1 Promotion Profitability for a Retailer : the Role of Promotion , Brand , Category , and Store Characteristics

The purpose of this paper is to quantify the net unit and net profit impact of promotions for a retailer and to understand the key correlates of this impact. Using data on all promotions offered in 2003 by CVS, a leading U.S. drug retailer, the authors (a) quantify the gross promotional lift; (b) decompose this into switching, stockpiling, and incremental lift for the retailer; (c) estimate the extent to which promotion affects sales of other product categories in the store to compute the net unit impact of the promotion; (d) account for promotional and nonpromotional margins and manufacturer funding to compute the net profit impact of the promotion; and (e) examine how promotion, brand, category, and store characteristics influence