Analysis of Sales Promotion Effects on Household Purchase Behavior

8 EMPIRICAL ANALYSIS TWO: SALES PROMOTION
REACTION MECHANISMS
8.1 Introduction
The approach we follow is tw<strong>of</strong>old. First, the intertemporal effects <strong>of</strong> sales promotions on
household purchase behavior are studied (taking the pre- and post-promotional effects into
account). Bucklin and Gupta (1999) conducted an investigation <strong>of</strong> UPC scanner data using
both the practitioner’s and the academic view <strong>of</strong> the use <strong>of</strong> this data. They concluded that one
<strong>of</strong> the immediate research needs was to develop simple, robust models that take the
intertemporal effects into account and investigate the consumption effect. Second, we focus
on the non-intertemporal part, namely decomposing the promotional bump.
In both approaches, the household is the unit <strong>of</strong> analysis. Brand switching, purchase
acceleration, purchase quantity, and category expansion are incorporated in our study. Store
switching and repeat purchasing are left out. Store switching is not incorporated in the
analyses because <strong>of</strong> lack <strong>of</strong> causal data regarding stores other than the primary store. The
repeat purchasing effect is not incorporated because we only had data for a relatively short
period <strong>of</strong> time. Besides, it is very difficult to investigate the enduring effect <strong>of</strong> a certain
promotion when other promotions interfere. Fortunately, previous research indicates that the
restrictive effect <strong>of</strong> not incorporating repeat purchasing is limited. Nijs et al. (2001), for
example, concluded that category demand was found to be predominantly stationary around a
fixed mean. This conclusion was based on examining category-demand effects <strong>of</strong> consumer
price promotions across 560 consumer product categories over a 4-year period.
The following questions will be answered in this chapter. (1) To what degree are the
different sales promotion reaction mechanisms exhibited by the households? Do, for instance,
promotions lead more <strong>of</strong>ten to brand switching than to purchase acceleration? (2) Do the sales
promotion reaction mechanisms differ across product categories? In other words, are
household reactions to sales promotions related with certain product category characteristics?
(3) Do sales promotion reaction mechanisms differ across product categories at the individual
household level? For instance, do households that switch brands in one category also do so in
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