The impact of product based reward promotions: Which sales strategies are more effective for retail companies, price discounts or point incentives?

Abstract

Which sales promotion has the greater effect, the discount or the awarding of points? In this study, we estimated the elasticity of promotions and the elasticity of discounts with respect to point awarding, using aggregated purchase history data at food supermarkets, and compared the effects of both. As a result of measuring the elasticity of promotion, it was confirmed that the higher the benefit level, the higher the elasticity of discounts, while the lower the elasticity of point awarding. These results confirmed that when the unit price of a product is low and the discount rate and point award rate are also low, point awarding has a higher sales effect than discounting. It is suggested that points are more advantageous than discounts when retailers carry out promotions at low benefit levels.