Cross-Channel Effects of Price Promotions: An Empirical Analysis of the Multi-Channel Grocery Retail Sector

• Offline price promotions reduce online category sales in short term.
• Online price promotions reduce offline category sales in short term.
• Effect of online promotions on offline category sales is stronger than vice-versa.
• Past promotion frequency mainly reduces promotion effectiveness in own channel.
• Negative cross-channel promotion effects are stronger for chain loyal customers.

An important consideration for multi-channel grocery retailers is which promotion strategy to adopt across channels. The tendency of grocery buyers to keep visiting the offline store after they start to buy at the chain's online store implies that promotions in one channel can have substantial negative effects on buying behavior in the other channel, especially if the promotions differ across channels. This article examines the cross-channel effects of price promotions on category purchase decisions, taking into account both contemporaneous effects (during the promotion period) and cross-period effects (after the promotion period). For cross-period promotion effects, a distinction is made between lagged promotion effects on subsequent category purchases, and promotion frequency effects on future promotion effectiveness. The results show that (1) promotions in one channel can have negative effects on category purchases in the other channel during the promotion period, (2) these cross-channel effects are asymmetric, (3) high promotion frequency can have negative effects on future promotion effectiveness in the other channel, and (4) cross-channel effects are more negative for more loyal customers of the chain.

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