Which policy involves assessing whether discounts on one item could reduce revenue of nearby items?

• A. Guardrails on promotion depth/duration
• B. Communication of value
• C. Cross-elasticities with other products
• D. Ensuring alternative channels remain profitable

Answer: (C)

Cross-elasticities with other products explain how the price or promotion of one item affects the demand for nearby items in the same lineup. When you discount one item, customers may substitute toward or away from related items, altering total revenue. The cross-price elasticity measures how much the quantity of one product changes in response to a price change of another. If the elasticity is positive, the items are substitutes, so discounting one can cannibalize sales from the other; if it’s negative, they’re complements, and discounting one could boost demand for the other. This concept is crucial for promo planning because it helps forecast whether a discount will lift overall revenue or simply shift sales within the portfolio. The other options address different aspects of marketing strategy—promotion governance, value messaging, or channel profitability—and don’t directly capture how discounts on one item impact revenue of nearby items.