8. Promotion

Introduction

Key concepts covered in this chapter:

Baseline Sales, Incremental Sales, and Promotional Lift

Redemption Rates for Coupons/Rebates

Percent Sales on Deal, Percent Time on Deal, and Average Deal Depth

Pass-Through and Price Waterfall

Price promotions can be divided into two broad categories:

• Temporary price reductions.

• Permanent features of pricing systems.1

With both of these, firms seek to change the behavior of consumers and trade customers in ways that increase sales and profits over time, though a promotion’s short-term effect on profits will often be negative. There are multiple routes to sales and profit growth and many potential reasons for offering price promotions. Such programs might be aimed at affecting ...

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