Abstract This study considers a supply chain consisting of a risk-natural supplier and a risk-averse retailer who faces a stochastic demand influenced by retail price and sales effort. Before selling season, the retailer makes demand forecasting and obtains an signal. Two types of sales promotion modes are discussed: retailer promotion (RP) and manufacturer promotion (MP). For each promotion mode, we derive the optimal selling price, wholesale price and sales effort, and investigate the impacts of the demand forecasting accuracy on the decisions and utilities of channel members, and the preferences for promotion modes. The results indicate that the retailer are better off with both promotion modes when improving demand forecasting accuracy. Under RP mode, improving forecasting accuracy is beneficial to the supplier only if the effectiveness of sales effort is relatively high. Under MP mode, improving forecasting accuracy is harmful to the supplier. Under certain conditions, both channel members prefer to MP (RP) mode when the forecasting accuracy is lower (higher). If the forecasting accuracy is at a moderate level, there may be conflicts of preferences of promotion modes.