The effects of price promotion depth on new and mature products

Although the short-term effects of price promotion depth on mature product sales volume and sales revenue are well known, empirical studies on the long-term effects of price promotions are relatively scarce. This study employs two models, a generalized linear autoregression model and a linear mixed model, to analyze the effects of promotion depth on sales revenue for a 106-weeks period. Using learning theory as a framework, the researchers also examine the effects of price promotions on new and mature consumer packaged goods sales. Across 10 store-level point-of-sales data sets, our results indicate that promotion depth does not affect brand extension sales but does positively influence line extension and mature product sales. We address the theoretical and managerial implications of these interesting results in the second half of the article.