category may benefit from a promotion. We find small stockpiling effects (6%), modest cross-item effects (22%), and substantial category-expansion effects (72%). The cross-item effects are the result of cross-item substitution effects within the category (26%) and within-category complementary effects (4%). Approximately 15% (=11% / 72%) of the category-expansion effect is due to between-category substitution effects of dependent categories.

Keywords: Cross-category effects; Decomposition; Brand sales model; Store-level scanner data; Daily data (search for similar items in EconPapers)
Date: 2008
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