A Retailer Promotion Policy Model Considering Promotion Signal Sensitivity

J. Jeffrey Inman and Leigh McAlister
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J. Jeffrey Inman: University of Southern California
Leigh McAlister: University of Texas at Austin

Marketing Science, 1993, vol. 12, issue 4, 339-356

Abstract: Recent research suggests that the signal (e.g., sign or marker) with a point of purchase promotion will stimulate a significant sales increase, regardless of whether or not that signal is accompanied by a price cut. This paper develops a model of retailer profitability that incorporates this “promotion signal sensitivity.” In a field test, the profitability of the promotion policy prescribed by this model is compared to the profitability of two other promotion policy-setting paradigms: a model-based policy that does not consider promotion signal sensitivity and one prescribed by industry experts. The test results support the proposed model. Its policy generates 11% more category profit per unit than the model-based policy and 12% more than the industry experts. Implications for retailers and future research are discussed.

Keywords: choice models; forecasting; promotion; retailing and wholesaling (search for similar items in EconPapers)
Date: 1993
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Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:12:y:1993:i:4:p:339-356

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