Economic Analysis Of Retailer Promotional Strategies

With the promotion used in business intensified in recent years, many retailers were stuck in the "promotion battle" with their competitors and could not analyze rationally their situations due to lacking of the understanding of market competition, consumer demand, and specific promotion methods. Meanwhile, it is difficult for the consumers to get a clear and comprehensive view of promotions. Thus, there will be many potential problems in real life promotion strategy. This paper firstly analyzed the current status and existing problems of the promotion used by retailers, based on the in-depth analysis of concepts and theories related to promotion strategy. Secondly, the detailed economic analysis was applied to investigate some typical and commonly used promotion methods, such as discounts, coupons, bundled promotions and membership promotions. This analysis involves some important concepts and theories in microeconomics like the price elasticity of demand, price discrimination, the two-step pricing and willingness to pay. Thirdly, a case-study was applied to a well-known health and beauty retailer Watson Company. In the end, the paper made a few recommendations regarding to retail marketing strategy, which may provide guidance to retailers and consumers and help to regulate the market, guide the market behavior, finally improve social welfare and promote economic development.