Multi-Product Pricing: Theory and Evidence from Large Retailers

Bonomo, Marco; Carvalho, Carlos; Kryvtsov, Oleksiy; Ribon, Sigal; Rigato, Rodolfo

doi:10.1093/ej/ueac088

Cited by 5 publications

(1 citation statement)

References 49 publications

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“…The theory of multi-product pricing posits that supermarkets, as multi-product providers, can attract consumers and stimulate their consumption of other products by offering promotions on a small selection of items, thereby maximizing supermarket profits [25,26]. This model is derived from the loss leader pricing model, with Degraba (2006) introducing variations to target more profit-oriented customers [27].…”

Section: Theoretical Framework and Hypothesesmentioning

confidence: 99%

How Can Price Promotions Make Consumers More Interested? An Empirical Study from a Chinese Supermarket

Niu,

Jin,

Chen

et al. 2024

Sustainability

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Price promotions are commonly employed to enhance supermarket performance and the sustainable development of the retail industry, yet their effectiveness may vary among similar supermarket chains. In contrast to Western countries, Chinese supermarkets are typically community-centered, allowing consumers to make frequent visits due to lower transaction costs. This multiple-visit pattern discourages substantial one-time purchases based on promotions. This study aims to investigate how pricing promotions can attract consumers more effectively and which product categories are most suitable for this purpose. Utilizing scanner data from Chinese chain supermarkets, we empirically assess the impact of promotion depth, breadth, and duration on consumer purchasing behavior using fixed effects models, IV, and GMM methods. Furthermore, we identify product category characteristics that are more appealing to consumers based on the relationships between different product category promotions and consumer behavior. Results demonstrate that each of the three price-promotion features has a positive effect on Chinese supermarket performance, with varying degrees of significance. Different promotion methods not only benefit promoted products but also stimulate sales of non-promotional items. At the product level, the impact of supermarket promotions on performance differs across categories. The most attractive category in terms of consumer purchases influenced by discounts is special paper, while small kitchen appliances have the least impact. Promoting categories with lower average prices, higher average sales volumes, fewer products, and better storage durability is conducive to attracting consumer shopping. These empirical findings have implications for academic research on price promotion theory and supermarket managers’ pricing strategy decisions, as well as the sustainable development of the offline retail industry.

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