Inman, J. Jeffrey; Mcalister, Leigh
September 1993
Marketing Science;Fall93, Vol. 12 Issue 4, p339
Academic Journal
Recent research suggests that the signal (e.g., sign or marker) with a point of purchase promotion will stimulate a significant sales increase, regardless of whether or not that signal is accompanied by a price cut. This paper develops a model of retailer profitability that incorporates this "promotion signal sensitivity." In a field test, the profitability of the promotion policy prescribed by this model is compared to the profitability of two other promotion policy-setting paradigms: a model-based policy that does not consider promotion signal sensitivity and one prescribed by industry experts. The test results support the proposed model. Its policy generates 11% more category profit per unit than the model-based policy and 12% more than the industry experts. Implications for retailers and future research are discussed. (Choice Models; Forecasting; Promotion; Retailing and Wholesaling)


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