Consumer Evaluation of Sales Promotion the Effect on Brand Choice

Consumer evaluations of salespromotion: the effect on brand

choiceBegona Alvarez Alvarez and Rodolfo Vazquez Casielles

Department of Business Administration, University of Oviedo, Oviedo, Spain

Abstract

Purpose – This study evidences the influence that sales promotion has on brand choice behaviour.Establishments wish to influence consumers’ buying behaviour, and thus they launch strongpromotional campaigns or introduce changes in their price policies, among other actions. However,they are not always capable of achieving their goal, since, although they may reach their objective inthe short term, when the longer term is considered there are undesirable consumer actions.

Design/methodology/approach – The problem of consumer brand choice can be adequatelydescribed with logit models that allow the use of discrete dependent variables. The probability that theconsumer chooses a brand depends directly on the capacity of satisfaction that the brand holds forhim/her. In this case, the dependent variable is the brand, and the independent variables are price,reference price, losses and gains, and the different types or techniques of sales promotion. With the aimof obtaining the necessary information for the present study, a regional consumer panel was used.

Findings – The results show that it is necessary to consider the product’s promotional state at themoment of purchase as an explanatory element of the process. Promotion is a tool that can helpmanufacturers and/or retailers in the achievement of their objectives (try the brand, help to decidewhat brand to buy, etc.). Immediate price reduction is the technique that exerts greatest influence onthe brand choice process. It is possible that the consumer perceives a promotion, for example, couponsor rebates, but does not modify his or her behaviour. In this case, manufacturers and/or retailers will beinvesting their resources in promotional actions that do not have any effect on the consumer.

Originality/value – Presents a regional consumer panel that has been elaborated and planned bythe authors. Because of this, the information collected is just what was necessary for this study. On theother hand, the paper shows that is very important to know the consumer’s preferences and the actionsthat influence his or her behaviour. Considering the results, it seems that promotions based on pricehave the greatest effectiveness.

Keywords Brands, Consumer behaviour, Prices, Advertising, Discounts, Promotional methods

Paper type Research paper

IntroductionPrices are used by retail establishments as an advertising appeal to attract consumers.This is shown by the increasing presence of product prices in the media andadvertising campaigns. This is aimed at providing the consumer with a comparativeelement to judge the different alternatives he or she has at his or her disposal whenmaking a purchase.

Similarly, it can be seen that establishments invest a large part of their budget insales promotion. The intention is to give the product greater appeal and value.Although a lot of sales promotion alternatives exist, traditionally the most widely usedis immediate price reduction. However, this situation often depends on the countryinvolved.

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Received January 2004

European Journal of MarketingVol. 39 No. 1/2, 2005pp. 54-70q Emerald Group Publishing Limited0309-0566DOI 10.1108/03090560510572016

www.emeraldinsight.com/researchregister

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These ideas allow us to conclude that establishments wish to influence consumers’buying behaviour, and thus they launch strong promotional campaigns or introducechanges to their price policies, among other actions. However, they are not alwayscapable of achieving their goal, since although they may reach their objective in theshort term, when the longer term is considered there are undesirable consumer actions.

In the present paper we aim to look closely into consumers’ buying behaviour. Weanalyse the influence of a series of fundamental variables on the brand choice process:price, reference prices, losses and gains and loyalty. Special attention is given to theinfluence that sales promotion actions developed by manufacturers and distributorshave on this process.

The structure of the present work is as follows. First we carry out a review of thebrand choice models, where the influence of price, reference prices, losses and gainsand loyalty is analysed. Then the study focuses on sales promotions, the alternativesestablishments have at their disposal, and those which are more acceptable toconsumers. Next, we formulate the hypotheses we wish to contrast as well as themethodology used to this end and the results obtained. Finally, we expose theconclusions and business implications derived from the study.

Brand choice modelsManufactures and retailers wish to understand the way marketing variables like price,loyalty or promotions may affect their sales and therefore the market share of theproducts they commercialise. In previous studies the most appropriate way to outlinebrand choice behaviour has been sought. Following these studies, we can attest theexistence of a series of fundamental variables, which we will comment on below(Figure 1).

The first such variable is price. The price observed at the moment of purchase is afundamental variable. In the models of Winer (1985), Lattin and Bucklin (1989),Kalwani and Yim (1992), Mayhew and Winer (1992), Briesch et al. (1996) or Mazumdarand Papatla (2000), it appears as an essential matter of study.

Closely related to price is reference price. We can consider the reference price as asubjective price level with which the consumer compares the prices observed at themoment of purchase. That is, when the consumer plans to buy a product, he or she willjudge prices comparatively in order to determine whether the price is acceptable or not.

Authors are unanimous about the importance of considering reference prices in thepurchasing and brand choice process. Nevertheless, there is no agreement on their

Figure 1.Process of brand choice

Evaluations ofsales promotion

55

formation. Some authors contend that reference prices are formed from the prices theconsumer has faced on previous occasions, i.e. estimates based on the past (Mayhewand Winer, 1992; Rajendran and Tellis, 1994; Bell and Bucklin, 1999; Erdem et al.,2001). Other authors also take into account the tendency to buy in promotions, the pricetendency or retailer characteristics (Kalwani et al., 1990; Kopalle and Winer, 1996).

Other authors contend that it is difficult for the consumer to store information aboutold prices, and it is therefore more likely that the consumer forms reference prices atthe sale point through the observation of certain brands’ prices (Hardie et al., 1993;Rajendran and Tellis, 1994). It is also possible to introduce the effect of loyalty towardsdifferent brands (Mazumdar and Papatla, 1995).

As a result of consumers’ comparison between the price and the reference price,potential losses and gains emerge. The consumer perceives a gain when the referenceprice is higher than the observed price. If the observed price is higher than thereference price, the consumer experiences a loss.

The repercussions of these variables on the brand choice process is clear. When theconsumer perceives a loss, the utility that the alternative provides (brand) willdiminish, and with it the likelihood of the purchase. If, in contrast, the consumerperceives a gain, he or she will be more inclined to purchase (Winer, 1986; Kalwani andYim, 1992; Briesch et al., 1996; Mazumdar and Papatla, 2000).

It has been observed that both effects are of different intensity, i.e. they produce anasymmetric response in consumers. However, there is no agreement on its direction.Some authors contend that the effect of losses will be greater than that of gainsaccording to prospection theory (Hardie et al., 1993; Kalyanaram and Little, 1994).However, other authors like Greenleaf (1993, 1995) defend the opposite position, i.e. thatthe consumers will react more strongly to gains than to losses.

It has been proved that the repercussions of both elements on consumers depend onthe individual’s loyalty. It is therefore interesting to segment the consumer market.Thus, we identify two groups, i.e. loyal and non-loyal consumers. It is likely that loyalconsumers will respond similarly to losses and gains. However, it seems that non-loyalconsumers will respond with more interest to gains (Krishnamurthi et al., 1992).

The variables considered so far constitute the basis of consumers’ decisions. Modelsthat study purchasing and brand choice behaviour take these variables as a startingpoint in their utility functions.

In the present paper we consider sales promotion actions, together with thefundamental variables indicated above (price, reference price, losses and gains andloyalty). Thus, in the next section we approach a series of aspects related to salespromotions that it is necessary to take into consideration.

Influence of sales promotion on the brand choice processThe implementation of an adequate sales promotion may guarantee an increase insales in a short period of time. This justifies the tendency of establishments to invest alarge part of their budget in these actions. A few years ago, communication actionswere more important, but they ended up saturating the final consumer and lost theireffectiveness. This has allowed sales promotion to acquire a greater prominence.

Sales promotion is a set of stimuli that are offered sporadically, and it reinforcespublicity actions to promote the purchasing of a certain product. Sales promotiontechniques are intended to have a direct impact on buying behaviour. The objectives of

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sales promotion will be reached to a greater extent when it is done sporadically, whenthe consumer does not expect it. If the consumer is capable of anticipating when a salespromotion action will take place, the results obtained will decrease. It is thereforenecessary for the consumer not to be able to anticipate sales promotions, and thus notto incorporate these incentives into the product’s characteristics.

However, this does not mean that sales promotion is something improvised by theestablishment. Sales promotion actions must be properly planned, organised andintegrated into the establishment’s marketing plan.

The establishment must study the characteristics of the sector where it operates aswell as its own characteristics. No less important is knowing the competitors’characteristics, the actions they carry out, the promotions they employ, and theconsumers’ characteristics. It is essential to know the audience being addressesed, theirbehaviour, psychological and demographic characteristics, among others (Figure 2).

In this way it is possible to determine and design the promotional strategy to bedeveloped. The organisation will have to choose the best sales promotion technique(s)to reach its objectives.

It is necessary for the establishment to determine clearly the objective to be reachedthrough sales promotion. Once this has been established, the advisability of employingone promotion technique or another can be derived. The objectives may in turn be ofvarious kinds. The intention may be to increase the establishment’s visitors or to act onthe consumer’s loyalty to the brand, increase product’s consumption or encouragetrying out a new brand, among others.

However, it is also relevant to distinguish between short-term and long-termobjectives. The former are generally aimed at responding to the competition’spromotion incentives or getting rid of stock. However, long-term objectives usuallyfocus on increasing the market share, the benefits and on developing an adequateimage to win renown.

The sales promotion technique to be developed will be different depending on theobjectives. There is a wide range of possibilities. In Table I we show one of theclassifications of sales promotion techniques, specifically that carried out byBrassington and Pettit (1997).

Figure 2.Sales promotion strategy


57

The use of different sales promotion techniques varies substantially from one countryto another. Thus, while the use of coupons is widespread in countries like the UnitedKingdom, in Spain it is immediate price reductions (price cuts) that are mostly used.

Promotions provoke two reactions in people. The first is an increase inconsumption, i.e. more quantity of a product is acquired. The second is storage ofthe product for the future, i.e. the consumer acts anticipating his purchases. Chandonand Wansink (1999) contrasted these effects for certain categories of product. However,the effects will vary depending on the attractiveness of the techniques employed.

On the other hand, is possible that consumers who do not buy the brand will want toacquire it because they are attracted by the sales promotion (Gupta, 1993). However,Brandweek (1994) found that some people who change brand due to a promotionchange back to their favourite brand when buying that category of product later.

It is necessary to highlight that the use of sales promotions to encourage brand andproduct purchase and consumption has to be sufficient. However it is necessary to stayalert, as the opposite effect could be provoked on certain occasions. This occurs whenthe consumer perceives that he is paying for unnecessary activities to enhance andposition the product: this then provokes the opposite effect to the desired effect, i.e. theconsumer will stop buying the promoted brand (Simonson et al., 1994). It is alsopossible that the consumer avoids buying the promoted brands so as not to have tojustify his behaviour to his peer group (Simonson, 1989). There is also another reasonwhy promotion may not obtain the expected results: the consumer may feel he is beingmanipulated and will “punish” the retailer by not purchasing the promoted brand orproduct.

The influence of sales promotions on the consumer will also depend on theconsumer’s characteristics. We can point to the existence of three types of consumersegments:

(1) those who find these actions attractive and are therefore likely to buy theproduct;

(2) those who find them neither attractive nor necessary, and will therefore act byreducing their choice probability; and

Money-based Product-based Gift-, prize- or merchandise-based Store-based

Reduced priceShelfOn pack

Extra productExtra freeBuy one, get one free

Loyalty schemes Demonstrations

CouponOn/in packPrint adsDoor-to-doorPoint-of-sale

SamplesOn packPrint adsDoor-to-doorTrial sizeDirect mail

Free in/on pack

RebatesMail-in cash back

Free with productContests and sweepstakesFree mail-inSelf-liquidating offer

Source: Brassington and Pettit (1997)

Table I.Consumer salespromotion methods

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(3) those who remain indifferent and are therefore not affected by these actions intheir final decision.

Formulation of hypothesesIn view of the review carried out, we consider it necessary to approach the study of thebrand choice models by taking into account not only the essential variables (i.e. price,reference price, losses and gains and loyalty), but also the influence promotionalactions have on them. As has been pointed out, promotions are frequently used byretailers for different purposes. Perhaps one of most relevant is the brand change, i.e. itis intended to increase a brand’s market share.

The possibility has been suggested of employing different promotion techniques.Some are easy for the consumer (immediate price reductions). Others need more effortor participation on the part of the consumer (coupons, rebates or games). In both casesthese promotions are related to the purchase of a specific product or brand. But wemust also consider a series of promotions that are related to the situation at the salepoint (the environment), like the celebration of anniversaries or special dates.

Taking these aspects into account, we intend to contrast the following hypothesesfounded on the analysis of previous studies and research works that acknowledge theneed to introduce sales promotions into the brand choice models (Gomez, 1997; Melaet al., 1998; Suri et al., 2000; Lam et al., 2001). In fact, Gilbert and Jackaria (2002)contrast the necessity of introducing sales promotion like an explanatory factor ofbrand choice, as well as considering the effect of different types of technique that ispossible to use.

H1. Models that incorporate the effect of sales promotion on brand choice willobtain better estimates that those that do not consider this effect.

H2. The effect price reduction promotions have on brand choice probability isgreater that the effect caused by the existence of any other type of promotion.

Research methodologyGeneral formulation: the modelThe problem of the consumer’s brand choice can be adequately described with logitmodels that allow the use of discrete dependent variables. These models fulfil theassumptions of discrete choice theory. Then, the probability of brand choice is afunction of the market value of this alternative, compared with the market value of therest. Thus, the probability that a consumer chooses a brand depends directly on thecapacity of satisfaction that the brand holds for him or her. The brand that theconsumer perceives to be the most suitable alternative to satisfy his/her needs is theone that has the larger probability of being selected.

When the consumer faces a purchase decision, he/she assigns a utility to each one ofthe available alternatives, opting finally for the alternative that provides him/her withthe largest utility (Guadagni and Little, 1983; Kamakura and Russell, 1989). In thisutility function, there are two types of components, one deterministic (represented byViht) and one random (represented by eiht). The expression to use would be:


59

Uiht ¼ Viht þ eiht;

Viht ¼ b0i þXz

P¼1

bPVMPiht;

where Uiht is the utility of brand i (i ¼ 1, 2, 3, . . . , I) to household h (h ¼ 1, 2, 3, . . . , H)at purchase occasion t (t ¼ 1, 2, 3, . . . , T ), Viht is the deterministic component of theutility (which will depend on the perception that the consumer has of the attributes ofthe brand and of the different marketing variables that are applied on this brand),VMP

iht is the value of marketing variable P (P ¼ 1, . . . , z) for brand i to household h atpurchase occasion t, b0i is a specific coefficient for each brand, bP is a coefficient formarketing variables, and eiht is the random error of household h in the utility of brand iat purchase occasion t.

Thus, considering the theory of discrete choice, to know the probability of choice ofa brand is enough to know the probability that the utility of an alternative i (Uiht) ishigher than any other k (Ukht):

PrhðiÞ ¼ PrðUiht $ Ukht=;i – k [ CN Þ ¼ PrðViht þ eiht $ Vkht þ ekhtÞ:

The probability that an individual h chooses the brand i at the moment t is expressedas follows (formulation of the logit multinomial model):

Piht ¼expðVihtÞPIi¼1 expðVihtÞ

;

where

0 # Piht # 1 andXI

i¼1

Piht ¼ 1 ðfor all hÞ:

The deterministic component of the utility function can be expressed like a linearfunction of observed variables or attributes for each of the available alternatives. Thecoefficients of the variables of this linear function will be estimated using procedures ofmaximum likelihood.

Collection of information and sample characteristicsWith the aim of obtaining the necessary information for the present study, a regionalconsumer panel was planned and elaborated. This panel was formed by a total of 200consumers who collected information systematically about a total of 54 categories ofproduct during a 12-month period. The information required of the consumers was asfollows:

. category of product;

. brand;

. type or modality;

. date of purchase;

. place of purchase;

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. number of units purchased;

. price per unit;

. type of promotion (if the product was promoted the individual had to select thespecific type of promotion);

. total value of purchase made;

. form of payment;

. whether the consumer was in possession of the establishment’s card; and

. whether the establishment had some type of special encouragement technique.

The categories of products analysed corresponded to habitual or everyday consumerproducts for most households. Nevertheless within the group of products studied wecan find different levels of purchasing frequency, from daily purchases (milk or juice),to more sporadic purchases (brandy or infusions).

The study focuses on one category of product, i.e. margarine, since it is a productpresent in most households’ shopping baskets.

In the process of database debugging and creation we eliminated those householdswhich did not buy the product on at least five occasions during the realisation of thepanel (we intended to eliminate the influence of sporadic shoppers). With reference tothe brands under study we selected, together with the store’s brands, brands with ahigher participation in the household panel. In the selected category of product, i.e.margarine, the market focuses on four brands which make up 71.5 per cent of theconsumer panel. Regarding the sizes, we have selected the most relevant ones (i.e. 250and 500 grams).

ResultsIn order to proceed to the study of the aspects related to sales promotion and brandchoice, we obtained information about the promotional situation at the moment ofpurchase. In the collection of information we have distinguished between promotionsrelated to a certain product (product promotions or product-based) and those related tothe establishment’s general offer (environment or store-based promotions).

Within each category (i.e. product promotions and environment promotions), weconsidered various types of techniques, as summarised in Figure 3. To carry out amore adequate analysis they have been grouped into three blocks, and thus wedistinguish between price promotions, other product promotions and environmentpromotions.

As we have previously pointed out, differences exist in the use of variouspromotional techniques in different countries. Thus, in Spain there is frequent use ofimmediate price reductions (reduced price). In the household panel analysed a cleardifference exists: 24.2 per cent of purchases were affected by an immediate discount,while only 3.8 per cent were under another type of product promotion. Finally,environment promotions were present in 13.6 per cent of the purchases analysed.

Effect of promotion on brand choice modelsThe first objective to achieve is to improve the estimate of brand choice models withtheir introduction into promotions. Thus we compare a model that includes thefundamental variables (price, reference price, losses and gains and loyalty), with a


61

more advanced model where three variables that represent the different groups ofpromotions indicated are introduced.

To calculate losses and gains it was necessary to estimate reference prices. In awork previous to the one presented here, different alternatives were analysed. Theresults showed that reference price estimates based on observation are the mostappropriate. Specifically, the approach used here calculates the reference price as thearithmetic mean of the highest and lowest prices observed at the moment of purchase.

The models we proceed to compare are:. the initial model;. the price promotion model;. promotions related to the product (i.e. price promotions and other promotions

related to the product); and. all types of promotions (i.e. price promotions, other promotions related to the

product, and environment promotions).

These models are discussed below.

Initial modelThe initial model (model 1) is given by:

Uiht ¼ b0i þ bPPiht þ bLOSSLOSSiht þ bL;LOSSðLhLOSSihtÞ þ bGAINGAINiht

þ bL;GAINðLhGAINihtÞ þ eiht:

Figure 3.Methods of salespromotion analysed in theconsumer panel

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Models with promotionsThe price promotion model (model 2) is given by:


þ bL;GAINðLhGAINihtÞ þ bPROPRIPROPRIiht þ eiht:

The model for promotions related to the product (i.e. price promotions and otherpromotions related to the product; model 3) is given by:


þ bL;GAINðLhGAINihtÞ þ bPROPTOPROPTOiht þ eiht:

The model for all types of promotions (i.e. price promotions, other promotions relatedto the product and environment promotions; model 4) is given by:


þ bL;GAINðLhGAINihtÞ þ bPROTOTPROTOTiht þ eiht:

In the above equations, Uiht is the utility of brand i to household h at purchase occasiont; Piht is the price of brand i for household h at purchase occasion t; Lh is a dummyvariable (Lh is 1 when the household is loyal and 0 when the household is not loyal);LOSSiht is the difference given that the reference price is lower than the price of brand ifor household h at purchase occasion t; GAINiht is the difference given that thereference price is higher than the price of brand i for household h at purchase occasiont; L is a dummy variable such that P ¼ 0 if Piht , PRht and P ¼ 1 if Piht . PRht ; G is adummy variable such that G ¼ 0 if Piht . PRht and G ¼ 1 if Piht , PRht ; PROPRIiht isa dummy variable indicating that brand i was subject to a price promotion forhousehold h at purchase occasion t; PROPTOiht is a dummy variable indicating thatthat brand i was subject to a product promotion for household h at purchase occasion t;PROTOTiht is a dummy variable indicating that brand i was subject to some type ofpromotion for household h at purchase occasion t; eiht is the random error of householdh in the utility of brand i at purchase occasion t; b0i is a specific coefficient for eachbrand; bP is a coefficient for price; bLOSS is a coefficient for losses; bGAIN is a coefficientfor gains; bL,LOSS is a coefficient for losses (loyal consumers); bL,GAIN is a coefficient forgains (loyal consumers); bPROPRI is a coefficient for price promotion; bPROPTO is acoefficient for product promotion; and bPROTOT is a coefficient for all types ofpromotion.

The results obtained are summarised in Table II. In Table II we show informationregarding the variables involved in the model and the goodness of fit for each of themodels estimated. In the first column in Table II we present information about theinitial model (with the fundamental variables) and in the next three columns theinformation derived from the models in which promotions are introduced is shown.

The fundamental variables of the model as a whole have a remarkable influence onthe brand choice process. Specifically, the price, losses and gains are significant. Withrespect to loyalty, we must point out that it influences perception and the consumer’sresponse to potential gains. However, its influence on losses does not seem to be


63

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Table II.Brand choice models:model without promotionversus models withpromotions

EJM39,1/2

64

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2 18:9

5%¼

28:9

Table II.


65

significant. It is possible that loyal and non-loyal consumers do not differ in theirresponse to a loss situation.

As can be seen, the incorporation of promotions improves the models’ estimates.The goodness of fit indicators point to slight increases. Similarly, through thelikelihood ratio it is proved that the introduction of the new variables contributessignificant information to the initial model (in this ratio the information provided bythe initial model is compared to that derived from each of the extended models). As wecan see, the variables that represent the promotional state are significant for the modelas a whole.

Therefore it is possible to state that the explicit consideration of promotions inbrand choice models is adequate, since they provide better approaches to theconsumer’s buying behaviour. As a result we have proved H1: brand choice modelsthat incorporate the effect of promotions obtain better estimates than those in whichthis effect is not accounted for.

Influence of different sales promotion techniquesNow we have confirmed the influence of the inclusion of promotions on brand choicemodels, we intend to look more deeply into some aspects related to the use of thedifferent techniques. As we have pointed out, there are various sales promotiontechniques that can be employed, either individually or together. In the householdpanel we collected information about the existing promotional state at the moment ofthe purchase. Specifically, we focused on the most widespread sales promotiontechniques (Figure 3). However, despite the variety of promotion techniques, the mostfrequently used is immediate price reduction.

In H2, we stated that the effect of price promotions on brand selection will begreater than that caused by any other type of promotional action. In order to prove thishypothesis, we introduce two new variables to the model proposed initially (price,reference price, losses and gains and loyalty, model 1). The first represents pricepromotions. The second includes other of promotional actions. In this way, we will beable to analyse which of the two variables exerts greater influence on the model.

Specifically, the model estimated is the following (model 5):


þ bL;GAINðLhGAINihtÞ þ bPROPRIPROPRIiht þ bOTHERPROOTHERPROiht þ eiht;

where PROPRIiht is a dummy variable that indicates that brand i was subject to a pricepromotion for household h at purchase occasion t; OTHERPROiht is a dummy variablethat indicates that brand i was subject to another type of promotion (non-pricepromotion) for household h at purchase occasion t; bPROPRI is a coefficient for pricepromotion; and bOTHERPRO is a coefficent for any other type of promotion.

In Table III we show a summary of the estimate for the new model proposed model5. In order to determine which of the two variables representing the different types ofpromotion has the most weight in the purchasing process we must first analysewhether each of them is significant. If this is so, we must verify the importance of eachvariable through a x 2 value.

As can be observed in Table III, the variable that represents price promotions issignificant, while the variable that represents the other promotion techniques is not.

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Consequently, we can say that price promotions influence buying and brand choicebehaviour. In contrast, there is no evidence to support the influence of other salespromotions. This leads us to confirm, as H2 put forward, that price promotions have agreater impact on consumer behaviour than other promotions.

Conclusions and future research directionsAs can be concluded from the number of existing studies on this matter, consumerbuying behaviour is a mystery for manufacturers and retailers, about which muchremains to be learned. In the literature there are numerous works that try to shed lighton the way that consumers plan and develop the purchasing process. A large numberfocus on the brand choice process. From them we can affirm that a series of relevantvariables exists in this process. Although the behaviour varies from one consumer toanother, there are some factors that influence most consumers.

In this way, we can state that the price of products and brands at the moment of thepurchase constitutes a variable of interest. It will act to favour the purchase or choice ofa specific brand (low price), or reduce the likelihood of its purchase or choice (highprice). Similarly, given the importance of price, consumers usually form a reference

Yih ¼ M0 Yih ¼ M1 Yih ¼ M2Z Exp (b) Z Exp (b) Z Exp (b) Yih ¼ M3

Price 28.527 (0.000) 0.934 4.329 (0.000) 1.026 23.533 (0.000) 0.981 ReferenceGain 5.177 (0.000) 1.073 0.744 (0.457) 1.010 1.552 (0.121) 1.017 brandLoss 1.240 (0.215) 1.037 21.749 (0.080) 0.979 21.573 (0.116) 0.978Lgain 22.493 (0.013) 0.967 21.101 (0.271) 0.983 22.098 (0.036) 0.975Lloss 0.793 (0.428) 1.023 21.567 (0.117) 0.982 20.064 (0.949) 0.999Propri 22.537 (0.011) 0.355 21.444 (0.149) 0.646 21.513 (0.130) 0.704Otherpro 20.235 (0.814) 0.899 0.319 (0.750) 1.101 21.689 (0.091) 0.633Const 2.350 (0.019) 24.865 (0.000) 0.673 (0.501)

Global significancePrice 155.948 (0.000)Gain 28.892 (0.000)Loss 6.536 (0.088)Lgain 7.335 (0.062)Lloss 3.401 (0.334)Propri 8.347 (0.039)Otherpro 3.666 (0.300)

Indicators of the model adjustmentLL(c) 2906.0526LL(b) 2741.4539Test RV 329.1973 (21 g.l.)r 2 0.1817r 2 adj. 0.1585AIC 762.4539CAIC 1,641.8080SBIC 1,620.8080

Note: x 221:95% ¼ 32:7

Table III.Price promotions versus

other types of promotion


67

price. Thus, when the consumer must take a decision he or she will act after comparingthe price on offer with the reference price.

From a comparison of prices and reference prices, potential losses (reference pricelower than observed price) and potential gains (reference price higher than observedprice) emerge. Losses act to reduce the brand choice probability, while gains act toincrease it. It has been observed that these effects are of different intensity, i.e. theyproduce an asymmetric response in consumers. However, there is no agreement on theits direction. Some authors contend that the effect of losses will be greater that theeffect of gains, according to prospection theory. However, other authors defend theopposite position, i.e. that consumers will react more strongly to gains than to losses.

Nevertheless, not all consumers react in the same way and thus we can segment themarket by distinguishing between consumers who are loyal to a brand and consumerswho are not loyal to a brand. It is necessary to take into account such differentiatedpatterns of behaviour. Strategies that may be valid for one group are not necessarilyvalid for the other.

These have been the most widely studied variables. However, it is necessary to takeinto account other variables such as promotions. Thus, in the present paper, apart fromconsidering the effect of the variables already investigated, we have shown evidence ofhow sales promotion techniques influence the consumer’s buying and brand choicebehaviour.

In this way, we have made clear the need to consider the product’s promotional stateat the moment of purchase as an explanatory element of the process. As we have seen,models that include promotions possess a greater explanatory capacity than those thatdo not.

The consumer’s brand choice is affected by sales promotions. This fact isoutstanding in the measure that the techniques of sales promotion can be used to getconcrete objectives. Prior to taking a decision, the consumer will take into accountwhether or not a promotion exists.

Promotions can have as a side effect the consumer acquiring a brand that he or shewould not otherwise try. Moreover, sales promotion can help to decide which brand tobuy when two brands are equally attractive to the consumer. Sales promotion is a toolthat can help manufacturers and/or retailers in the achievement of their objectives.

A wide range of sales promotion techniques can be used. For the most part, it seemsthat promotions based on immediate price reductions are the most frequently used. Ithas been proved that it is this technique that exerts a greater influence on the brandchoice process, i.e. sales promotion decisively influences the brand choice process.Specifically, of all the techniques that can be employed, it is immediate price reductions(price cuts) that have a more important effect on consumer behaviour.

Those sales promotion techniques that provide the best results should be used.Considering the results, it seems that promotions based on price are most effective.This fact is very important, since the manufacturers and/or retailers can invest inpromotional actions that are not valued by consumers.

It is possible that the consumer perceives a promotion, for example coupons orrebates, but does not modify his or her behaviour. In this case, the manufacturersand/or retailers are investing resources in promotional activities that do not have anyeffect on the consumer. It is very important to know the consumer’s preferences and theactions that significantly influence consumer behaviour. So, resources invested in sales

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promotion campaigns that are not valued by consumers should be diverted towardsother promotional activities which are valued by consumers (e.g. price cuts).

The present work needs to be extended to other categories of product in whichbrand choice behaviour could vary. It would also be interesting to analyse the influencethat consumers’ characteristics have on their reactions to sales promotions(consumption, loyalty, socio-economic or demographic factors).

Therefore the present work should be extended to other categories of product inwhich consumers show other preferences. It should possible to analyse categories ofproduct that are not bought with the same frequency. Also, it would be interesting toconsider products where consumers show a strong brand preference. Maybe ifcategories of products whose buyers are very loyal are considered, another type ofsales promotion action would be preferred. This way, coupons or promotions thatreward the loyalty could have a bigger effect than price cuts.

Also, the characteristics of consumers could be another essential factor. How thereactions of households to sales promotion activities varies according to the level ofconsumption of the product category could be analysed. It would also be interesting toanalyse for a certain category of products how promotional behaviour variesdepending on the type of consumer (i.e. loyal or not loyal to a brand). Very revealingresults could be achieved: are loyal consumers sensitive to promotions? Do loyal andnon-loyal consumers prefer the same type of sales promotion activity?

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Further reading

Voss, G. and Seiders, K. (2003), “Exploring the effect of retail sector and firm characteristics onretail price promotion strategy”, Journal of Retailing, Vol. 79, pp. 37-52.

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Documents

Consumer Evaluation of Sales Promotion the Effect on Brand Choice