Drivers of the synergy between price cuts and store flyer advertising at supermarkets and discounters |
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| Affiliation: | 1. University of Hamburg, Moorweidenstraße 18, 20148 Hamburg, Germany;2. Eberhard Karls University of Tuebingen, Nauklerstr. 47, 72074 Tuebingen, Germany;3. University of Hamburg, Moorweidenstraße 18, 20148 Hamburg, Germany;4. Tilburg University, Warandelaan 2, 5000 LE Tilburg, the Netherlands;1. Zale Corporation Centennial Fellow, McCombs School of Business, University of Texas at Austin, 1, University Station, Austin, TX 78712, United States;2. Marion B. Ingersoll Professor of Marketing, Foster School of Business, University of Washington, Box 353226, Seattle, WA 98195, United States;3. McCombs School of Business, University of Texas at Austin, 1, University Station, Austin, TX 78712, United States;1. ESCP Business School, France;2. University of Liverpool Management School, United Kingdom;3. Arison School of Business, Reichman University (IDC, Herzliya), Israel;4. Stern School of Business, New York University, United States;1. Kansas State University, 1301 Lovers Lane, Manhattan, KS 66506, USA;2. University of Michigan, 701 Tappan Street, Ann Arbor, MI 48109, USA;1. HHL Leipzig Graduate School of Management, Jahnallee 59, 04109 Leipzig, Germany;2. IU Internationale Hochschule, Rosa-Luxemburg-Straße 27, 04103 Leipzig;1. Graduate School of Management, University of California at Davis, Davis, CA 95616, United States;2. Technion – Israel Institute of Technology, Faculty of Industrial Engineering and Management, Technion City, Haifa 32000, Israel;3. HEC Paris, Marketing Department, 1 rue de la Libération, 78351 Jouy-en-Josas Cedex, France;4. Università degli Studi di Palermo, Viale delle Scienze, 90128 Palermo, Italy |
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| Abstract: | Despite retailers’ intense use of both price cuts and store flyer advertising, it is still unclear whether and when it is beneficial for retailers to combine the two promotion tools at the same time as opposed to using them separately. We systematically investigate synergies between price cuts and store flyers for a broad set of 488 brands from 44 consumer packaged goods categories across six leading German retailers. We find that a clear majority of the brands benefit from positive synergies and hence, combining price cuts and store flyer advertising is recommended, especially at supermarkets. This synergy can be strong. For instance, a 15 % price cut without store flyer support at a supermarket, on average, increases sales by 11 %, and medium spending on store flyers for the brand at its regular (non-promoted) price results in a sales lift of 8 %. The combined use of both tools, however, increases sales by 52 %, much more than the sum of their separate effects (11 % + 8 % = 19 %). Yet, there is also substantial variance in the synergy, which we explain with retailer format (supermarkets versus discounters) as well as various brand and category characteristics. Our findings have important implications for the coordination of promotion activities by retailers. |
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| Keywords: | Price cuts Store flyers Synergy Discounters Supermarkets |
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