Problem Set #15 Key Sonoma State University Business 580-Business Intelligence Dr. Cuellar Measuring the Effects of Promotion II 1. For Total Wine Sales Using a Non-Promoted Price of $9 and a Promoted Price of $8 per Bottle a. Decompose the effect of price from promotion by month using the method of Cuellar et al. Construct a table showing the total lift in unit sales, the lift in unit sales due to price and the lift in unit sales due to promotion by month. $8.00 $8.00 $9.00 Promoted NonPromo NonPromo Price Lift % Promo Lift % Total % January 2384.023 2996.502 2265.432 731.07 0.322706663-612.479-27.04% 118.591 0.052348073 February 1846.035 2031.441 1788.212 243.229 0.136017989-185.406-10.37% 57.823 0.032335651 March 2357.507 1091.272 1242.85-151.578-0.121960011 1266.235 101.88% 1114.657 0.896855614 April 2688.635 2145.693 1634.816 510.877 0.312498165 542.942 33.21% 1053.819 0.644610158 May 2377.882 2309.481 1836.61 472.871 0.257469468 68.401 3.72% 541.272 0.294712541 June 3221.003 1558.715 1435.716 122.999 0.085670843 1662.288 115.78% 1785.287 1.243481998 July 2844.676 948.7677 1149.566-200.7983-0.174673138 1895.9083 164.92% 1695.11 1.474565184 August 2697.55 2280.298 1842.932 437.366 0.237320748 417.252 22.64% 854.618 0.463727365 September 3196.438 1892.448 1588.228 304.22 0.191546806 1303.99 82.10% 1608.21 1.012581317 October 3060.322 2730.644 1906.033 824.611 0.432632069 329.678 17.30% 1154.289 0.605597595 November 4513.787 3556.838 2264.172 1292.666 0.570922174 956.949 42.26% 2249.615 0.993570718 December 4806.441 2243.426 1989.693 253.733 0.127523693 2563.015 128.81% 2816.748 1.415669654 b. Show graphically the unit lift in sales due to promotion.
c. Show graphically the percentage lift in sales due to promotion. d. When is promotion most effective and least effective? Promotion is most effective in July and least effective in January. 2. For Cabernet Sauvignon Sales Using a Non-Promoted Price of $9 and a Promoted Price of $8 per Bottle a. Decompose the effect of price from promotion by month using the method of Cuellar et al. Construct a table showing the total lift in unit sales, the lift in unit sales due to price and the lift in unit sales due to promotion by month. $8.00 $8.00 $9.00 Promoted NonPromoNonPromoPrice Lift % Promo Lift% Total % January 2915.384 3105.916 2364.37 741.546 0.313634-190.532-8.06% 551.014 0.233049 February 1598.564 2010.703 1834.925 175.778 0.095796-412.139-22.46% -236.361-0.12881 March 2035.221 1192.063 1315.85-123.787-0.09407 843.158 64.08% 719.371 0.546697 April 2370.584 1733.392 1450.671 282.721 0.19489 637.192 43.92% 919.913 0.634129 May 2173.325 2676.759 1977.578 699.181 0.353554-503.434-25.46% 195.747 0.098983 June 2731.271 1808.966 1475.6 333.366 0.225919 922.305 62.50% 1255.671 0.850956 July 2217.124 1162.302 1178.318-16.016-0.01359 1054.822 89.52% 1038.806 0.881601 August 2151.14 1649.618 1469.097 180.521 0.122879 501.522 34.14% 682.043 0.46426 Septembe 2439.857 2663.78 1901.253 762.527 0.401066-223.923-11.78% 538.604 0.283289 October 2840.857 2430.389 1750.436 679.953 0.388448 410.468 23.45% 1090.421 0.622943 November 4319.069 3652.847 2334.067 1318.78 0.565014 666.222 28.54% 1985.002 0.850448 December 4986.97 2583.771 2183.894 399.877 0.183103 2403.199 110.04% 2803.076 1.283522
b. Show graphically the unit lift in sales due to promotion. c. Show graphically the percentage lift in sales due to promotion. d. When is promotion most effective and least effective? Promotion is most effective in December and least effective in May.
3. For Chardonnay Sales Using a Non-Promoted Price of $9 and a Promoted Price of $8 per Bottle a. Decompose the effect of price from promotion by month using the method of Cuellar et al. Construct a table showing the total lift in unit sales, the lift in unit sales due to price and the lift in unit sales due to promotion by month. $8.00 $8.00 $9.00 Promoted NonPromoNonPromoPrice Lift % Promo Lift% Total % January 1906.424 2836.528 2146.382 690.146 0.321539-930.104-43.33% -239.958-0.1118 February 1977.998 1723.718 1599.857 123.861 0.07742 254.28 15.89% 378.141 0.236359 March 2625.203 1005.589 1176.278-170.689-0.14511 1619.614 137.69% 1448.925 1.231788 April 2896.563 2570.317 1824.898 745.419 0.408472 326.246 17.88% 1071.665 0.587247 May 2751.551 2165.05 1797.152 367.898 0.204712 586.501 32.64% 954.399 0.531062 June 3537.985 2763.285 2049.018 714.267 0.34859 774.7 37.81% 1488.967 0.726673 July 3075.989 1196.478 1327.349-130.871-0.0986 1879.511 141.60% 1748.64 1.317393 August 3197.059 2647.098 2094.881 552.217 0.263603 549.961 26.25% 1102.178 0.526129 Septembe 3546.527 1974.417 1671.049 303.368 0.181543 1572.11 94.08% 1875.478 1.122336 October 3209.521 2823.101 1962.497 860.604 0.438525 386.42 19.69% 1247.024 0.635427 November 4634.886 3535.571 2224.891 1310.68 0.589099 1099.315 49.41% 2409.995 1.083197 December 4707.696 1428.422 1629.767-201.345-0.12354 3279.274 201.21% 3077.929 1.88857 b. Show graphically the unit lift in sales due to promotion.
c. Show graphically the percentage lift in sales due to promotion. d. When is promotion most effective and least effective? Promotion is most effective in December and least effective in January. e. Do the effects of promotion differ by varietal? Explain fully. The effects of promotion by varietal (shown graphically below) differ in effectiveness. The promotional lift for Chardonnay is nearly double that of cabernet in the most effective months of December, July, and March, but it is nearly half that of cabernet in April and June. We see some lift in Chardonnay sales as a result of promotional efforts in February and May, but cabernet sales show negative effects from promotion in these months. Overall, promotion can be planned and strategically implemented.
Consumer Heterogeneity-There is a debate over whether consumers who buy on promotion are more price sensitive than those who choose not to buy on promotion. 4. For Cabernet Sauvignon a. Show graphically the relationship between price and quantity of promoted and non-promoted sales. Describe your graph. b. Estimate the price elasticity of demand for promoted and non-promoted sales. Which is greater? Is the difference statistically significant? Do they differ in the expected way? Explain fully. Elasticity of Demand for Promoted and Non-Promoted Cabernet Log Cases Log Price -5.984 (5.60)** Significant
dpromo 0.106 (0.04) dpromo*log Price -0.198 (0.15) Not Significant Constant 20.863 (8.57)** Observations 312 R-squared 0.49 Absolute value of t-statistics in parentheses * significant at 5%; ** significant at 1% ε Promoted > ε Non Promoted 6.18 > 5.98 5. For Chardonnay a. Show graphically the relationship between price and quantity of promoted and non-promoted sales. Describe your graph. b. Estimate the price elasticity of demand for promoted and non-promoted sales. Which is greater? Is the difference statistically significant? Do they differ in the expected way? Explain fully. Elasticity of Demand for Promoted and Non-Promoted Chardonnay Log Cases Log Price -2.827 (3.25)** Significant dpromo 3.802 (1.67) dpromo*log Price -1.669 (1.65) Not Significant
Constant 13.711 (6.92)** Observations 312 R-squared 0.70 Absolute value of t-statistics in parentheses * significant at 5%; ** significant at 1% ε Promoted > ε Non Promoted 4.95 > 2.82