Evaluating the Effectiveness of Price Promotions

Abstract

This paper looks at the effectiveness of price promotions on Amazon by considering the effect that they have on the sales rank of the promoted product. It also examines the link between the size and frequency of the price promotions. The paper uses data on 1,000 top-selling products from the ‘shoes’ category. It reaches three main conclusions. First, sales promotions improve product’s sales rank, and the larger the sales promotion, the larger this improvement is. Second, the effects of the sales promotion tend to be permanent, i.e. the sales rank remains lower 30 days after the sales promotion take place. Third, the frequency of the sales promotions is inversely related with their sizes.