INFORMS Marketing Science Conference edition:35 location:Istanbul, Turkey date:11-13 July 2013
An important consideration for multi-channel retailers is which promotion strategy to adopt across channels. This not only requires insight into differences in promotion effectiveness across channels – which may provide opportunities for promotion differentiation – but also in potential negative cross-channel effects. This article examines cross-channel promotion effects in an online-offline multi-channel grocery context, and focuses on immediate cross-channel promotion effects on category purchase decisions, as well as delayed cross-channel effects on consumers’ promotion sensitivity. When promotions in one channel have an immediate negative effect on purchase decisions in the other channel, the resulting cross-channel shifts in category sales should be taken into account for the analysis and planning of multi-channel promotion actions. Moreover, when a high promotion frequency in one channel leads to promotion anticipation and reduced promotion sensitivity in the other channel, offering different promotions in the online and offline channel may reinforce the risk of long-term erosion in promotion effectiveness. To analyze these immediate and delayed cross-channel promotion effects, we use an integrated modeling approach and estimate a Tobit II model that captures purchase incidence and spending decisions in the category, and that allows for channel-specific and time-varying promotion effects. The results show that category promotions in one channel have an important negative, immediate effect on category purchase decisions in the other channel, but that a high promotion frequency in one channel does not significantly reduce future promotion sensitivity in the other channel.