This paper aims to focus on measuring and assessing the sales impact of temporary retail price discounts on all brands within a product subcategory as well as across other subcategories that differ slightly on composition and taste.
To test these effects, the study uses a regression approach to analyse data of several fast moving consumer good subcategories obtained from a Spanish supermarket.
The results confirm that temporary retail price reductions increase brand sales of the promoted brands, especially at weekends. Some brands gained sales at the expense of sales of substitute items within the same subcategory and also from sales of competing items in other subcategories.
The results of the current research suggest the presence of brand substitution effects within the analysed subcategories. In particular, while asymmetrical cross‐price effects are detected in only two subcategories, neighbourhood cross‐price effects have been evidenced in most subcategories. When considering the general product categories, certain substitution effects have been also evidenced: neighbourhood cross‐price effects are detected in most subcategories whilst asymmetrical cross‐price effects are not evidenced.
Retailers can learn from the experiences of a cross‐subcategory competition in order to determine which prices and discounts should set at the variety level. Though grocery retailers implement several decisions at the category level, brand level or even brand size level, it is valuable to learn from the experiences of a cross‐subcategory competition in order to determine whether or not it is interesting to set prices at the variety level.
The contribution in this paper consists not only of the measurement and assessment of the sales impact of temporary retail price discounts on all brands within a product subcategory as well as across other subcategories that differ slightly on composition and taste, but also of the application with data from the Spanish market.
