Analysis of Sales Promotion Effects on Household Purchase Behavior

Table 8.7, and Table 8.8. But what is lacking is a decomposition <strong>of</strong> the promotional bump that
provides detailed insights in the relative strengths <strong>of</strong> brand switching, purchase timing, and
purchase quantity.
Following the line <strong>of</strong> reasoning applied in the major prior studies on promotional
bump decomposition (e.g., Gupta 1988, Bell et al. 1999, Van Heerde et al. 2001, 2002), three
different response patterns can occur when a promotion takes place. Current purchases can be
borrowed from future purchases (changes in purchase time; purchase time acceleration or
purchase time deceleration), current purchases can be drawn from planned current other brand
purchases (unchanged purchase timing combined with brand switching), or regular customers
purchase a different quantity (unchanged purchase timing, no brand switching). Two different
approaches have been applied in prior studies to decompose the promotional sales, the
elasticity based decomposition (e.g., Gupta 1988, Bucklin et al. 1998, Bell et al. 1999), and
the unit sales based decomposition (Van Heerde et al. 2001, 2002).
The elasticity based approach decomposes the total elasticity <strong>of</strong> a brand into brand
choice elasticity, purchase time elasticity, and purchase quantity elasticity. Overall, the
elasticity based decomposition studies found that the brand switching component is by far the
largest (74 percent), followed by purchase quantity (15 percent), and purchase timing (11
percent). It was also found that this decomposition differs across product categories.
Van Heerde et al. (2001) demonstrated that decomposing the promotional sales
bump using an elasticity approach differs from a unit sales approach. They argue that a
temporary price cut for a brand may increase the purchase incidence probability. A large part
<strong>of</strong> this typically goes to the promoted brand. However, the authors argue that the nonpromoted
brands can also benefit. That is, even though their conditional choice probabilities
tend to decrease, other brands may gain in part from the increased purchase incidence
probability. As stated by Van Heerde et al. (2001), the elasticity based decomposition does
not take this into account whereas the unit sales decomposition does take this into account. In
addition, a mathematical explanation for the difference between the elasticity based and the
unit sales based approach is derived by Van Heerde et al. (2001). The authors argued that the
unit sales decomposition should be preferred. Although differences are found across product
categories, there is a clear tendency that brand switch effects derived using the unit sales
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