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Estimating cannibalizing effects of sales promotions: The impact of price cuts and store type

Rod McColl, Renaud Macgilchrist and Shuddhasattwa Rafiq ()

Journal of Retailing and Consumer Services, 2020, vol. 53, issue C

Abstract: To evaluate the financial impact of supermarket sales promotions, managers must estimate how much new demand comes from cannibalizing the base product compared with other sources. However, investigations into cannibalization are scant. Using vector autoregression analytical framework applied to three years of supermarket scanner data, and sales promotions for pound cake, we estimate cannibalization effects for two common price reductions (10% and 15%), across large, medium and small supermarkets. The sales bumps varied across supermarkets for each price cut while cannibalization effects were substantial only in large supermarkets, with moderate effects in medium stores and no effects in small supermarkets.

Keywords: Sales promotion; Price discounting; Cannibalization; Dynamic structural equations; SVARMAX (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:joreco:v:53:y:2020:i:c:s0969698919300608

DOI: 10.1016/j.jretconser.2019.101982

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