The Effects of Price Promotions on New and Mature Products

Abstract

Although the 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 examines the impact of promotion depth on units sold and dollar sales for a 106-weeks period. Using learning theory as a framework, the study also examines the effects of price promotions on new and mature products. Our results indicate that promotion depth is negatively associated with brand extension sales. We address the theoretical and managerial implications of this surprising finding in the final sections of the paper.