Price promotions are used extensively in marketing for one simple reason -- consumers respond. The sales increase for a brand on promotion could be due to consumers accelerating their purchases (i.e., buying earlier than usual and/or buying more than usual) and/or consumers switching their choice from other brands. Purchase acceleration and brand switching relate to the primary demand and secondary demand effects of a promotion. Gupta (1988) captures these effects in a single model and decomposes a brand's total price elasticity into these components. He reports, for the coffee product category, that the main impact of a price promotion is on brand choice (84%), and that there is a smaller impact on purchase incidence (14%) and stockpiling (2%). In other words, the majority of the effect of a promotion is at the secondary level (84%) and there is a relatively small primary demand effect (16%). This paper reports the decomposition of total price elasticity for 173 brands acros...

www.elsevier.comrlocaterijresmar Market share response and competitive interaction: The impact of temporary, evolving and structural changes in prices

What are the drivers of retailers ' prices and what, if any, are their financial consequences? The results of a large-scale quantitative analysis show that retail prices are mainly driven by pricing history (50%), acquisition costs (25%) and demand feedback (12.5%). In contrast to pricing history, demand-based pricing is associated with higher retailer (and manufacturer) financial

The authors are listed in reverse alphabetical order. They gratefully acknowledge the support of IRI/Europanel, who provided the data on which this study is based. They thank the participants at the MSI Conference on Competitive Reaction for constructive comments on an earlier draft of this work. Financial support by the Flemish Science Foundation (F.W.O) under grant G.0145.97 and the Research Council of the Catholic University of Leuven under grant OT.96.4 is greatly How do competitors react to each other’s price-promotion and advertising actions? How do these reactions influence the net sales impact we observe? We answer these questions by performing a large-scale empirical study of the short-run and long-run reactions to promotion and advertising shocks in over 400 consumer product categories, over a four-year time span. Competitive reaction can be passive, accommodating or retaliatory. We first develop a series of expectations on the type and intensity of reaction behavior, and on the moderators of this behavior. These expectations are assessed in two ways. First, vector-autoregressive models quantify the short-run and long-run effect of a promotion or advertising action on competitive sales and on competitive reactions. By cataloging the numerical results, we are able to formulate

making the data available. Retail Price Drivers and their Financial Consequences What are the drivers of retailers ' prices and what, if any, are their financial consequences? The results of a large-scale quantitative analysis show that retail prices are mainly driven by pricing history (50%), acquisition costs (25%), and demand feedback (12.5%). In contrast to pricing history, demand-based pricing is associated with higher retailer (and manufacturer) financial performance. The remaining price drivers: category management, store traffic, and store brand performance, affect manufacturer and retailer performance in more complex ways.

Number of pages 50

Several researchers have decomposed sales promotion elasticities based on household scanner panel data. A key result is that the majority of the sales promotion elasticity, about 74 percent on average, is attributed to secondary demand effects (brand switching) and the remainder to primary demand effects (timing acceleration and quantity increases). We demonstrate that this result does not imply that if a brand gains 100 units in sales during a promotion the other brands in the category lose 74 units (74 percent). We offer a complementary decomposition measure based on unit sales. This measure shows the ratio of the current cross-brand unit sales loss to the current ownbrand unit sales gain during promotion, and we report empirical results for this measure. We also derive analytical expressions that transform the elasticity decomposition into a decomposition of unit sales effects. These expressions show the nature of the difference between the two decompositions. To gain insight into the magnitude of the difference, we apply these expressions to previously reported elasticity decomposition results. We find that on average about one third of the