The Relationship between Retail Price Promotions and Regular Price Purchases

Abstract

Retailers offer temporary price promotions to attract shoppers to stores and encourage them to purchase regular price merchandise. Existing research has found little evidence that price promotions affect regular price sales, possibly because published studies have not directly examined individual purchase baskets to determine if shoppers buying promoted items also purchase regular price items. The authors match actual purchases of individual shoppers with an in-store survey to determine the relationship between regular price and promotion purchasing. The results show a significant, positive relationship between regular price and promotion purchases. Among shoppers who identify the promotion as one of their reasons for visiting the store, three-fourths make regular price purchases. On average, these shoppers spend more money on regular price merchandise than on promotion merchandise. Also, the results show that shoppers visiting the store for the promotion are no less profitable to the store than other shoppers.