Research On The Expansion Effect Of Product Price Promotion

Most time, the research on the decomposition of the sales volume increase due to the price promotions involves the effects only within a single product category. This article use a framework which theory based on the former studies that can involve the specific cross-category effects when price promotion happens. The datas are scanned and from one store of the T retailor. We discover the results based on daily data at the item level which can show the effects of promotions on sales in some other categories are quite important. On average, the cross-category complementary effects (20%) are very larger than the cross category substitution effects(11%). So, an item’s promotion can give an average net spin-off effect of (20-11=) 9% of its own effect. Considering that the number of important cross-category effects is not high,which means that most of the time,it is ok to just look at the within category effects. We also find out that in the within-category complementary effects, the competitive items of focal promotion items can also benefit from the promotion.In the study,we discover small stockpiling effects(6%),modest cross-item effects(22%),and huge category-expansion effects(67%).Combined the result of cross-item substitution effects within the category which is 26% and within-category complementary effects which is 4%, we can have the total cross-item effects. Due to the cross-category substitution effects of related categories,we come out about 16%(=11%/67%) of the category expansion effect. We find out that it is very important to discover and make full use of the between category effect. Based on the above study, we provide some promotion advice to the T company in this article.