Introduction
Conceptual framework
Study | Categories | (Intrastore) Effects | Aggregation Level | |||
---|---|---|---|---|---|---|
Number | Related | Unrelated | Complementary | Substitution | ||
Walters and MacKenzie (1988) | 2a
| – | – | No | No | Category |
Mulhern and Leone (1991) | 2 | √ | – | Yes | Yes | Brand |
Walters (1991) | 2 | √ | – | Yes | Yes | Brand |
Wedel and Zhang (2004) | 3b
| √ | – | Yes | Yes (but small) | SKU’s/Brands |
Song and Chintagunta (2006) | 4 | √ | – | Yes | Yes | Brand |
2a
| √ | √ | Yes | Yes | Category | |
Kamakura and Kang (2007) | 2 | √ | – | Yes | Yes | Brand |
Leeflang et al. (2008) | 2 (pairs of categories) | √ | – | Yes | Yes | SKU’s/Categories |
This study | 12 and 13 | √ | √ | Yes | Yes | Category |
Promotional effects
Own elasticities
Cross elasticities
Data
Total annual turnover* | Number of top items | Average daily price** | Supported Price Promotions | Unsupported Price Promotions | |||||
---|---|---|---|---|---|---|---|---|---|
Number of days | Number of days discount exceeds 5% | Average daily discount (%) | Number of days | Number of days discount exceeds 5% | Average daily discount (%) | ||||
Aperitif product categories
| |||||||||
Bottle of beer, 1 l | 51.78 | 5 | 0.66 (4.95) | 36 | 35 | 4.36 | 75 | 47 | 5.48 |
Can of beer, 33 cl | 146.52 | 4 | 0.28 (2.88) | 67 | 62 | 10.66 | 82 | 72 | 6.58 |
Can of mussels | 23.34 | 9 | 1.06 (16.47) | 89 | 89 | 24.16 | 160 | 130 | 14.62 |
Can of cockles | 75.48 | 20 | 1.94 (29.88) | 30 | 28 | 15.18 | 147 | 119 | 5.25 |
Can of clams | 13.86 | 4 | 1.14 (34.37) | 71 | 71 | 16.64 | 164 | 126 | 10.21 |
Can of tuna in oil | 16.68 | 6 | 1.01 (9.54) | 89 | 77 | 8.84 | 156 | 123 | 8.72 |
Can of asparagus | 22.98 | 11 | 1.40 (18.20) | 18 | 18 | 17.54 | 133 | 90 | 10.45 |
Bottle of red wine | 18.06 | 12 | 1.57 (19.19) | 16 | 14 | 5.21 | 176 | 125 | 9.41 |
Bottle of white/rose wine | 68.52 | 16 | 2.15 (17.11) | 17 | 16 | 7.25 | 144 | 93 | 7.73 |
Bag of potato chips | 68.88 | 13 | 0.88 (15.09) | 13 | 13 | 4.99 | 201 | 201 | 18.63 |
Can of stuffed olives | 42.36 | 8 | 0.64 (8.10) | 33 | 33 | 16.22 | 209 | 164 | 9.59 |
Can of razorshells | 12.66 | 6 | 1.98 (22.10) | 11 | 11 | 1.54 | 32 | 21 | 3.14 |
Breakfast product categories
| |||||||||
Juice mini brick | 68.28 | 15 | 1.03 (1.22) | 35 | 35 | 13.19 | 207 | 135 | 5.12 |
Bottle of juice, 1 l | 66.36 | 22 | 0.61 (0.77) | 47 | 47 | 5.99 | 398 | 343 | 15.67 |
Pack of standard cookies | 44.76 | 10 | 1.09 (2.31) | 28 | 25 | 9.91 | 192 | 95 | 6.55 |
Pack of filled cookies | 35.34 | 9 | 0.60 (1.62) | 20 | 19 | 8.91 | 187 | 76 | 4.59 |
Pack of soluble cocoa | 63.00 | 6 | 3.54 (3.11) | 19 | 13 | 7.28 | 206 | 84 | 4.69 |
Pack of soluble coffee | 90.54 | 6 | 2.53 (0.71) | 45 | 0 | 2.15 | 179 | 2 | 1.87 |
Pack of normal coffee | 55.80 | 13 | 1.14 (2.55) | 64 | 60 | 9.75 | 203 | 170 | 7.78 |
Brick of unskimmed milk 1 l | 174.66 | 13 | 0.61 (0.85) | 29 | 29 | 3.90 | 113 | 41 | 1.70 |
Brick of skimmed milk, 1 l | 47.22 | 6 | 0.58 (0.53) | 15 | 13 | 2.76 | 81 | 29 | 1.25 |
Brick of semi-skimmed milk, 1 l | 74.28 | 7 | 0.59 (0.58) | 5 | 2 | 0.90 | 108 | 5 | 2.10 |
Brick of enriched milk, 1 l | 115.20 | 14 | 0.74 (10.83) | 2 | 2 | 0.56 | 25 | 15 | 1.33 |
Pack of cereal | 55.56 | 23 | 1.57 (14.13) | 6 | 6 | 2.44 | 204 | 131 | 6.58 |
Pack of normal sugar, 1 kg | 42.00 | 1 | 0.93 (0.00) | 0 | 0 | 0.00 | 2 | 2 | 0.00 |
Model specification
Category attraction model
-
The Cluster Asymmetry Attraction model (CAA model).
-
The Fully Extended Attraction model (FEA model).
-
The attraction model developed by Carpenter et al. (1988) (the CCHM model).
Category Promoted | Own-Elasticities | Category Affected | Cross-Elasticities | ||
---|---|---|---|---|---|
SPI | NSPI | SPI | NSPI | ||
Aperitif Cluster
| |||||
Beer 1 l | n.s. | n.s. | – | ||
Beer33cl | −0.88 (0.16) | −1.15 (0.38) | Mussels | −0.18 (0.15) | |
Red wine | −0.27 (0.28) | ||||
Mussels | −0.48 (0.13) | n.s. | Beer 33cl | −0.22 (0.12) | |
Cockles | n.s. | n.s. | – | ||
Clams | −1.31 (0.40) | −1.02 (0.48) | – | ||
Tuna | n.s. | n.s. | Clams | −0.72 (0.38) | 1.05 (0.48) |
Asparagus | −0.91 (0.15) | n.s. | Beer 1 l | 0.77 (0.31) | |
Red wine | n.s. | −0.99 (0.45) | Olives | −1.39 (0.35) | |
White/rose wine | −0.82 (0.36) | −2.62 (0.66) | – | ||
Potato chips | −0.25 (0.15) | n.s. | Tuna | −0.29 (0.12) | |
Olives | −0.48 (0.22) | n.s. | Mussels | −0.50 (0.22) | |
Breakfast Cluster
| |||||
Juice mini | n.s. | n.s. | – | ||
Juice 1 l | −0.48 (0.20) | n.s. | Soluble cocoa | −0.47 (0.26) | |
Standard cookies | −0.45 (0.12) | n.s. | – | ||
Filled cookies | −0.44 (0.19) | n.s. | – | ||
Soluble cocoa | −0.80 (0.33) | n.s. | – | ||
Soluble coffee | −8.07 (1.02) | n.s. | Normal coffee | 3.74 (0.98) | |
Normal coffee | n.s. | −1.01 (0.29) | Soluble cocoa | 0.57 (0.25) | |
Skimmed milk | 1.31 (0.31) | ||||
Unskimmed milk | n.s. | −0.31 (0.19) | Normal coffee | −0.43 (0.15) | |
Skimmed milk | −0.28 (0.15) | ||||
Skimmed milk | n.s. | n.s. | Semi-skimmed milk | 0.42 (0.13) | |
Semi-skimmed milk | −0.96 (0.03) | −1.00 (0.39) | – | ||
Enriched milk | n.s. | 0.14 (0.07) | Semi-skimmed milk | 0.56 (0.18) | |
Cereal | −0.53 (0.04) | n.s. | Standard cookies | −0.61 (0.23) |
Explaining promotion elasticities: effects of moderators
Empirical results
Category attraction model (Eq. 1)
Explaining promotion elasticities: effects of moderators (Eqs. 3 and 4)
\( SOPIR_i^{ * } = \begin{array}{*{20}{c}} { - 1.47 + .01 \times SD{F_i} + {{2.70}^{{{\rm{c)}}}}} \times SD{D_i} + .10 \times C{I_i}} \hfill \\{(0.91)\quad (0.02)\quad \quad (1.42)\quad \quad \quad \quad (0.06)} \hfill \\\end{array} \)
|
\( NSOPIR_i^{*} = \begin{array}{*{20}{c}} { - 0.73 + 0.0002 \times NSD{F_i} - 0.52 \times NSD{D_i} + 0.03 \times C{I_i}} \hfill \\{(0.47)\;\;(0.004)\quad \quad \quad \quad \;(4.54)\quad \quad \quad \quad (0.03)} \hfill \\\end{array} \)
|
R-squared = 0.23 |
Adjusted R-squared = 0.16 |
where: |
\( (N)SOPIR_i^{*} \) = the absolute value of the own (un-) supported price (index) elasticity of category i, |
(N)SDF
i
= the (un-) supported discount frequency of category i, |
(N)SDD
i
= the (un-) supported discount depth of category i, |
CI
i
= competitive intensity of category i. |
\( \begin{gathered} DCPI{R_{{ic}}} = - 2.87 * - 0.02 * * * \times D{C_{{ic}}} + 0.23 \times DC{F_{{ic}}} + 0.16 \times DF{L_{{ic}}} \hfill \\{ }\left( {{0}{.45}} \right)\quad \left( {{0}{.01}} \right)\quad \quad \quad \quad \;\left( {{0}{.63}} \right)\quad \quad \quad \;\left( {{0}{.75}} \right) \hfill \\\end{gathered} \)
|
---|
McFadden R-squared = 0.11 |
where: |
\( DCPI{R_{{ic}}} = \left\{ \begin{gathered} 1\quad {\hbox{if}}\;SCPI{R_{{ic}}} \ne 0\;{\hbox{or}}\;NSCPI{R_{{ic}}} \ne 0{ } \hfill \\0\quad {\hbox{otherwise,}} \hfill \\\end{gathered} \right. \)
|
SCPIR
ic
= the supported cross-price (index) elasticity of category c on the revenue share of category i,
|
NSCPIR
ic
= the unsupported cross-price (index) elasticity of category c on the revenue share of category i,
|
DC
ic
= the spatial distance between product categories i and c (note that DC
ic
≡ DC
ci
), |
DCF
ic
= dummy variable that takes a value 1 if the cross-price (index) elasticity of category c on category i is feature supported and 0 if it is unsupported, |
\( DF{L_{{ic}}} = \left\{ \begin{gathered} {1}\quad {\hbox{if}}\;{\hbox{categories}}\;i\;{\hbox{and}}\;c\;{\hbox{are}}\;{\hbox{located}}\;{\hbox{on}}\;{\hbox{the}}\;{\hbox{ground}}\;{\hbox{floor}}\;{\hbox{of}}\;{\hbox{the}}\;{\hbox{store}} \hfill \\{0}\quad {\hbox{otherwise}}{.} \hfill \\\end{gathered} \right. \)
|
Expectations | Support ? | |
---|---|---|
P1: | The promotional effects of SKUs/brands in category i (a) primarily affect revenues in category i, | Yes |
and (b) influence the revenues of only a limited number of other categories (i.e., cross-promotional effects). | Yes | |
P2: | Significant own-category elasticities are larger than cross-category elasticities (in absolute values). | Yes |
P3: | Effect of a promotion: (a) within (b) between categories is affected by the support of a promotion. | Yes |
Supported price promotions have greater effects on category revenues than unsupported price promotions. | ||
P4: | The number of brands in a category has a negative impact on own price elasticities. | Yes Confirmed at the 11% level |
P5: | Cross-promotion elasticities are larger (in absolute value) if the distance between the categories is smaller. | Yes |