Effectiveness of Trade Promotions: Analyzing the Determinants of Retail Pass Through

Kumar, Nanda; Rajiv, Surendra; Jeuland, Abel
September 2001
Marketing Science;Fall2001, Vol. 20 Issue 4, p382
Academic Journal
Trade promotions are temporary price cuts that manufacturers offer retailers to encourage them to reduce retail prices. While trade promotion spending as a percentage of marketing budget has increased dramatically, the inefficiency of trade promotion represents the "number-one concern" among manufacturers, as indicated by recent trade surveys. At the heart of this dissatisfaction lies manufactureby advertising his trade promotion directly to consumers, thus performing a channel coordination function. We consider several extensions of the base model—explicit retail competition, differentiated retailers, and heterogeneity in consumers' knowledge about the frequency of trade deals—and show that our results still hold.


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