Should companies jointly promote their complementary products when they compete in other product categories?

• Joint promotion model (JP) for complementary products when firms also sell competing products.
• Spillover of the JP on competing products’ demands affect the profitability of the partnership.
• Positive two-side spillover is better than one-side spillover, which is better than no spillover.
• For negative spillover, partnerships with reduced spillover interferences are preferred.

Joint promotions, whereby companies pool marketing resources to promote their brands, are increasingly used to reduce marketing costs and develop common business opportunities, but formal knowledge about how they should be effectively implemented remains sparse. This paper investigates whether firms should jointly promote their complementary products when they also offer substitute products in another category. It also studies whether companies should partner with allies that can or cannot leverage on joint promotion to create spillover in their product portfolios. Our main findings are as follows. A company’s decision to enter or not to enter into a joint promotion depends on the presence and nature (positive or negative) of promotion spillover in its own product portfolio and the effect of joint promotion on each complementary product demand. Particularly, in the absence of spillover effect, joint promotion may not be mutually beneficial if its direct effects on the two complementary products are asymmetric. On the other hand, depending on its direct effects on the complementary products, joint promotion could be a profit-enhancing activity for the two firms even when it negatively affects the demand of their substitute products by intensifying price competition. Finally, we discuss the implications of branding strategies on the effectiveness of joint promotion. The results in this paper are useful for firms offering products in different categories where joint promotional spillover can occur.