Classification of Empirical Work on Sales Promotion: A Synthesis for Managerial Decision Making

Sales Promotion activities have gained strategic focus as markets are getting complex and competitive. Key managerial concerns in this area are budget allocation across elements of promotions as well as trade vis. consumer promotion, how to design individual sales promotion techniques and a calendar in face of competitive promotions, how to manage them and evaluate the short-term and long-term impact of the same. The objective of this paper is to present, through Meta-analysis, an overview of recent contributions appearing in scholastic journals relevant to the field of Sales Promotion, to classify them into different classificatory framework, report key findings, highlight the managerial implications and raise issues. The database used is the EBSCO host available on VSLLAN (Library)- Indian Institute of Management Ahmedabad). The selection procedure consisted of peer-reviewed scholarly contributions for recent five year period. Out of more than 700 articles 64 article were selected which were analyzed for classifying them into • Perspective addressed: Manufacturer, retailer or consumer. • Market [country where the research was undertaken] • Type of promotion activity addressed - coupon, contest, price cut etc. • Management function addressed: planning, implementation, control [evaluation] • It was found that majority of the articles addressed manufacturers perspectives ; almost all studies were done in developed countries ; coupon as a consumer promotion tool was widely researched; and more than half of the articles were addressing planning related issues. Finally attempt has been made to synthesize managerial implications of the studies under broad topic areas for guidelines for managers.

Nash Game Model for Optimizing Market Strategies, Configuration of Platform Products in a Vendor Managed Inventory (VMI) Supply Chain for a Product Family

This paper discusses how a manufacturer and its retailers interact with each other to optimize their product marketing strategies, platform product configuration and inventory policies in a VMI (Vendor Managed Inventory) supply chain. The manufacturer procures raw materials from multiple suppliers to produce a family of products sold to multiple retailers. Multiple types of products are substitutable each other to end customers. The manufacturer makes its decision on raw materials’ procurement, platform product configuration, product replenishment policies to retailers with VMI, price discount rate, and advertising investment to maximize its profit. Retailers in turn consider the optimal local advertising and retail price to maximize their profits. This problem is modeled as a dual simultaneous non-cooperative game (as a Nash game) model with two sub-games. One is between the retailers serving in competing retail markets and the other is between the manufacturer and the retailers. This paper combines analytical, iterative and GA (genetic algorithm) methods to develop a game solution algorithm to find the Nash equilibrium. A numerical example is conducted to test the proposed model and algorithm, and gain managerial implications.supply chain management;nash game model;vendor managed inventory

Vertical competition between manufacturers and retailers and upstream incentives to innovate and differentiate

Vertical competition, namely competition between retailers' store brands (or private labels) and manufacturers' brands has become a crucial factor of change of the competitive environment in several industries, particularly in the grocery and food industries. Despite the growing literature on the determinants of the phenomenon, one topic area regarding the impact of vertical competition on the upstream incentives to adopt non-price strategies such as product innovation as well as horizontal and vertical product differentiation has so far received little attention. An idea often put forward is that the increasing bargaining power of retailers and higher vertical competitive pressures can have negative effects on such incentives by lowering manufacturers' profits. On the other hand, there is a significant empirical evidence supporting the view that non-price strategies of product innovation and differentiation continue to play a key role and remain a crucial source of competitive advantages for several manufacturers. In this paper, we present a simple conceptual framework which allows us to focus on two hypotheses which interacting explain why the disincentive effects are not so obvious. The first hypothesis regards the existence of an inverse relationship between the strength of a given brand and the retail margin as suggested by Robert Steiner. Through a two-stage model in which manufacturers do not sell directly to final consumers and the retail industry is not perfectly competitive, Steiner argued persuasively that in such models leading brands in a product category yield lower retail margins than less strong brands. Retailers are forced to stock strong brands and therefore have relatively less bargaining power in negotiating wholesale prices. In addition, price competition among retailers is more intense on strong brands since consumers select these brands to form their perceptions of stores' price competitiveness and are ready to shift to lower price stores if retail price of these brands is not perceived as competitive. Thus, intensive intrabrand competitive pressures discipline retailers pricing policy on stronger manufacturer brands much more than on weaker brands. A key prediction of Steiner's two-stage model is that, since manufacturers' non-price strategies have a margin depressing impact which is additional to their direct demand - creating effect, manufacturers face greater incentives to invest in advertising and R&D. The second central hypothesis in our framework is that in a world of asymmetric brands and intense vertical competition there is a further mechanism at work due to retailers' delisting decisions. Given that retailers have to make room for their store brands at the point of sale, they have to readjust their assortments delisting some manufacturer brands. Retailers would like delisting strong brands given that the retailer's margin on these brands is lower. The problem is that strong brands can contrast vertical pressures better than weaker brands and cannot be delisted. In making shelf - space decisions, rational retailers will recognise that they can delist only the brands whose brand loyalty is lower than their store loyalty. On the contrary, retailers cannot delist brands for which brand loyalty is greater than store loyalty. This implies that manufacturer brands operate in a two- region environment. We call these two regions, respectively, the 'delisting' and 'no-delisting' region and show that the demarcation point between them is given by the level of retailer's store loyalty. By combining the Steiner's hypothesis with the mechanism of delisting, we argue that in a competitive environment characterized by vertical competition is at work a threshold effect which increases optimal 2 R&D and advertising expenditures. The intuition is that it is vital for manufacturers willing to remain sellers of branded products to keep brand loyalty of their brands at a level higher than retailer's store loyalty. And the only way to pursue this goal and avoid to be involved into the risk of being delisted is to boost brands. We also show that vertical competitive pressures are particularly strong on second- tier brands. A brief review of some recent patterns and stylised facts in the food industries and grocery channels consistent with these predictions conclude the paper.vertical competition, store brands, delisting, optimal advertising, Industrial Organization,

Nash Game Model for Optimizing Market Strategies, Configuration of Platform Products in a Vendor Managed Inventory (VMI) Supply Chain for a Product Family

This paper discusses how a manufacturer and its retailers interact with each other to optimize their product marketing strategies, platform product configuration and inventory policies in a VMI (Vendor Managed Inventory) supply chain. The manufacturer procures raw materials from multiple suppliers to produce a family of products sold to multiple retailers. Multiple types of products are substitutable each other to end customers. The manufacturer makes its decision on raw materials’ procurement, platform product configuration, product replenishment policies to retailers with VMI, price discount rate, and advertising investment to maximize its profit. Retailers in turn consider the optimal local advertising and retail price to maximize their profits. This problem is modeled as a dual simultaneous non-cooperative game (as a Nash game) model with two sub-games. One is between the retailers serving in competing retail markets and the other is between the manufacturer and the retailers. This paper combines analytical, iterative and GA (genetic algorithm) methods to develop a game solution algorithm to find the Nash equilibrium. A numerical example is conducted to test the proposed model and algorithm, and gain managerial implications

A new era in retail:Private-label production by national-brand manufacturers and premium-quality private labels

Private labels have witnessed considerable growth in grocery retailing. While existing academic studies have provided valuable insights concerning the evolution of private labels, several issues remain largely unexplored. First, in the face of these large private-label volumes, private-label production opportunities arise. Due to increased private-label competition, national-brand manufacturers increasingly pursue a dual-branding strategy and engage in private-label production next to their national-brand activities. In chapter two of this dissertation, a major motivation for national-brand manufacturers to engage in private-label production, namely whether it creates retailer goodwill, is investigated. It shows that private-label production is indeed rewarded: national-brand manufacturers involved in private-label production for a discounter have a higher likelihood of obtaining national-brand shelf presence at that discounter. The third chapter focuses on one of the main reasons why retailers push private labels, i.e. because they generate high margins, and considers how a retailer’s private-label margins vary within categories. It demonstrates that a retailer’s private-label margins depend on the nature of the private-label supplier-retailer relationship, that they differ across quality tiers and package sizes, and that they are affected by a supplier’s extent of national-brand focus next to its private-label production for the retailer. Finally, this dissertation concentrates on the recent premium private-label trend. Even though premium private labels are seen as “one of the hottest trends in retailing,” retailers are selective in picking their battles with top-quality national brands and do not feel the need to extend their standard private label with a premium private label in every category. The fourth chapter provides insight into why retailers offer premium private labels in some categories, but not in others. The research presented in this dissertation is among the first to empirically investigate the phenomenon of private-label production, and to shed light on the recent trend of premium private labels

Nash game model for optimizing market strategies, configuration of platform products in a Vendor Managed Inventory (VMI) supply chain for a product family

This paper discusses how a manufacturer and its retailers interact with each other to optimize their product marketing strategies, platform product configuration and inventory policies in a VMI (Vendor Managed Inventory) supply chain. The manufacturer procures raw materials from multiple suppliers to produce a family of products sold to multiple retailers. Multiple types of products are substitutable each other to end customers. The manufacturer makes its decision on raw materials' procurement, platform product configuration, product replenishment policies to retailers with VMI, price discount rate, and advertising investment to maximize its profit. Retailers in turn consider the optimal local advertising investments and retail prices to maximize their profits. This problem is modeled as a dual simultaneous non-cooperative game (as a dual Nash game) model with two sub-games. One is between the retailers serving in competing retail markets and the other is between the manufacturer and the retailers. This paper combines analytical, iterative and GA (genetic algorithm) methods to develop a game solution algorithm to find the Nash equilibrium. A numerical example is conducted to test the proposed model and algorithm, and gain managerial implications. © 2010 Elsevier B.V. All rights reserved.postprin

Holiday Price Rigidity and Cost of Price Adjustment

Using unique retail and wholesale price data for 4,532 products carried by a major Midwestern grocery retailer, we find evidence of significant retail price rigidity during the Thanksgiving through Christmas holiday period relative to the rest of the year. We suggest that this pattern of holiday retail price rigidity is best explained by an increased opportunity cost of changing prices at these stores during the holiday period. Evidence based on discussions with retail managers suggests that during holidays the physical, managerial, and customer costs of changing prices rise considerably. Due to higher store traffic, performing tasks such as restocking shelves, handling customers’ questions and inquiries, running cash registers, cleaning, and bagging, become more urgent during holidays and thus receive priority. As a result, the holiday-period opportunity cost of price adjustment increases dramatically for the stores. The data provide a natural experimental setting to study variation in price rigidity because the products, stores, and surrounding institutional features and arrangements, including the market structure, the contractual arrangements, and the nature of relationships, etc., do not change between holiday and non-holiday weeks.Price Rigidity, Price Flexibility, Cost of Price Adjustment, Menu Cost, Holidays, Thanksgiving Holiday, Christmas Holiday, Scanner Data, Transaction Price Data, Retail Price, Wholesale Price, Natural Experiment, Opportunity Cost of Changing Price

Manufacturer's pricing strategies in cooperative and non-cooperative advertising supply chain under retail competition

This article studies the manufacturer's pricing strategy in a supply chain with a single manufacturer and two competing retailers. The manufacturer, as a Stackelberg leader specifies wholesale prices to two retailers who face advertisement dependent demand. Based on this gaming structure, two mathematical models are developed - the cooperative advertising model where manufacturer shares a fraction of retailers' advertising costs and the non-cooperative advertising model where manufacturer does not share any retailer's advertising expenses. The optimal strategies of the manufacturer and retailers are determined and a numerical example is taken to illustrate the theoretical results derived. We show that cooperative advertising policy is beneficial not only for the participating entities but also for the entire supply chain