The Determinants of Pre- and Postpromotion Dips in Sales of Frequently Purchased Goods

The authors empirically study the relationships between pre- and post-promotion dips in weekly store data and Universal Product Code (UPC), category, and store trading-area customer characteristics. Drawing on recent advances in econometric modeling, they estimate 39,441 pre- and postpromotion dip elasticities in 83 stores in ten product categories. They relate these elasticities to 24 characteristics, such as UPC price and market share, category budget share and storability, and store trading-area demographics. The authors find that UPC, category, and store trading-area customer characteristics all explain significant variation in the elasticities. For example, both pre- and postpromotion dips are stronger for high-priced, frequently promoted, mature, high-market-share UPCs. They find that postpromotion dips are not significantly different for private labels but are more prominent for UPCs with less predictable promotion patterns. They also find that stores with trading areas that consist of older customers who live in larger households and own cars are particularly prone to postpromotion dips. The findings potentially deepen the understanding of stockpiling and deceleration and blend two trends in promotion response research: an increased focus on pre- and postpromotion effects and a greater emphasis on examination of cross-sectional differences in promotion response.

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