Measuring the effect of promotion in non-controlled settings: a decompositional approach created by Steven Cuellar, Michael Noland and Scott Kirkwood.

This paper provides a market based method that allows firms to obtain an accurate measure of the effects of promotion in non-controlled settings. Determining the effect of promotion is often confounded by differences in price between promoted and non-promoted sales as well as heterogeneity among consumers who buy promoted and non-promoted products. This paper provides a market based method that overcomes both these obstacles. We begin first by providing a brief graphical analysis outlining the problems associated with accurately measuring the effects of promotion. We address the particular issue of price and how to decompose the effects of price from promotion. Next, we address the issue of heterogeneity of consumers, allowing those who buy on promotion to differ from those who buy off promotion. Finally we introduce a formal methodology to isolate the effects of promotion.