Elasticities and dynamics of on-line price promotions and advertising

Danjel Bratina

Economic Research-Ekonomska Istraživanja, 2018, vol. 31, issue 1, 1228-1239

Abstract: Our paper deals with short and long-term effects of price promotions and advertising using experimental research on a web shop sales and page clicks. We try to assess how promotions and advertising elasticities are affected by different combinations of marketing activities. We also determine dynamic behaviour of web sales and page-clicks using category aggregated daily time series with various marketing activities as intervention pulses. Findings show higher elasticities for increased marketing efforts, peaking at highest discounts and maximum levels of advertising. Price elasticities have been found to be 0.32 to −2.64, while advertising elasticities were between 0 and 0.32. Analysis of dynamics of both marketing activities and carryover effects confirm an immediate effect of discounting on sales and a lagged effect of 1 period of advertising. The decay of advertising effect is faster than discounting and neither of the two has a carryover effect.

Date: 2018
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DOI: 10.1080/1331677X.2018.1458638

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