The effect of price promotions on variability in product category sales

The present objective in this research is to relate variability in product category sales to promotional activity in the product category, and other category specific characteristics. The findings may be relevant from retailers’ perspective as retailers’ revenues are more closely related to the sales of the product category as opposed to the sales of any particular brand. The paper analyzes data on about 2000 brands from 25 different SAMI categories, obtained with the cooperation of a major grocery chain. The present data suggest that an increase in the magnitude of discounts increases the variability in category sales but an increase in the frequency of discounts has an opposite effect. Furthermore, categories which are bulky, or categories where the degree or competitivenes is high, exhibit lower variability in sales.