Product-Type Moderating Effects on Short-Term Demand for Reduced Price Convenience Goods

Abstract

A field experiment within a supermarket chain found that demand sensitivity to price reductions varied sharply between product categories according to whether the product was a stock-up good, increased consumption good or a non-consumption increase good. Following a price reduction, stock-up goods and increased consumption goods were both elastic while non-stock up goods showed much less sales change. While stock-up goods then showed later lagged decreases in sales as consumers extend their savings, increased consumption goods returned to previous sales levels. The results imply simple but useful pricing strategies for grocery retailers.