The Estimation of Pre- and Postpromotion Dips with Store-Level Scanner Data

Abstract

One of the mysteries of store-level scanner data modeling is the lack of a dip in sales in the weeks following a promotion. Researchers expect to find a postpromotion dip because analyses of household scanner panel data indicate that consumers tend to accelerate their purchases in response to a promotion—that is, they buy earlier and/or purchase larger quantities than they would in the absence of a promotion. Thus, there should also be a pronounced dip in store-level sales in the weeks following a promotion. However, researchers rarely find such dips at either the category or the brand level. Several arguments have been proposed to account for the lack of a postpromotion dip in store-level sales data and to explain why dips may be hidden. Because dips are difficult to detect by traditional models (and by a visual inspection of the data), the authors propose models that can account for a multitude of factors that together cause complex pre- and postpromotion dips. The authors use three alternative distributed lead and lag structures: an Almon model, an unrestricted dynamic effects model, and an exponential decay model. In each model, the authors include four types of price discounts: without any support, with display-only support, with feature-only support, and with feature and display support. The models are calibrated on store-level scanner data for two product categories: tuna and toilet tissue. The authors estimate the dip to be between 4 and 25% of the current sales effect, which is consistent with household-level studies.