Question

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1- Discuss the impact of promotion on demand within a supply chain ?

Answer 1

The impact of promotion on demand within a supply chain can be described by the following 3 effects:

1. Cannibalization: It means that when the company is producing two products that are perfect substitutes of each other, the customer will tend to buy that product who's promotion is done by the company. The demand for the promoted product will increase but it will eat up all the deemed of other products. It is called "promoted product eats up the demand of non-promoted products".

2. Halo effect: This impact is just the opposite of the Cannibalization effect in which customers show a bias toward one product and leaves the other similar product. In such a situation, the producer must promote that product who's demand is declining due to the bias of customers. It will positively impact the demand for other products as well when the goods are promoted wisely.

3. Stealing effect: This impact describes how customer demand for a product increases suddenly when the good is promoted and subsequently declines once the promotion is done. In this scenario, the promotion has a negative impact on the demand in the supply chain in the long run.

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