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- Title
Helping Merchants to Assess the Profitability of Deal-of-the-Day Promotions.
- Authors
Reiner, Jochen; Skiera, Bernd
- Abstract
The ability to calculate and understand the profitability of deal-of-the-day promotions (DoDs) is of vital importance for merchants. It is also challenging because it requires these merchants to consider long-term, cross-selling, and cannibalization effects and select an appropriate discount for the promotion. The authors develop and implement a model as a free online calculator (http://www.coupon-calculator.com) to help merchants to determine the profit they can generate from these promotions. This calculator evaluated almost 3,700 DoDs from the merchants' and providers' perspectives. To gain insight on the expected profitability of DoDs, the authors analyzed 627 of these planned promotions and 30 realized promotions. The results indicate that two-thirds of the planned and all realized DoDs are expected to be profitable in the long term. Yet, DoDs are unlikely to pay off in the short term. The bindings also show that unredeemed coupons strongly increase profit, particularly those of the provider.
- Subjects
MERCHANTS; PROFITABILITY; SALES promotion; MARKET capitalization; COUPONS (Retail trade)
- Publication
Interfaces, 2018, Vol 48, Issue 3, p247
- ISSN
0092-2102
- Publication type
Article
- DOI
10.1287/inte.2017.0937