Title: Do promotions benefit manufacturers, retailers or both?
Authors: Srinivasan, Shuba ×
Pauwels, Koen
Hanssens, Dominique M
Dekimpe, Marnik #
Issue Date: 2004
Series Title: Management Science vol:50 issue:5 (May) pages:617-629
Abstract: Do price promotions generate additional revenue and for whom? Which brand, category, and market conditions influence promotional benefits and their allocation across manufacturers and retailers? To answer these questions, we conduct a large-scale econometric investigation of the effects of price promotions on manufacturer revenues, retailer revenues, and total profits (margins). A first major finding is that a price promotion typically does not have permanent monetary effects for either party. Second, price promotions have a predominantly positive impact on manufacturer revenues, but their effects on retailer revenues are mixed. Moreover, retailer category margins are typically reduced by price promotions. Even when accounting for cross-category and store-traffic effects, we still find evidence that price promotions are typically not beneficial to the retailer. Third, our results indicate that manufacturer revenue elasticities are higher for promotions of small-share brands, for frequently promoted brands and for national brands in impulse product categories with a low degree of brand proliferation and low private-label shares. Retailer revenue elasticities are higher for brands with frequent and shallow promotions, for impulse products, and in categories with a low degree of brand proliferation. Finally, retailer margin elasticities are higher for promotions of small-share brands and for brands with infrequent and shallow promotions. We discuss the managerial implications of our results for both manufacturers and retailers.
ISSN: 0025-1909
Publication status: published
KU Leuven publication type: IT
Appears in Collections:Research Centre for Marketing and Consumer Science, Leuven
× corresponding author
# (joint) last author

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