Does Promotion Depth Affect Long-Run Demand?

We use the results of three large-scale field experiments to investigate how the depth of a current price promotion affects future purchasing. While most previous studies have focused on packaged goods sold in grocery stores, we consider durable goods sold through a direct mail catalog. The findings reveal different effects for firsttime and established customers. Deeper price discounts in the current period increased future purchases by first-time customers (a positive long-run effect) but reduced future purchases by established customers (a negative long-run effect). We investigate alternative explanations for these findings including purchase acceleration, selection, customer learning and increased deal sens itivity.