The Long-Term Impact of Promotions on Consumer Stockpiling Behavior

Abstract

Although brands have increased their promotional spending substantially in many categories over the past decade, panel-based research into consumer stockpiling behavior typically has assumed that consumers’ decisions regarding whether and how much to purchase have remained invariant to this increase. The authors develop a varying parameter model of purchase incidence and purchase quantity to ascertain whether this increase in promotions has affected households’ stockpiling decisions in the long term. The authors estimate the model on the basis of more than eight years of panel data for a frequently purchased, nonfood, consumer packaged-goods product. The results suggest that consumers’ stockpiling behavior has changed over the years. The increased long-term exposure of households to promotions has reduced their likelihood of making category purchases on subsequent shopping trips. However, when households do decide to buy, they tend to buy more of a good. Such behavior is indicative of an increasing tendency to “lie in wait” for especially good promotions. This change appears to have some deleterious ramifications for category profitability.