| By: |
Li, Zhen;
Yada, Katsutoshi;
Zennyo, Yusuke |
| Abstract: |
Anecdotal evidence has shown that retail price promotions can help small and
medium-sized retailers enhance their sales, and thus, retail profits. However,
most marketing managers usually stop a promotion after a certain duration.
This study aims to explain why these retailers discontinue their price
promotion. Our approach posits that the promotion’s overall contributions to
the total retail profit progressively diminish with time. We present a
theoretical framework to explain the relationship between duration and profit
effects of price promotions and propose a statistical model to empirically
examine this framework using point-of-sale (POS) data. Our findings provide
empirical support that the overall profit effects of price promotions have a
downward trend with elapsed time, upholding the hypothesis. The results are
helpful for marketers to understand how price promotions dynamically influence
retail profits and when the promotion should be terminated. |
| Keywords: |
Duration of Price Promotion; Elapsed Time; Retail Profit; Customer Traffic; Product Loyalty; Point-of-Sale Data |
| JEL: |
M31 |
| Date: |
2019–03–30 |
| URL: |
http://d.repec.org/n?u=RePEc:pra:mprapa:93047&r=all |