The effect of sales promotions intensity on volume and variability in category sales of large retailers

Abstract

Marketing is a system and operational process which includes various interconnected subsystems, harmonising with contributor elements to reach maximum efficiency. In this quest to sustain the most efficient sales trend, “sales promotions” have an essential role in stimuli of sales trends. Although earlier studies treat promotions as an interim activity to dissolve excess stock, starting from the 1980s, promotions had been seen as a critical element in creating a sustainable sales trend for the products. This paper focuses on the significance of the effect of promotional decisions on mean level and volatility of category sales trend. We employed time series methods, including exogenous variables. In our investigative methodology, sales trend considered in two different contexts, first the current level of sales, which corresponds to an increase in average sales trend and later variability of sales, leading to change in the level of uncertainty in category sales. To illustrate this research question, we use data belonging to one of the largest supermarket chains in Turkey. Category sales data span for five years between 2014 and 2018 in daily frequency queried from the company's database. We select the “laundry powder detergents” category sales quantity as a pilot category. The study exhibits that promotion policy variables have a significant effect on the average level of category sales. However, the uncertainty caused through promotional variables has a weakly significant effect compared to their impacts on the mean level of sales. Our study verifies previous studies claiming promotional variables significantly positively affect the mean level of sales trend. Besides, we found concrete evidence that the volatility of sales trend has a diminishing effect on the trend, while most of this adverse effect stemming from sales series own endogenous volatility process, not promotional variables.