Promotions 85-Percent Effective Across 20 Grocery Retail Categories

University Relations

Dinesh Gauri

In "Measuring the Efficiency of Category-Level Sales Response to Promotions," a new study published in the October issue of Management Science, Dinesh Gauri, professor of marketing in the Sam M. Walton College of Business, measured the efficiency of sales response to promotions across various categories and stores.

Gauri and his colleagues developed an efficiency model and used data from multiple sources, including census socio-demographic information and point-of-sales data on 20 frequently bought categories of products across 24 retail grocery chain stores. The data spanned millions of transactions.

The researchers found that not only did store and category characteristics play an important role impacting category sales response to promotions, but the impact varied with the three segments — premium, economy and value — uncovered in the market. Their analysis showed that the average efficiency of category and store sales response to promotions was 84.34 percent. The researchers found lower values in categories such as spreads and fresh seafood and higher values in categories such as frozen entrées and meat.

"The variation in efficiency of this sales response can be attributed to specific store and category characteristics such as selling area of store, distance to competition, number of stock-keeping units in the category, and average time between purchases," Gauri said.

Understanding the roles these characteristics play in the efficiency of sales response can aid managers in devising a strategy to maximize sales, said Gauri.

He published the study with co-authors Minakshi Trivedi, professor of marketing at University at Buffalo; and Yu Ma, associate professor of marketing at McGill University in Montreal, Quebec, Canada.