Determinants of regular, promotional and cross price elasticities

The effects of market characteristics on price elasticities are investigated. Market characteristics are determined by strategic and tactical marketing decisions of retailers and manufacturers, e.g. product quality, number of brand varieties or display- and feature-activities of the competing brands. The price elasticities are differentiated with respect to regular prices, promotional prices and competitive promotional prices. A review of related literature provides the basis for the development of hypotheses. These hypotheses are tested within the empirical study. The price elasticities are estimated at the brand- and store-level on the basis of a sales response model. Next, these elasticities are related to strategic and tactical marketing decisions of the retailers and the manufacturers in order to determine the key impact factors of the empirically estimated price elasticities. The results add additional insights into the nature and structure of price elasticities and also offer guidelines to retail and brand managers for the planning and evaluation of brands' specific marketing activities.