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A Brand New Promotion-Free World: Learnings From a Price Promotion Ban

Price promotions are often seen as a “necessary evil”: while their costly practice generates short-term sales spikes, their long-term effectiveness has long been scrutinized. However, brand manufacturers are reluctant to unilaterally abandon price promotions, out of fear for competitive repercussions. As such, a retailing world without price promotions long remained an improbable yet intriguing proposition. In this study, we exploit a formal ban on price promotions that encompassed an entire retail market, to investigate if all brands truly stand to gain from a world devoit of price promotions. Specifically, we consider how characteristics related to prior promotional intensity, price positioning, branding and assortment determine who ultimately reigns supreme, and who is left in scrambles when promotions are absent. Our analyses reveal that, while the average brand stands to gain from abandoning promotions, private label brands and brands typically offering deep discounts are worse off, while larger-assortment brands gain more.