Theoretical models of sales promotions – contributions, limitations, and a future-research agenda

Our objective in this paper is to review theoretical models of sales promotions. We highlight the key contributions of these models, discuss their limitations, and outline an agenda for future research. Managerial questions examined in these models include some very fundamental issues such as why firms resort to the use of sales promotions in mature markets, and why the use of sales promotions has increased dramatically during the last two decades. Also included in this review are models that address firm level strategic issues such as the allocation of dollars between advertising and sales promotions, and the relative emphasis on trade promotions vis-à-vis consumer promotions. We also review theoretical models that explain how consumers respond to price promotions, and what type of sales promotion tools may be superior to others in a particular market. The review concludes with a possible agenda for future research.