nep-mkt New Economics Papers
on Marketing
Issue of 2019‒04‒15
one paper chosen by
Marco Novarese
Università del Piemonte Orientale

  1. Duration of Price Promotion and Retail Profit: An In-depth Study Based on Point-of-Sale Data By Li, Zhen; Yada, Katsutoshi; Zennyo, Yusuke

  1. 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

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