Consumer evaluations of different promotion types and price presentations: the moderating role of promotional benefit level

The effects of promotion type (i.e., price discounts and bonus packs) and price presentation (i.e., dollars and percentages) across promotional benefit levels were investigated in three experimental studies. The results suggest, for the products considered, that price discounts and bonus packs were valued similarly for both low and moderate promotional benefit levels, while price discounts were preferred when high promotional benefit levels were employed. Additionally, promotions presented in percentage terms were preferred when the benefit level was high. The implications of these results for retailers and manufacturers are that percentage price presentations should be used when large discounts are being offered. Furthermore, it appears that bonus packs are a viable alternative to price discounts when promotion levels are small or moderate since they have less of a deleterious effect on the brand.     

The expected benefit as determinant of deal-prone consumers' response to sales promotions

This study proposes that the responses of more and less deal-prone consumers to price discounts and premiums depend on the promotional benefit level. At low and moderate benefit levels, low deal-prone consumers show a higher evaluation for price discounts than for premiums but if the benefit is high, deal proneness does not bias the higher evaluation of price discounts. An experimental study shows that low deal-prone consumers are concerned with obtaining price discounts. Taken together, these findings suggest that consumers more concerned with obtaining promotions do not always prefer price discounts.     

Virtual Bundling with Quantity Discounts: When Low Purchase Price Does Not Lead to Smart‐Shopper Feelings

Previous research has shown that promotional techniques influence both the smart‐shopper feeling and the consumption level at home through a direct mechanism (lower perceived cost) and an indirect consequence of promotions (larger supply). The development in France of virtual bundles with quantity discounts raises questions regarding a consumer's cognitive and affective appreciation of the deal, and therefore promotional efficiency. Four experiments on French consumers confirm the effect of price and supply on declared consumption, but only for “vice” products. In Experiment 2, virtual bundles with quantity discounts lead to the lowest perceived unit price and consequently to the highest level of consumption. Additionally, when compared with more traditional promotional techniques (e.g., physical bundles), virtual bundles with quantity discounts reduce the evaluation of a “good deal” and the smart‐shopper feeling (Experiments 3 and 4). To summarize, such promotional techniques, which might have seemed appealing at first (“buy more to save more”), are preferred less by consumers than more traditional promotional techniques. These preliminary results could be enriched by field studies that go beyond declared consumption and observe consumers evolving in their natural environment across time.     

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.     

Something Free or Something Off? A Comparative Study of the Purchase Effects of Premiums and Price Cuts

As an alternative to promotional price cuts, retailers and manufacturers often rely on non-price promotion techniques, such as premium promotions, where consumers receive a free gift with the purchase of a product. We compare the effectiveness of premiums to that of price cuts, and study moderators of this comparative premium effectiveness. We use data from a large online shopping simulation study with more than 2,000 participants to model consumers’ purchase decisions in response to premiums and price cuts. Results indicate that the impact of premiums on purchase behavior is systematically lower than that of equivalent price cuts. However, a premium’s smaller sales impact may be offset by a cost advantage. This is especially true for private label brands where the premium’s purchase effects do not differ too much from those of a price cut. We calculate how large the cost advantage has to be for a premium to be more profitable than a price cut, and show that premiums entail risks as well as opportunities, for both manufacturers and retailers.     

Using daily store-level data to understand price promotion effects in a semiparametric regression model

Though it has been widely reported in the marketing literature that temporary price discounts generate substantial short-term sales increase, the shape of the deal effect curve constitutes a key research topic, for which there are still limited empirical results. To address this issue, a semiparametric regression approach is used to model the complex nature of this phenomenon. Our model is developed at the brand level using daily store-level scanner-data, which allows the study of several nonreported promotional effects, such as the influence of the day of the week both in promotional and nonpromotional periods. The results show that the weekend is the most effective in increasing promotional sales and that asymmetric and neighborhood effects hold. However, 9-ending promotional prices are not impactful.     

Sampling,discounts or pay-what-you-want: Two field experiments

Free sampling and price discounts are important, popular promotional tools used to attract new customers by reducing their risk of trial. The authors investigate pay-what-you-want (PWYW) as an alternative promotional tool to free sampling and price discounts in two field experiments. The authors find significant differences in perceived promotional characteristics and relevant performance measures, such as trial and repeat purchases by new customers. The entertaining and innovative character of PWYW induces many people to try it. PWYW may yield a higher repeat purchase rate of new customers, and sellers using PWYW benefit from higher word-of-mouth behavior. Finally, PWYW yields the highest promotional revenues.     

The influence of sharing versus self-use on the preference for different types of promotional offers

Sharing, which refers to giving something you have to someone else, is one of the most ubiquitous forms of human behavior in the world. Everyone experiences it in various situations, including buying food. Nonetheless, although buying something to share with others is quite common in our daily lives, most consumer research on buying focuses on the condition of “self-use” rather than “sharing.” The main purpose of this study is to investigate the influence of promotional offers on consumers' purchase decisions when buying food for self-use/sharing with others. The authors conducted four experiments to answer the main research questions. The results indicated that consumers prefer “price discounts” over “bonus packs” when the shopping task relates to self-use due to their concern about “loss reduction.” In contrast, they prefer bonus packs over price discounts when the shopping task relates to sharing with others because of their focus on “extra gains.” In addition, consumers’ perceived responsibility is a moderator. When perceived responsibility is low and the purchase is for self-use (sharing with others), price discounts (bonus pack) are favored over bonus packs (price discounts). However, when perceived responsibility is high, consumer preference to promotional offers are not significant different either in self-use or sharing with others condition. It seems that role of responsibility is influential when the shopping task relates to self-use. This study not only contributes to a deeper understanding of consumer psychology but will also be beneficial to practitioners in designing effective promotional strategies that consider motives for food shopping.     

Retail Grocer Pricing Responses to Manufacter-Initiated Cents-Off-Package Promotions

Manufacturers' Cents-Off promotional discounts are sometimes NOT passed on to the consumer. This survey over 240 stores across 8 SMSAs reveals the extent of this practice by various retailer “types” and provides suggestions for future research to monitor the effectiveness of FTC regulations.     

Price competition during and after promotions

We provide a framework for setting regular prices and using promotional discounts in a duopoly where long‐term promotional effects are present and the firms' pricing and promotional strategies are common knowledge (e.g., as in online markets). We show that at equilibrium, the two firms may not promote and instead adopt an Everyday Low Price (EDLP) strategy. Consumers' tendency to stockpile promoted products, the level of brand loyalty and product differentiation, and the possibility of a postpromotional sales increase critically influence regular prices, price discount rates, and profits. Under some conditions consumer stockpiling intensifies promotional competition and reduces firms' profits while the possibility of attracting new consumers reduces the need to heavily promote and ensures better profits. Managerial implications are discussed. Copyright © 2007 ASAC. Published by John Wiley & Sons, Ltd.     

“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.     

Exploring the effect of retail sector and firm characteristics on retail price promotion strategy

This study examines why retail price promotion strategies vary across retail sectors and across firms within sectors. Using hierarchical linear modeling and a sample of 38 firms from 11 retail sectors, the authors investigate how two sector-level characteristics, related to product assortment perishability and heterogeneity, and three firm-level characteristics, related to retailer differentiation, number of stores, and average store size, influence price promotion decisions. The results indicate that assortment heterogeneity moderates the positive influence of perishability on price promotion activity; scale and scope also have significant effects. These results offer fresh insight into the ongoing debate surrounding stable versus promotional pricing, suggesting that the benefits of a particular strategy are driven largely by a complex interaction between sector-level characteristics as well as firm-level cost advantages.     

Effects of prior brand usage and promotion on consumer promotional response

We examine how prior purchases influence consumer response to promotional activity in brand choice decisions. To improve understanding of the nature of this influence, we separate previous purchases into those on promotion and those not on promotion, and consider their differential impact on subsequent brand choices. Impact may be observed at the brand level, category level, or both and we suggest circumstances in which each might occur. Across four product categories, consumer sensitivity to price, price promotions, and feature advertisements increases for all brands in the product category following a promotional purchase but also decreases for the most recently purchased brand. The magnitudes of the results indicate that prior promotional purchases influence choice more than prior brand usage does. We offer managerial recommendations regarding promotional activities, for both retailers and manufacturers.     

Ambiguity and Exaggeration in Price Promotion: Perceptions of the Elder and Nonelder Consumer

This paper examines the effects of plausible as well as implausible or exaggerated tensile discounts on consumer discounting behavior, price perceptions, and behavioral intentions. The effects are compared across two consumer segments, elder and nonelder, for a product and a service. Findings indicate that age of the consumer had a significant interaction with discount level for consumer discounting behavior regarding the product offer. While consumers were skeptical of implausible discounts, the effects of implausible and high-plausible discounts on price perceptions were higher than that of low-plausible discounts. In addition, there were no significant differences between the implausible and high-plausible discount levels for price perceptions or behavioral intentions. The results provide implications for public policy makers.     

How U.S. consumers view in-store promotions

Most sales promotion analysis, either at the external-to-the-store or in-store level, has been conducted based on what marketers have done and how consumers have responded in specific retail situations and for specific promotional techniques. Most studies, therefore are reported as, point-in-time and point-of-place specific, historical, after-the-fact results and imply a consumer preference for the measured activity. This paper provides a holistic view of how U.S. consumers regard all forms of promotion, both external-to-the-store in the form of 31 media alternatives and 23 in-store techniques across thirteen broad product categories. Data comes from twice a year online studies of representative groups of U.S. consumers, conducted since 2002. Consumers report on which in-store activities most influence their purchase decisions. From that, predictive models of consumer response to alternative promotional combinations are developed using CHAID analysis. This predictive approach is superior to traditional after-the-fact measures.     

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.     

Effects of sales promotion type and promotion depth on consumer perceptions: the moderating role of retailer reputation

This study uses a between-subjects experimental design to test the effect of two sales promotion formats (coupon versus markdown) with either high and low face values on consumer attitudes toward the deal, perceived product quality, and purchase intentions. The reputation of the retailer offering the deal is predicted to moderate the relationship between the promotional offer and consumer responses. Consumers perceive product quality to be higher when offered a high value coupon vs. markdown but there is no significant difference in perceived quality across promotion types when the promotion face value is low. When a deep price discount is offered by a retailer with a negative reputation, however, consumers have more favorable attitudes toward the deal and higher purchase intentions when provided with a markdown vs. coupon. Conversely, a high value coupon elicits more favorable evaluations than a markdown when the retailer has a positive reputation. When the value of the promotion is low and the retailer has a positive reputation, consumers have more positive deal attitudes and purchase intentions when offered a markdown vs. coupon. There is no significant difference in the effects of promotion type when the retailer has a negative reputation. The findings therefore establish retailer reputation as an important moderator of sales promotions effectiveness. This research is limited by the use of a single product category and a student sample. Process measures are also needed to validate the proposed theoretical conceptualization. The results provide managers insight into the type and value of the sales promotion to offer based on consumer perceptions of the retailer's reputation in the market.     

Semantic cues in reference price advertisements: The moderating role of cue concreteness

Retailers use a variety of semantic cues to advertise discounts at their stores. In this paper we introduce the concept of cue concreteness and examine its impact on effectiveness of semantic cues. Four studies were conducted which concur with the findings of earlier research in this area and expand our knowledge about the effectiveness of semantic cues. Results indicate that between-store cues are perceived to be more effective than within-store cues at moderate price discount levels only when the cues are concrete in nature. In addition, a between-store cue resulted in more favorable evaluations than a within-store cue when the ad was viewed at home, but only when the cue was concrete. Implications for marketers and public policy makers are discussed.     

Should firms display the sale price using larger font?

Prior work has shown that evaluations may be lower when retail price discounts are either small or large (vs. moderate), due to concerns about discount depth perceptions and/or product quality. Building from work on perceptual salience, we show that displaying the sale price in larger (vs. similar) font vis-à-vis the regular price makes the sale price more “salient”. In turn, when retail price discounts are either small or large (but, not moderate), such salience impacts how consumers process price discount information, mitigating concerns relating to discount depth perceptions and/or product quality, and so increasing evaluations. In effect, displaying the sale price using a relatively larger font increases consumers’ evaluations, somewhat mitigating the negative aspects of using small or large price discounts. We propose theory contributions towards research on display effects and pricing. Further, the proposed mechanism in this research note is easy-to-implement, and is expected to increase sales.     

The Influence of Home Page Complexity on Consumer Attention,Attitudes, and Purchase Intent

The Web is an increasingly important component of promotional strategy for many organizations. To date, most advertising research has focused on banner ads. In the present study, home pages as promotional vehicles are evaluated. Specifically, we examine the influence of perceived home page complexity on communication effectiveness, as measured by attention to the home page, attitude toward the home page, attitude toward the company, and purchase intent. Qualitative research is used to identify important factors that appear to influence perceptions of home page complexity, including home page length, number of graphics, number of links, amount of text, and use of animation. A pretest experiment further aided in the selection of appropriate factors and factor levels to manipulate in a subsequent, main experiment. The findings in the main experiment suggest that consumers respond more favorably toward home pages that fall in a moderate range of perceived complexity.