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Quantitative Marketing and Economics

, Volume 4, Issue 4, pp 351–382 | Cite as

Pass-through timing

  • Sergio MezaEmail author
  • K. Sudhir
Article

Abstract

Trade promotions are the most important promotional tool available to a manufacturer. However trade promotions can achieve their objective of increasing short-term sales only if the retailer passes through these promotions. Empirical research has documented that there is a wide variation in retail pass-through across products. However little is known about the variations in pass-through over time. This is particularly important for products with distinct seasonal patterns. We argue that extant methods of measuring pass-through are inadequate for seasonal products. We therefore introduce a measurement approach and illustrate it using two product categories. We find interesting differences in pass-through for loss-leader products versus regular products during high demand and regular demand periods. We find that retailers use a deep and narrow pass-through strategy (high pass-through on loss-leader products, but small pass-through on regular products) during periods of regular demand and broad and shallow pass-through strategy (smaller, but similar pass-through on both loss-leader and regular products) during periods of high demand. Loss leader products continue to obtain higher pass-through in high demand periods, if the category's high demand period is also a high demand period for other product categories as well.

Keywords

Pass-through Retail competition Loss leaders Trade promotions 

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Copyright information

© Springer Science + Business Media, LLC 2006

Authors and Affiliations

  1. 1.Rotman School of ManagementUniversity of TorontoTorontoCanada
  2. 2.Yale School of ManagementNew HavenUSA

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