A framework and model to evaluate promotions: A restaurant cross-promotion in-market study

Tim Norvell () and Alisha Horky
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Tim Norvell: The Love School of Business, Elon University
Alisha Horky: The Love School of Business, Elon University

Journal of Revenue and Pricing Management, 2017, vol. 16, issue 4, No 2, 345-356

Abstract: Abstract This article presents a framework and a model to evaluate the impact of promotions on company revenue and profit based on the examination of empirical findings from a restaurant cross-promotion in-market study. Promotions are difficult to evaluate because firms do not know to what extent the promotion creates incremental transactions or to what extent it simply provides discounts to existing customers who would have paid full price. To properly measure the impact, a firm must be able to determine the following: (i) the percentage incremental versus replacement transactions, (ii) the percentage incremental transactions from new versus existing customers, and (iii) the extent to which the promotion affected their overall spending behavior. This information can be combined with the discount amount of the promotion and the firm’s profit margin to arrive at the financial impact of the promotion. To maximize this effect, the company must first market the promotion to a similar but different customer base to minimize cannibalization. Second, they can institute an aggressive upselling program to counteract the consequence of discounting existing customers.

Keywords: promotions; coupons; profit; revenue; restaurant; cross-promotion (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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DOI: 10.1057/rpm.2016.14

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