Which policy requires analysis of how a price promotion affects substitute or complementary products?

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

Answer: (C)

The main idea being tested is how a price promotion affects demand for other products in the portfolio, which is captured by cross-elasticities with substitutes and complements. When you change the price of one product, you must anticipate how that shift will influence the sales of related items: substitutes may gain or lose demand as consumers switch, while complements may see increased or decreased demand due to the sale. Analyzing cross-elasticities provides a quantitative way to forecast cannibalization or bundling effects, helping you plan promotions, pricing, and assortment so you optimize overall profitability rather than just boosting a single item. Other policies focus on internal controls, messaging, or channel economics, not on the interdependencies between products, so they don’t target the real impact of promotions across substitutes and complements.