Imagine you are a marketing manager and about to decide when to launch your price promotions next year.
You know that 2020 starts with the U.S. Super Bowl in early February and excites the sports world with the European Soccer Cup in mid-June followed by the Summer Olympics in Japan.
Should you target or avoid these time slots with your price promotions? Do popular events actually matter at all when planning your price promotions?
Keller/Deleersnyder/Gedenk (2019) found for fast-moving consumer good (FMCG) products in the Netherlands that the sales uplift during popular events is 9.3% higher during popular events than during nonevent times.
This change in sales due to price promotions is also called “promotion elasticity”. It measures the increase in sales due to a price drop of 1%. In this study, the promotion elasticity changed on average from 1.283 to 1.402 which means in nonevent period a 10% price drop leads to a sales increase of 28.3% during popular events the same price decrease lifts sales by 40.2%.
However, price promotions during popular event times are most effective,
- if there is a high category-event fit (e.g. beer during soccer cups) or a low category-event fit (toilet refreshers during skating events). If the link between product category and event is intermediate, price promotions tend to be less effective.
- if the brand is a premium brand demanding a price premium compared to other brands.
- if you manage the promotional clutter during popular event periods of competing brands in the respective retail environment.
By the way, the researchers only looked at the sales side of price promotions. Higher costs for promotional activities have not been taken into account. All in all, from a sales uplift perspective, the recommendation on promotion timing is straight-forward, but the actual decision requires some more thinking and evaluating.
Keller, Wiebke, I.Y., Barbara Dellersnyder, and Karen Gedenk (2019), “Price promotions and poplar events,” Journal of Marketing, 83(1), 73-88.