Don't Waste that Free Lettuce! Impact of BOGOF Promotions on Waste
43 Pages Posted: 14 Dec 2020
Date Written: December 12, 2020
Buy-One-Get-One-Free (BOGOF), a ubiquitous sales promotion scheme by which one can get two items for the price of one, encourages consumers to buy and waste food. Motivated by the initiative of a major retailer, we consider an alternative promotional scheme where consumers receive a coupon for a second item available for free at a later time; a move which was promoted as an attempt to curb waste. We develop a two-period Newsvendor model for the sale of a perishable product under the two promotional schemes using an aggregate demand formulation. We obtain analytical comparisons of order quantities, profits and waste and use numerical experiments to generate further insights. We find that delaying when consumers receive the free item often leads to a win-win proposition: the retailer makes more profit and the fraction of product wasted by both the retailer and the consumers is reduced. Yet, interestingly, we find that for high gross margin products, the traditional implementation of BOGOF can be also be a win-win strategy compared to not running a promotion and compared to delaying the free item. We also find that the BOGOF promotion scheme can actually be an effective waste-reduction strategy for seasonal products. Overall our results paint a more favorable picture of this promotional scheme than commonly perceived and suggest that its environmental criticism emanates from a too narrow and too consumer-centric view of the waste problem.
Keywords: food waste, waste, sales promotions, Buy-One-Get-One-Free, coupons, sustainability
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