Assessing the Impact of Retail Price Promotions on Product Substitution, Complementary Purchase, and Interstore Sales Displacement

Abstract

The author investigates the impact of retail price promotions on consumer purchasing patterns and the performance of competing retailers. A conceptual framework for retail promotional effects that includes brand substitution effects, interstore sales displacements, and the effects of promotions on complementary goods is developed. The framework is tested with store-level scanner data. Results are generally supportive of the framework and show that retail price promotions created significant complementary and substitution effects within the store. Interstore promotional effects also were detected in several cases as the promotions of products in one store significantly decreased sales of substitutes and complements in a competing store. Implications of the results for retail and manufacturer promotional strategies are discussed and several directions for future research are offered.