Promotional Elasticities and Category Characteristics

Abstract

The authors study the relationships between product category characteristics and average brand promotional elasticity within the category. They present a framework for understanding these relationships and use it to generate hypotheses. The authors also consider three types of promotions and seven category characteristics. They study 108 product categories and use data compiled from weekly scanner data, scanner panel data, and survey data. Their results indicate that promotional elasticities are higher for categories with relatively fewer number of brands, higher category penetration, shorter interpurchase times, and higher consumer propensity to stockpile. The authors find no statistically significant relationship between promotional elasticity and either impulse buying or private label market share. They discuss the reasons for these results and their managerial implications.