The Effects of Price and In-Store Promotion on Sales in Different Regions and Retail Formats

Resumo

Price and in-store promotion strategies are important to consumer goods companies and retailers. Previous studies show that their effect on sales could vary according to some specific context (i.e., retail format). As market heterogeneity is a key characteristic of emerging markets, we investigate the effect of price and in-store temporary displays (i.e., with products on promotions) on sales volume in Brazil according to different regions with contrasts (i.e., northeast versus southeast) and store formats (self-service versus traditional mom&pop). Data for this study comes from retail market audit in the ready-to-drink juice category that spans three years broken down by region and channel. We specify a panel vector autoregression framework and an impulse-response function to verify short- and long-term effects on sales. Results suggest that price sensitivity is mainly influenced by the type of store format and not by regional differences. Effects of price on sales presented a similar pattern in both regions, whereas effects of temporary displays on sales presented different patterns according to each store format and region. This study also shows that especially in the lower-income region (i.e., northeast), in-store temporary displays with products on promotion could be more beneficial to companies than a price decrease in the traditional mom&pop format.