Promotional Framing of Green Products: Mediating Role of Sale Proneness

Abstract

The impact of sales promotion in boosting short-term sales is well established in the literature. While there are ample studies on the impact of sales promotion on conventional products in western countries, there is very scant research on the effect of promotions on green products and almost nonexistence research in emerging economies. This research addresses this gap by doing a comparative assessment of economically equivalent bonus pack sales promotion and price discount sales promotions on green versus non-green products through two experiments designed as a 2 (green product motivation: hedonic vs. utilitarian) × 2 (promotional frame: price discount vs. bonus pack) × 2 (discount level: low vs. high) between-subjects study, and 2 ( product types: green, non-green/control) × 2(promotional frame: price discount, bonus pack) between-subjects study. This research further examines the mediating role of sale proneness in the purchase process. The findings of this research indicate that buyers' preferences for promotion are quite varied for the purchase of green versus non-green products, and the price discount increases sale proneness which exerts a negative impact on product purchase willingness. Accordingly, this study has some theoretical and practical implications.     

The effects of promotional package frames and price strategies on inaction inertia

Inaction inertia is the phenomenon in which people are less likely to accept a less attractive opportunity after having missed a relatively more attractive one. Previous studies have mainly explored the inaction inertia effect on single products or services, whereas this study explored how the promotional frames of sales packages influence inaction inertia toward the individual items within the sales packages and the inaction inertia effect of the target product under different price strategies. On the basis of the cost assignments of mental accounting and comparisons of the current inferior promotion with missed superior promotion, this study found evidence that when consumers encounter a freebie (bundle) condition, they assign a higher cost to the focal (supplementary) product and a lower cost to the supplementary (focal) product. Therefore, consumers who have missed a freebie (bundle) promotion exhibit lower (higher) inaction inertia toward the focal product, but higher (lower) inaction inertia toward the supplementary product. Applying a similar internal mechanism to pricing strategies, the findings also show that when consumers encounter a two‐component sales package with a surcharge promotion using a partitioned price (vs. a price discount promotion using an all‐inclusive price), they assign a higher cost to the base product and a lower cost to the surcharge. So, consumers who have missed the surcharge (vs. price discount) promotion show higher inaction inertia when the surcharge of the current inferior opportunity is salient, but show less inaction inertia when it is not salient. Moreover, the percent of a surcharge as a part of the total package value moderates the impact of promotional price strategy frames on inaction inertia. These findings have significant implications for both theoreticians and practitioners interested in inaction inertia, promotional frames, and price strategies.     

Retail price discount depth and perceived quality uncertainty

This study analyzes the impact of retail price discount depth on consumer perception of quality uncertainty and its implications. While the extant research finds a negative relationship between perceived mean quality (indicated by the mean of quality perception) and price discount, we suggest an inverted-U-shaped relationship between perceived quality uncertainty (indicated by the variance of quality perception) and price discount. The underlying mechanism for this phenomenon is that consumer attribution of price promotion varies by discount depth. Specifically, when provided with a moderate discount (compared with a low or high discount), consumers cannot ascertain whether the discount is related to product quality; thus, they perceive a higher level of quality uncertainty and correspondingly rely more on other cues, such as country of origin and product popularity information, to make inferences about quality. Those findings have implications for setting the depth of retail price discounts and providing product quality-related information in the context of price promotion.     

The effect of specific discount pattern in terms of price promotions on perceived price attractiveness and purchase intention: An experimental research

This study aims to investigate consumer perceptions and reactions in terms of specific discount patterns (fixed price, 40% discount, discount from 500 TL to 300 TL and 20% + 25% discount) in price promotion. According to the results, specific discount patterns in price promotion have a significant effect on perceived price attractiveness and purchase intention. When the specific discount patterns in price promotion and gender interaction were analyzed in terms of perceived price attractiveness, the scenario of the “discount from TL 500 to TL 300” significantly differentiated from both the control scenario (fixed price) and experimental scenarios for female. For males, no significant difference was found between the control and experimental scenarios. In terms of purchase intention, a significant difference was found between the fixed price scenario and the discount scenario from 500 TL to 300 TL and between the fixed price and 20% + 25% discount scenario. The theoretical managerial implications of the study were discussed, and future research suggestions were presented.     

Can fat taxes and package size restrictions stimulate healthy food choices?

Consumers prefer bonus packs, as opposed to price discounts, for healthy foods, but they want a price discount rather than a bonus pack for indulgent foods (Mishra & Mishra, 2011). This study conceptually replicates and extends this finding to show that consumers are more responsive to changes in price than to changes in package size for indulgent food options, whereas they are more responsive to changes in package size than to changes in price for healthy food options.     

Are your consumers variety seekers? The moderating impact on the effectiveness of free gift promotions vs. price discounts

The purpose of this paper is to assess the effect of consumers’ variety-seeking tendency on their preference for monetary versus nonmonetary promotions (i.e. a price discount versus a free gift, respectively) and to identify possible reasons for this preference. A sample population of 150 students was surveyed. The research employed a 2 (discount/free gift)?×?2 (high variety seeking/low variety seeking) between-subjects design. A two-way ANOVA was applied to analyse the effects of the promotion frame and variety seeking on perceived transaction value. The ANOVA revealed a general consumer preference for a free gift over a price discount. This outcome is moderated by the variety-seeking tendency of the consumer; that is, repetitive consumers prefer a price discount, but variety-seeking consumers favour a free gift. This study gives managers insights into the issue of what kind of price promotion is most effective under which circumstances, namely for which type of consumer segment. The practical implications of our findings recommend that if the targeted consumer segment is variety-seeking, a free gift may be optimal, yet if the target segment represents returning customers, a price discount yields better results. If no clear assignment of consumers to either segment is possible, a free gift is the preferred option.     

When do amount-off discounts result in more positive consumer responses? Meta-analytic evidence

Extant research has examined the effects of amount-off discounts on consumer responses, but the empirical findings are inconsistent. This study presents a meta-analysis of 19 studies and 86 effect sizes (N = 12,003) calibrating the effects of discount frames on consumer responses. Amount-off discounts are found to lead to positive consumer responses through positive changes in attitudes. Analyzing various moderators’ impacts shows that amount-off discounts have different effects depending on the product price level, the product type, and the price promotion mode. For instance, amount-off discounts tend to be more effective than percentage-off discounts when the price is high, when the product type is material, and when the price promotion mode is a discount.     

Pricing Policy and Partial Collusion

We study the pricing policy equilibria emerging in a partial collusion duopolistic framework where firms in the first stage of the game choose non-cooperatively the pricing strategy (perfect price discrimination or uniform pricing), and from the second stage onward collude on prices. We show that for intermediate discount factors and high firms’ asymmetry, the unique equilibrium is characterized by only the smaller firm choosing price discrimination. In the case of intermediate discount factors and low firms’ asymmetry, there are two possible equilibria: both firms price discriminate or no firm price discriminates. When the discount factor is particularly high or particularly low both firms price discriminate in equilibrium.     

Taming the Blame Game: Using Promotion Programs to Counter Product-Harm Crises

The present research examines how different kinds of promotion programs (i.e., price discount versus donation promotion) buffer brands from the ill effects of product-harm crises. Drawing on attribution theory, the authors investigate the differential effects of promotion programs on consumer responses following ambiguous product-harm crises. These effects are moderated by promotion depth (i.e., the monetary value of a promotion) and brand reputation. Results show that for low-depth promotions, donation is more effective than price discount when the product-harm crisis involves moderately reputable brands. Importantly, the authors identify blame attribution as the mediating mechanism accounting for the interaction effects. When the locus of causality is external to the focal brand, the interaction effects of promotion programs and brand reputation disappear.     

Hidden price promotions: Could retailer price promotions backfire?

Hidden-price promotions, a type of uncertain price promotion in which the final price is not revealed when consumers first encounter the product, have been recently adopted by retailers. However, current research suggests that hidden-price promotions have the potential to backfire and result in reduced consumer purchase intention. Across seven studies, we reveal that hidden-price promotions can be effective but risk increasing discount expectations, as consumers expect a large discount. Only when the discount level meets or exceeds inflated expectations does the excitement built by the promotion positively impact purchase intention. For cognitive purchases, even without providing a high discount, hidden-price promotions are as effective as traditional ones. This research provides guidelines for retailers that want to employ hidden-price promotions.     

Marketplace attributions and consumer evaluations of discount claims

Two studies were conducted in which respondents were exposed to test advertisements in which the amount of savings implied by a reference price discount claim was manipulated. Respondents' attributions concerning the advertiser's motives for making the reference price discount claim were measured, along with dependent variables that assessed the respondents' evaluations of the price offer. Results across both studies indicated that the attributions about the advertiser's motives for the price discount offer had a significant effect on consumers' evaluations of the offer. Furthermore, across both studies, a person-stimulus-circumstance taxonomy appeared consistent with the structure of the attributions that respondents made when presented with reference price claims.     

Does manufacturer advertising suppress or stimulate retail price promotions? Analytical model and empirical analysis

Does manufacturer advertising for a brand stimulate or suppress retail price promotions? This study addresses this controversial issue. The authors develop an analytical model that shows that the relationship between manufacturer advertising and retail price promotion depends on the role of advertising. If advertising differentiates brands and suppresses consumer response to retail promotion, then the relationship is negative. But, if advertising is informative enough to increase consumer response to retail promotions, then the relationship is positive. A follow-up empirical analysis shows a strong positive relationship between category advertising expenditure and size of retail price discount, and between advertising and discount frequency. The finding supports the informative role of advertising in the context of retail price promotions. The implications of these findings and directions for future research are discussed.     

A comparative analysis of marketing promotions and implications for data analytics

Retailers use many different marketing promotions to increase sales and profits. These promotions include price reductions, coupons, cash mail-in rebates, free gift cards, and buy-one-get-one (BOGO) discounts. The type of promotion used results in different outcomes for demand, profit, average price, consumer surplus, and sales taxes collected. We perform comparative analysis of these five promotions and their outcomes. We show that for the same discount amount, price reductions result in the lowest average price. For products with weakly diminishing consumer utility and low consumer stockpiling, BOGO promotions result in the largest demand, profit, consumer surplus, and taxes collected. Cash mail-in rebates may result in large profit and taxes collected, but they perform poorly in terms of average price paid and consumer surplus. We also find that a retailer offering a delayed incentive (i.e. gift cards and mail-in rebates) offers a larger reward but provides lower consumer surplus than when offering an immediate incentive (i.e. price reduction and BOGO). In a segmented market with a price-insensitive consumer segment, immediate incentives have the disadvantage of allowing price-insensitive consumers arriving during the promotion to obtain the discount, which reduces the discount effectiveness. The addition of more retailer objectives to maximizing profit, such as demand maximization or consumer surplus, increases the effectiveness of immediate incentives. We also provide a framework for estimating the important parameters for evaluating promotion effectiveness using readily available transactional data and examine its accuracy using a simulation experiment.     

The Effects of Discount Location and Frame on Consumers’ Price Estimates

A discount may be defined by the location in which, and frame by which, it is communicated. Discount framing, particularly the differences between cents-off and percentage-off discounts, has been widely studied. Discount location (e.g., proximate to or distal from regular price info) has received considerably less attention. We employ the proximity-compatibility principle and tenets of human memory to demonstrate that discount framing (cents-off, percentage-off, and revised price) and discount location (proximal, distal) interact to differentially affect both the immediate value and the persistence of consumers’ price estimates. The implications of these results for retailers and manufacturers are highlighted in the discussion.     

Product line competition and price promotions

Besides its familiar demand-redistribution effect, price promotion by a multi-product firm creates cannibalization, as lowering the price of one variety may erode the profits of its other varieties. We study endogenous product line selection and price promotions in a duopoly. In equilibrium, the ex ante symmetric firms may offer asymmetric product lines with unequal length. The two-product firm is more profitable. The single-product firm offers a larger mean discount and promotes more (less) frequently than its competitor when the former’s unit cost is relatively low (high).     

“One-deal-fits-all?” On Category Sales Promotion Effectiveness in Smaller versus Larger Supermarkets

Even within a store chain and format, supermarket outlets often exhibit substantial differences in selling surface. For chain managers, this raises the issue of correctly anticipating the promotion lift, and of profitably managing promotion activities, across these outlets. In this paper, we conceptualize why and how store size influences the category sales effectiveness of four promotional indicators (depth of the promotional discount, display support, feature support, and whether the promotion is quantity-based). We then estimate the net moderating effect on four product categories for 103 store outlets belonging to four chains. For each of the promotion instruments, we find the percentage sales increases to be lower in large stores. For instance, whereas a 10% point increase in feature activity enhances category sales by about 1.64% in a 700 m² store, this figure drops to only 1.03% in a 1300 m² store – a 59% reduction. This moderating effect is especially pronounced for discount depth, the relative sales lift from a typical price cut being about 78% lower in the larger-sized outlet. However, since large outlets also have larger base sales, the picture changes when we consider absolute sales effects. The net outcome is that deeper discounts or quantity-based promotions do not systematically generate larger or smaller absolute sales bumps in large stores, whereas for in-store displays and features, we obtain a clear positive (be it less than proportional) link between store size and absolute category sales lift. When it comes to margin implications, we show that large stores gain higher profit from price cuts than small outlets only as long as the retailer keeps part of the manufacturer discount to himself. Managers can use these insights to improve their promotional forecasts across outlets, as well as to tailor their mix of instruments to store selling surface.     

The effect of product touch information and sale proneness on consumers' responses to price discounts

Since price discounts are costly and can negatively affect consumers' perceptions of quality, it is crucial to identify the factors that make them effective in stimulating purchase behavior. Drawing on cue utilization theory, we examine price discount effectiveness in affecting consumers' reliance on the sale cue based on the provided product touch information as an intrinsic cue and individual consumer differences in sale proneness. Two experimental studies indicate that price discount information, product touch information, and sale proneness interact to determine consumers' responses. Perceived quality is the underlying mechanism behind the observed effects. For nonsale-prone consumers, product touch information favorably influences responses to large price discounts by addressing product quality concerns and enhancing purchase confidence, but has no effect for regularly priced or low discounted products. For sale-prone consumers, product touch information is not effective in increasing their responses regardless of the discount size. A qualitative study provides support for these results and highlights the role of perceived quality and purchase confidence. The research contributes to behavioral pricing, cue utilization theory, and sensory marketing and suggests that marketing managers should provide consumers with product touch information when implementing high discounts for products for which prepurchase touch is important.     

PRICING CALLABLE BONDS BY MEANS OF GREEN'S FUNCTION1

This paper derives a closed-form solutin for the price of the European and semi-Amirican callable bond for two popular one-factor models of the term structure of interest rates which have been proposed by Vasicek as well as Cox, Ingersoll, and Ross. the price is derived by means of repeated use of Green's function, which, in turn, is derived from a series solution of the partial differential equation to value a discount bond. the boundary conditions which lead to the well-known formulae for the price of a discount bond are also identified. the algorithm to implement the explicit solution relies on numerical quadrature involving Green's function. It offers both higher accuracy and higher speed of computation than finite difference methods, which suffer from numerical instabilites due to discontinuous boundary values. For suitably small time steps, the proposed algorithm can also be applied to American callable bonds or to any American-type option with Green's function being explicitly known.     

Price promotion landscape in the US and UK: Depicting retail practice to inform future research agenda

Price promotions dominate the modern grocery retail environment. This paper documents the prevalence and nature of these price promotions (i.e., deal types and discount depths) in the United States and United Kingdom. The analysis comprises of 23 categories across five retail chains. One of the key findings is that multiple-unit promotions – deal types that have been under-researched – account for approximately half of all price promotion activity. The analysis also identifies an increase in price promotion prevalence since the Global Financial Crisis, predominantly driven by national brand promotions. This research carries important implications for the alignment of academic research with common industry practices.