Promotional Effect on Sales

1. Introduction

One of the tools of the marketing mix that companies can use to influence the sales of their products is promotion. The allocation of marketing resources to promotional tools reflects this interest of companies in promotional tools. In 2005, 64% of questioned executives already used it as a part of the company’s marketing strategy (PROMO, 2006). Next to mechanisms such as advertisement, sampling and word-of-mouth, another way to promote sales of a product is via price promotion (Borden, 1964). Price discounts on products are the most used form of sales promotion (Darke & Chung, 2005). Consumers often evaluate price discounts in relative terms since the discounted price as well as the regular price is given in monetary terms. This makes it fairly easy for customers to comprehend and assess the value of price discounts in comparison to other promotional tools (Palazon & Delgado-Ballester, 2009).

In the retail environment of supermarkets, sales promotion is especially important, since, due to the similarity of products in one product category, it is difficult to differentiate products (Simpson, 2003). As up to 80% of supermarket purchases are unplanned and purchase decisions are influenced by unexpected, situational factors (Narhinen, Nissinen and Puska, 2000), supermarkets category managers can influence the decision-making process of customers’ purchases (Simpson, 2003). Also, customers often need to replenish their stocks of groceries; therefore trips to the supermarket are made on a regular basis (Greene, n.d.), leading to a frequent exposure to sales promotion such as price discount.

From an operational point of view, it is important to know what the effect of the price discount is on your sales and thus demand. In this paper, this particular effect of price discounts on the sales of various stock-keeping units (SKUs) in the juices category will be examined, thereby taking into account different effects of the price discounts on the sales of...