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Helping merchants to assess the profitability of deal-of-the-day promotions

journal contribution
posted on 2018-05-01, 00:00 authored by J Reiner, Bernd SkieraBernd Skiera
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 findings also show that unredeemed coupons strongly increase profit, particularly those of the provider.

History

Journal

Interfaces

Volume

48

Issue

3

Season

May-June

Pagination

247 - 259

Publisher

Institute for Operations Research and the Management Sciences (I N F O R M S)

Location

Catonsville, Md.

ISSN

0092-2102

eISSN

1526-551X

Language

eng

Publication classification

C1.1 Refereed article in a scholarly journal; C Journal article

Copyright notice

2018, INFORMS