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How Promotions Work

How Promotions Work

Empirical generalisations of how promotions work (Blattberg R, Briesch R, and Fox E, 1995) from my advanced market analysis course:

  • Temporary reductions in retail price increase sales substantially
  • Higher market share brands are less deal elastic
  • The frequency of deals changes the consumer’s reference price – loss of brand equity when brands are heavily promoted
  • The greater the frequency of deals, the lower the height of the sale spike in response to the deals
  • Cross promotional effects are asymmetric, and promoting higher quality brands affects weaker brands (and private label products) disproportionately – promoting higher tier brands generates more switching than does promoting lower tier brands
  • Retailers pass through to consumers less than 100% of trade deals
  • Display and feature advertising have strong effects on item sales
  • Advertised promotions can result in increase store traffic
  • Promotions affect sales in complementary and competitive categories
  • Brand loyalty may (or may not) be affected
  • New triers may (or may not) be attracted
  • Promotions interact with other elements of the marketing mix (advertising in particular)
  • Promotional results interact with production and distribution, affecting inventory levels rapidly and dramatically
  • Promotional frequency influences promotional effects and is linked to the average length of the products purchase cycle
  • The type of promotion selected may have differential effects on brand loyalty and promotional attractiveness
  • Promotion size may have threshold and saturation effects, suggesting an S-shaped sales-response relationship
  • Firms may experience different levels of success in implementing different promotions

Another interesting observation of objectives’ by promotional type from the course material provided:

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