Journal of Marketing Management, 1995, 11, 419-441

Pierre Chandon
School of f

Consumer Research on Sales
Promotions: A

Management, Paris

State-of-the-Art Literature Review^*
Many research traditions have dealt with consumer psychology and behaviour vis-a-vis saks promotions. The consumer-oriented approach seeks to identify the heavy users of promotions and to track their purchasing strategies involving the choice of a promoted brand. The aim of the theory-oriented research traditions is to test the explanatory power of various cognitive, attitudinal, behavioural and economic frameivorks, be it to explain why and how consumers react to sales promotions or to understand when companies should promote. This article exposes the specificity of each research tradition, its principal results and the most promising areas for future research.

Introduction More than 200 studies on sales promotions have been published in the past 10 years, compared to about 40 studies between 1965-1983 (Blattberg and Neslin 1990). This dramatic rise in research can be explained by both the large increase in promotional spending and the availability of scanner panel data.

Organization

This review takes an historical perspective rather than a thematic approach^, it is organized by research tradition in order to mirror the innovation process of science at its best. A research tradition was defined by Laudan (1977) as "a framework hinging on a privileged theory, methodology or conception of the world". This notion can help us understand the persistence of conflicting results on many key issues: these conflicts are due to the fact that these results are the fruit of many diverse research traditions. Besides, scholcirs can assess the problem-solving potential of each tradition so as to motivate, or deter, their insistence upon one research tradition or another^. The main disttnguishing factors between one research tradition and another are neither its concepts nor the methodologies employed, but the cognitive aims and the
*A French version of this paper was published in Redierdies el Applications en Marketing (Chandon 1994<!). ^For a thnnadc approach on how promotions work, see BUtd>eig et al. (1994). *rhis explicit reference to a rational criterion for the choice of a research tradition distinguishes it from the concept of paradigm, whose choice would eventually amount to an act of faith.

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©1995 The Dryden Press

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viewpoints each of them favour. The consumer-oriented research tradition emphasizes the study of consumers' behaviours associated with sales promotions. It has two subdivisions: the identification of frequent users of sales promotions and the study of purchasing strategies involving sales promotions. In contrast, the aim of the theory-oriented research tradition is to test various cognitive, behavioural or economic theories. This papier wiU further distinguish the reference-price theories from other more comprehensive models. This cluster is, of course, a compromise between the within-group cohesion and the clarity of exposition. It is, to some extent, subjective since no consensus about the adequate aggregation level of research traditions in marketing exists, despite the recent interest in this area (Laurent et al. 1994).

Definition and Typology

The numerous definitions of sales promotions available have in common the idea that sales promotions are a temporary and tangible modification of supply, the goal of which is to directly impact consumer, retailer and sales force behaviour. The diversity of phenomena encompassed by this definition has led scholars to focus on one of ihe particular aspects indicated in Figure 1. Recent but sparse research has completed this panorama by emphasizing the direct-marketing and communicative aspects of sales promotions, but they will not be reviewed here (Vemette 1990; Desmet 1991; Guilbert 1991; Ward and Hill 1991; Jones 1992). The above definition encompasses many promotional techniques (price reductions, coupwns, games, etc.) cind scholars are not certain whether we must study them separately, as it is currently the case for price promotions and coupons, or if it makes sense to spieak of sales promotions as a whole. The most widely accepted typwlogy to date makes three distinctions; (a) retail promotions; {}}) trade promotions; and (c) consumer promotions (Figure 2). However, this "natural" typology is not completely relevant to corwumer research. For example, price-cuts

Decisions

Medianisms

Effects

Firms
N,

Sales
promotions

Custonters On sales and profitahility

—Promotional policy

y

—Consumers / \ \/ The autho Hties —Consumer welfi ire y Price product advertising —Retailers —Sales force

Onhehavicmrs and attitude

Figure I. Different levels of analysis of sales promotion.

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TVade promotionB

EetaHers' promotions Price promotions T)isp]syB Features Retailers and sales force Consumers Games, anniversary sales

Discounts Manufacturers

Ckinsumers' promotions Coupons, refunds, premiums More product, two for the price of one

Figure 2. "Natural" typology t^sales promotions.

and games are both targeted to coiwumers but they bdng about very different reactions. Only price-cuts are spontaneously associated with the word "sales promotions" by the vast majority of consumers (Guilbert 1991). What is needed is a a posteriori typology, based on consumers' reactions to sales promotions. The exploratory research of Diamond and Johnson (1990) is a useful first step in this direction which could be replicated using real promotions instead of abstract definitions. Their typology is based on the nature of the gain (whether it is monetary or not), the amount of effort required to attain it, and the relationship of the gain to the product (more of the same product, gain of a prize or anything other than the product). These criteria permit distinction of price-cuts from quemtity gains and from gains of cmother product.

The Consumer-oriented Research Tradition
Identifying the Frequent Users cf Promotions

Demographics were the first variables employed to identify the frequent users of sales promotions, with few, if any, conclusive results. For example, the effect of income is not clear (Blattberg and Neslin 1990, pp. 73-76). As a result, the more recent studies have relied on: (a) perceived risk theory (Bauer 1960); (b) economic theory; or (c) psychographics (Tables 1-3, respectively). Overall, these studies have sketched a rather coherent portrait of the frequent users of promotions: they are price sensitive; receptive to price and promotion information; bremd switchers; and heavy buyers of the category. Besides, they stodqjile and accelerate their purchases in reaction to sales promotions. These studies eire also useful for, e.g. targeting the heavy users of promotions or deterring buyers from taking advantage of promotions^
^ e percentage of redemptions made by buye^ depends on various coupon characteristics (Henderson 1%5; Neslin and Clarke 19S7) as well as on Qie time period used to define who is a buyer of the brand (Ehrenbeiig and Uncles 1993).

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TaUe 1.
Dependent

Identification of tke frequent users of sales promotions tkanks to perceived risk theory
variable Independent variable References

Intention to redeem the offered coupon (1) Redemption of diiect-maiJ coupon (2,3) Increase in the repurchase likelihood of new buyers (3)

Self-declared familiarity (1) Brand purchases (panel data) (23)

(1) Shoemaker and Tibrewala 1985 (2) Bawa and Shoemaker 1987!J (3) Bawa and Shoemaker 1989

Tahle 2.

Identification ef the ftequent users of sales promotions thanks to economic theory
Independent variables: Household characteristics References

Mediating variables: Perceived costs and benefits of promotions usages

Costs: - Substitution of a preferred brand for a less preferred, promoted brand (1-3); - Opportunity costs of time (cUpping and holding coupons) (3-5); - Inventory of stockpiled promoted brands. Benefits: - Smart shopper feelings (3,5).

House ownership: (+) for (3). Living in large dties: (+) for (5). Higher education: (+) for (3-5). Price sensitivity: (+) for (6). Size: (+) for (3), (n.s.) for (5). Brand and store loyalty: (-) for (5,7). Children: (-) for (4), (n.s.) for (5). Working housewife: (n.s.) for (4,5). Income: (n.s.) for (4-6). Age: (n.s.) for (5,6). Sex: (n.s.) for (6).

(4) Narasimhan 1984 (5) Bawa and Shoemaker 1987B (6) Jolson el ai 1987 (7) Henderson 1985

Table 3.

Identification of ike frequent users of sales promotions thanks to psychographics
Independent variables References

Dependent variables

Coupon usage: (+) for (8), (n.s.) for (10). Prediction of future pron^otions: (+) for (9). Search and memorization of prices, purchase of generics: (n.s.) for (10). n.s., not significant.

"Market mavenism": possession and transmission of market expertise (Feickand Price 1987) (8-10).

(8) Price et al 1988 (9) Krishna ef a/. 1991 (10) Lichtenstein et al. 1993

Purchase Situation and Purchasing Strategies Involving Sales Promotions

The literature on purchasing strategies has taken a situational approach, as opposed to the former stream of research which assumes that a "natural" deal-proneness explains consumers' responses to sales promotions. For example, the economic model reviewed above predids that such a penchant should not vary across product categories, since the costs associated with coupons are the same, and since it is in consumers' best interests to spread these costs over the maximum number of purchases (Bawa and Shoemaker 1987fl). These authors find that, contrary to their original hypothesis, up to 31% of consumers use coupons in some product categories but not in others. Bawa et al. (1989) show that a single consumer experiences varied

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marketing environments in different stores which then translate into varying perception of and sensidvity to sales promodons. This study shows that promodonal activity: the number of displays and the width of the assortment in the preferred store, are correlated with overall deal-proneness and price sensidvity. Familiarity with promodons is also employed, along with store familiarity and inventory level, to predict the "dedsion state" of a consumer on a particvilar shopping trip (Buckhn and Lattin 1991), While an opportunisdc decision state leads to deal-proneness, consumers only read to their own preferences when they are on a "planned" shopping trip. Similarly, consumers use less coupons but read more to features when on an unplanned shopping trip (for a refill, for instance) than on a regular trip (Kahn and Schmitdein 1992), Consumers adapt themselves to a changing marketing environment by employing various purchasing strategies (Tellis and Gaeth 1990), Currim and Schneider (1991) have established a typology of the purchasing strategies used by consumers when they encounter promotions on their preferred brands or on other brands (e.g. inertia, brand switching, stockpiling, etc). Of the five purchasing strategies mentioned in their study, two involve promodons: (a) passive deal-proneness (stockpiling of the preferred brand displayed); and (b) acdve deal-proneness (brand switching and purchase acceleration for any brand featured, or holding coupons). Their research shows that three out of four consumers use more than one purchasing strategy, at least one of which involves sales promodons. Another study by the same authors shows that acdve deal-prone consumers may become passively deal-prone but that the reverse is rare (Schneider and Currim 1991), They did not find any pure, i.e, not provoked by promodons, variety-seeking purchasing strategy because of data aggregation problems in household (in contrast to individual) panels (Kahn et al. 1986), or simply because this kind of behaviovir has become less frequent with the pervading of sales promodons.

Synthesis and Areas Jot Future Research

This literature has shown that the diversity of promodon usage patterns between and within consumers can be partly explained by the percepdon of the costs and benefits of promodons, StiU, the most promising area for future research in the identification of frequent and infrequent users of promotions is in the use of psychographics. Smart-shopper self-concept, role percepdon (homemaker pride) persorality traits (need for cognidon, need for variety) or other price-related schemata have already been used in the theory-oriented literature (Cadoppo et al. 1984; Kahn and Louie 1990; Schindler 1992; Lichtenstein et al. 1993; Mittal 1994), The feelings (fun, entertainment, anger) or moods created by many consumer promotions and the influence of sodal fadors are other imder-researched areas that could improve our understanding of who exactly uses them. For instance, Simonson et al. (1994) found, in an experiment, that a "useless" premium may deter cor\sun:»ers from bu)Tng the brand when they know that they will need to justify their choice to others of their social group. There are probably individual differences in this phenomenon worth exanuning. Finally, a very interesting direction is to enhance the explanatory power of demographics through the use of consumer self reports on "perceived busyness" or "perceived finandsil wellness" (Mittal 1994).

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This literature has also shown that, if each consumer is indeed inherently prone to deals, his behaviotir also depends on the point-of-purchase promotional environment. Future research is needed to determine which of these two sources of variance is domiiuuit. By favouring the personality explanation, scholars may have been victims of the fundamental attribution error, that is the tendency to attribute one's behaviour to personality rather than to environment. The next step in this Une of reseetrch could be to study the long-term effect of the multiplication of sales promotions; luunely, do they encourage active deal-proneness? The major limitation of this reseaidi tradition is to have measured deal loyalty instead of deal-proneness. However, we know that consumers may be heavy deal users if their preferred brands are frequently on sale, or if they take advantage of promotions only when satisfying their desire for variety (lichtenstein et al. 1990; Froloff 1992). Other findings are rather tautological. It is obvious, for instance, that brand loyalty is inversely related to overall promotion usage*. The present tendency towards more theory and non-observable constructs should help surpass these Umits. Furthermore, enhancing our knowledge of why promotions are used will not only improve our knowledge of the deal-prone consumers, but Jilso approach critical issues like the long-term effects of promotions on brand equity or on the relationships between manufacturers and retailers.

The Role of Price: Reference Price and Attribution Theory There is an abundant literature on price and jwidng. This paper will now focus on the theories that have been specifically applied to price promotions^.

Theoretical Foundations of the Reference-price Concept

The adaptation-level theory (Helson 1964) was the first theory to argue that individuals compare prices, or any other attribute, to a personal reference level instead of valuing their absolute amount. Cognitive psychology has supported this abandon of the notion of objective price by showing that the human perceptual apparatus is best suited to the evaluation of changes than to absolute values (Kahneman and Tversky 1979). The assimilation-contrast theory (Sherif and Hovland 1953) adds that there is a "just-noticeable" difference within which there is no reference effed but assimilation. Gupta and Cooper (1992) have shown that this threshold is larger for retailers' brands, a conclusion which corroborates the hypothesis that consumers have a reference price for each level of quality.

Formation and Encoding of Reference Prices

However largely accepted the reference-price concept may be, there are many controversies concerning its formation (Table 4). There is reason to believe that
'Note that if consumers aie very receptive to the promotions oSeied on their preferred brand (to which they are loyal), generally speaking "brand loyal" consumers are not deal-prone. ^Fot a review of the general literahjre on price and pricing, see Gijsbrechts (1993).

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consumers form and use more than one reference price. Brand loyal and selfconfident consumers tend to stick to their internal (temporal) reference prices, whereM brand switchers use mainly external (contextual) reference prices (Puto 1987; Rajendran and Tellis 1994). Let us highlight the fniitfulness of the forwardlooking reference-price concept in the domain price promotions. Being temporary, sales promotions induce consumers to think about future prices, not only past or current prices. This, in tum, explains both purchase acceleration (anticipating future purchases) or deceleration (postponing of planned purchases) phenomena. Reference prices are not only influenced by the amount of the deal, but also by their frequency and their pattern. In a computer experiment, Krishna (1991) found that consumers can assess the frequency of regular price promotions, but underestimate frequent promotions and over-estimate the frequency of a rarely promoted brand if other brands are frequently promoted. Because the external validity of such computerized experiments is weak (Burke et al. 1992), Krishna et al. (1991) have replicated this result with a field experiment. Response accuracy appears to be better for loyal buyers of the brand, those with lower incomes and lai^er households (Wakefield and Irunan 1993). These results are importemt because the impact of a promotion is substantially larger when unexpected (Latdn and Buckiin 1989; Kalwcini and \lm 1992). AU in all, these studies recommend random promotions so that consumers cannot plan ahead. The perceptual encoding of price promotion is a topic of importance for understanding wecir-out effects. Prospect theory assumes a utility function that is concave over gains (Kahneman and Tvereky 1979), which predicts that people prefer a 50 cent coupon and a $5 price than simply paying $4-5. TTiat is why the promotion is separated from the price, i.e. promotion and price are put into two separate "mental accounts" (Mazumdar and Jun 1993). The type of sales promotion moderates this principle: non-monetary promotions (premiums, lotteries) are framed as gains, whereas price reductions are framed as reduced losses, and thus aggregated with the price of the product (Diamond and Johnson 1990; Diamond and Sanyad 1990). This tjrpe of aggregation is important because sales promotions framed separately tend to lower less reference prices (Diamond and Campbell 1989).

Evolutitm in the Conception of Reference Prices

The reference-price concept has been ciitidzed in present years. In a field survey, Dickson and Sawyer (1990) found that the attention devoted to price information, its memorization and the resulting confidence in consumers' estimates are globally very weak, even when they are collected at the point of purchase just Jifter a choice is made. Contrary to common knowledge, consumers do not take more time when choosing a brand on sale, and their price estimates are not less precise but systematically under-valued. The same thing applies for purchases made with coupons (Buzas and Marmorstein 1988). These results challenge the economic view of a rational consumer since the vast majority (at least) don't have precise internal reference prices. However, these internal reference prices can be easily replaced with contextual reference points. In addition, it appeeirs that consumers easily remember if a price was cheap or expensive, even if they cannot remember the exact figure. Mazumdeir and Monroe (1990) found that consumers don't pay attention to absolute

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1 III

Consumer Research on Sales Promotions prices unless they want to make comparisons with other stores or make choices regarding quandty. In most common brand choice decisions, consumers only need to be aware of reladve (cheap/expensive) prices (Krishnamurthi and Raj 1988),
Attribution Theory

427

Price reducdons are not neutral. They bring about inferences and attribudons which, in turn, moderate the reference-price effeds mentioned above (Lichtenstein et al. 1991), Generally speaking, attribudon theory deals with the mechanisms by which consumers discount price reducdons, the quality of promoted brands or the purchase of a brand. Recent research has focused on causal attribudons, i,e, "Why is this brand promoted?" When consumers encounter an unusual promodon, Lichtenstein and Bearden (1986) found that they use counterfactual reasoning (Kelley 1973), To assess whether this has something to do with the produd (respectively, the situadon, the store), they check whether the promoted brand is the only one to be on sale (respecdvely, has already been on sale in the past, is promoted
Table S. Works on attribution theory applied to sales promotions
References (1) Moore and Olshavasky 1989 (2) Gupta and Cooper 1992 (3) Lichtenstein and Bearden 1989

Experimental results Consumers discount very large discounts uidess they are familiar with the brand. On the contrary, store familiarity has no effect. Same results with purchase intention and perceived value of the discount as dependent var^bles. Beyond a certain level, the perceived value of a price cut is higher when this type of discount is rare.

The perceived value of a price reduction is higher for national brands (4) Biswas and Blair 1991 and non-discount stores. Perceived quality of a brand is hampered by defirutive price reductions but not by couporw, Penreived value of a price-cut and attitude towards the promotion are better ii consumers think that manufacturers want to attract customers rather thaji if they think that it is to get Hd of unwanted goods. (5) Schindler 1992 (6) tichtenstein and Bearden 1989

in other stores). Table 5 summarizes the few studies that have applied attribution theory to sales promodons, A recurrent finding is that consumers familiar with the produd are less prone to the discount of price-cuts. The "discounting prindple" says that it is because these consumers can imagine many reasons for the occurrence of sales promotions (competition, etc.) that, in turn, dintinish the credit granted to each of the possible explanations and thus prevent negative attributions (e,g, poor quality) from predominating.

Synthesis and Areas for Future Research

AU in all, research on price perception has highlighted the multiple facets of price. It has also specified the rules of reference points formadon as well as their share in the influence of sales promodons. This area has been reladvely thoroughly covered.

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Nevertheless, the long-term effects of repeated price promotions are worth investigating (e.g. how long before the effects of price promotions wear-off and consumers dedde to accelerate or decelerate ptirchases?). Moreover, attributions appear to moderate the effects of price promotions, but this area needs further research. The abundant literature on cognitive psychology (Hilton 1991) could be used to differentiate causal attributions ("Why did it happen?") from attributions linked to the intrinsic propensity of a brand to be on sale ("Why is this brand often on sale?"). Other studies are necessary to examine the impact of prior beliefs, and not only information, related to attributions. Finally, no one has studied the impact of attributions on mood, attitude towards the brand, or towards the promotion. One particularly interesting case is that of sweepstakes which announce a certain gain of, for most consumers, a deceptive prize. What are the effects of attributions concerning the reasons for the loss (e.g. bad luck or dishonesty) on mood and attitude towards the sponsor?

Attitudinal, Cognitive and Behavioural Sales Promotion Models Many theories have been employed to expkun why consumers are sensitive to deals beyond the price reduction explanations. These theories postulate different levels of information pnxessing intensity and, thus, operate at the comprehensive attitudinal, purely cognitive or even behavioural levels of analysis.

The Theory of Reasoned Action and the Concept of Deal Proneness

The theory of reasoned action is an expectancy-value model distinctive for its reference to rationality (Fishbein and Ajzen 1975). It posits that attitude stems from persona! beliefs, while sodai pressures form subjective (perceived) norms. Attitude and subjective norms are then at the origin of behavioural intentions. In application to coupon usage, Shimp and Kavas (1984) measured beliefs of the buyer and her husband about the costs and benefits of coupons. Overall, the perceived economies and the smart-shopper feelings attributed to coupon usage are the variables which correlate most with attitude towards coupons and self-dedared behaviour (see also Tat 1994). Shimp and Kavas' study is one of the few to acknowledge the influence of familial pressure, even if spouse beliefs were found to be very inter-correlated. Finally, Bagozzi et al. (1992) found that the influence of personal beliefs is greater among action-oriented individuals, and, conversely, that subjective norms are critical for state-oriented people. By incorporating tWs jjersonality trait, as well as prior experiences with coupons, the percentage of explained variance reaches 58%, 10 points above Shimp and Kavas' model. Among the literatiu^ on the influence of sales promotions on attitude, there is a special case to be made for the concept of deal-proneness. Deal-proneness is an attitudinal construct caused by beliefs and attitude toward promotions. It has been measured by Froloff (1993) at the level of self-declared behaviours ("I am influenced by promotions at the time of purchase"). Her exploratory research suggests, in addition, distinguishing attitude and deal-proneness vis-i-vis {jrefeiTed brands from attitude and deal-proneness vis-d-uis any brand. Further, Lichtenstein et al. (1990)

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distinguish deal-proneness from coupon-proneness. The former stems from what Thaler (1983) calls acquisition utility (pleasure due to the utility of the product itself relative to the price paid), and the latter from transaction utility (pleasure due to paying less than the reference price). Deal-prone consumers are experts who have well-defined internal reference points and who dedare lasing coupons only if they increase the price-quality ratio. Coupon-prone consumers pay attention to prices and features, have a lower income, and dedare using coupons to pay less than other consumers (Lichtenstein et al. 1991; Lichtenstein et al. 1993). It is interesting to note that these two groups use an equal number of coupons.

Cognitive Models of Light Information Processing

Historically, attitude models were developed for highly involved situations that bring about intensive information processing, whereas in consumer goods, most dedsions are rapid and involve little processing (Olshavsky and Granbois 1979). Inman et al. (1990) used Petty and Cadoppo's Elaboration Likelihood Model (ELM) (1986) to reconcile conflicting evidence regjirding the processing of promotional information. The ELM acknowledges that situational and individual fadors can diminish the likelihood of information elaboration and divert one's attention away from central elements. Their study showed that high need-for-cognition consumers (Capioppo et al. 1984) process all the information of promotional messages and do not read to promotional signals (e.g. displays) which are not accompanied by a price-<ut. In contrast, low need-for-cognition consumers are influenced by the mere announcement of a sale: they buy the produd without checking the price. Moreover, there is much evidence to suggest that there are circumstances in which promotions may serve as cues (Moriarty 1983; Currim and Schneider 1991;Schneider and Currim 1991; Schindler 1992; Cheong 1993). Besides, the coeffident of a dummy variable indicating the presence of a promotion is always significant in logit-type models of choice. The notion of schema is a recent alternative to the ELM model. According to Norman and Bobrow (1975), a schema is "a framework for tying together the information about a given concept or event with specifications about the types of inter-relations and restrictions upon the ways things fit together". A schema is often based on past experiences and encoded as a prototype that will be compared to the actual situation, sometimes even mindlessly (Langer et al. 1978; Pinson 1986). According to Wamond (1990), there are three schemata associated with promotions. The simplest are non-algebraic heuristics (semantic statements such as "A promotion is a gain"), then perceptual processing (e.g. cheap/expensive categorization) and, finally, complex schemata using cognitive algebra (e.g. multi-attribute models). Finally, scripts are schemata which also involve behavioural sequences (Shank and Abelson 1975). Henderson (1988) argues that some consumers use die script "Buy the brand for which I have a coupon", and other consumers use the more complex purchase strategy "Buy the cheapest brand", but these hypotheses were not confirmed. The model of Gardner and Strang (1984) assodated the two routes to promotional influence: scripts and attitude change. It has not yet been tested.

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Behavioural Learning Theories

Sales promotions create changes in behaviours thanks to tangible stimuli. This phenomenon fits well into the behavioural learning paradigm (Rotschild and Gaidis 1981; Gaidis and Cross 1987; Rotschild 1987; Blattberg and Neslin 1990). Operant conditioning theory argues that reinforced behaviours tend to be repeated more often than other behaviours. In this view, promotions are rewards that reinforce the purchase of a brand if both the reward and the behaviour to be reinforced are dosely and regularly linked. When conditioning is effective, its effects last even after the reward has ended. Moreover, behavioural learning theory distinguishes primary reinforcers which have intrinsic utility (product usage) from secondary reinforcers which have none (coupons). This theory states that promotion usage can replace brand usage as the reinforced ("learned") behaviour if promotions become the primary reinforcers. This phenomenon is likely to take place when there are no perceived differences between brands, when it is a mature brand and when promotions are j>ervasive. In other cases, brand usage reinforces brand purchase. Finally, immediate reinforcement, continuous and then random, produces the most durable effects.

Synthesis and Areas for Future Research

These reviewed theories offer various explanations as to the effectiveness of promotions beyond price reduction. Ten years after Sawyer and Dickson (1984), it can still be said that they are reasonably complementary. On one hand is the robust multi-attribute model of attitude change suited to extensive information processing situations. It could be extended to other involved promotions like loyalty programmes. One important and not yet resolved issue is the postulate of cognitiveevaluative-behavioural sequence. Knowing that the costs of clipping coupons are perceived as being lower for more frequent users of coupons (Jolson et al. 1987; Tat 1994) does not indicate whether beliefs cause behaviours or the reverse. Generally speaking, our knowledge of consumere' beliefs about promotions cind promoted products is very poor. Further research is needed to investigate their beliefs about the amount of effort necessary, the sincerity of the sponsor and his motivations (Alpert 1993; Froloff 1993; Tat 1994). Turning to deal-proneness, future research could link the two types of deal-proneness with each consumer's conception of value (Zeithaml 1988). However, by articulating the distinction between couponproneness and vedue-consdousness, attitude research has demonstrated the limits of its earlier postulates of a rational consumer. On the other hand, scholars have proposed the notions of signal, schema and script, as well as behavioural learning ttieories that are suited to succinct information processing situations. These models deserve future research. Specifically, we have medium involvement situations in mind, where promotional signals can serve to attract consumers' attention, which would in turn result in the brand entering the consideration set and its information being centrally processed. Besides, consumer behaviour theories adapted to routine purchases like the Hoyer Purchasing Tactic Model (1984) would benefit from explidt accoimt of sales promotions. Finally, behavioural theories, and especially recent ones (Shimp 1992), deserve further

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attendon since they have highlighted one of the major long-term issues of sales promodons: do they teach people to buy products on sale?

The Economic Approach: Stylized Theoretical Models "Stylized" theoredccil modelling is the emerging line of research in Marketing Sdence (EUashberg and Lilien 1993), The objective of these models is to help marketers understand the market mechanism by concentrating on some of the multiple forces that rule it (Moorthy 1993; Schmitdein 1994), They are based on normative assumptions, "stylized" for pedagogical purposes, and aimed at capturing the essence of the reladons between firms and markets, Prescripdons concerning the optimal behaviour of firms are then mathemadcally derived. Generally speaking, theoredcal models explain when and why it is in the best interest of firms to promote rather than to lower prices. The first line of research views promodons as long-term equilibrated discriininadon strategies (Gijsbrechts 1993), The interest of the second line of research is in the role of promodons in compeddve games.

Static Models

Sales promodons can take advantage of consumer heterogeneity in three ways (Table 6), The first way is for retailers to use this heterogeneity to reduce inventory costs or the opportunity costs entailed by too frequent sales. The second consists in only offering coupons to consumers who have a low opportunity cost of time and high demand. By doing this, monopolistic firms can reap high profits on those consumers who don't want to spend time and effort clipping coupons and who eire less pricesensitive. This promotion-as-a-discriminating-tool view is original because it argues that promodons can be profitable long-term strategies even if they do not convert new buyers into loyal ones. They are simply a way of charging prices adapted to the demand of the different segments of consumers. Lasdy, promodons can be a way to test the demand for a temporary produd, such as dothes, by reducing prices as soon as those consumers willing to pay higher prices have bought. Other researchers have investigated the presence of cross-promotional asjfmmetries. The model of Blattberg and Wisniewslci (1989) links udbty to quality, price and willingness to pay for quality (which results in nadonal brand loyalty). It assumes that markets eire composed of three levels within which quality is similar: nadonal brands, regional brands and generics. If willingness to pay for quality has a bi-modal distribudon, promoted brands attrad buyers of brands belonging to the same level or to an inferior level but have no effects on buyers of superior-level brands. This explains why private labels don't tend to promote. In addidon, it nullifies the comparison to a prisoner's dilemma because neither party loses as much if they don't co-operate (i,e. if they promote). Finally, Sivakumar and Raj (1993) show that nadonal brand's promodons are the only promodons to attract new buyers to the category, which largely explains the asymmetric pattern of brand compedtion discovered by Blattberg and Wsniewski,

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TaUe 6. Mechanisms Cost reduction Sales promotions cost less than everyday-low-price poUcy.

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Taking advantage of consumer heterogeneity iinth promotions Operationalizations (1) Transfer of storage costs to the coiteumers who have cheaper storage costs than the retailer fBlattbergrfflf. 1981). (2) Improving the efficiency of price promotions through pseudo price-cuts if there are enough light information processors among consumers. Empirical evidences (1) Non-perishabk products have greater promotional elasticity (Litvack rtfl/. 1985). (2) Simulation in a university retail outlet. The recommended promotioral policy yields higher returns (Irunan and McAUster 1991). (3) Coupons are offered on expensive products (Wlcassim and TOttink 1987). Consistent with the discrimination hypothesis, promotions are often random, of similar naagnitude and, above all, ptirdiase probabilities don't change after a promotional purchase (Tellis 1989).

Consumer pricediscrimination Price promotions permit to charge prices adapted to the level of demand of each consumer segment, which is more profitable.

(3) People with high demand have higjier opportunity costs of time. Companies can use the foQovnng costs to discriminate their customers: — Cost of collecting coupons (Narasimhan 1984; VUcassim and Wittink 1987); — Transaction costs of coupons (Geistner and Holtausen 1986); — Storing promoted products Oeuland and Narasimhan 1985).

Testing the demand level Sales promotions can help assess an unknown demand.

(4) If they don't ki^own how to discriminate consumers, firms can begin by charging a high price and then reduce it in accordance with market size, competition and costs of the information search.

(4) Anecdotal evidence of markets where prices are set very high but promoted soon because competition is weak, suggests that consumers are numerous and information search is expensive.

Dyruimic Modeb

One recent contribution of theoretical stylized models to the study of price promotions has been the incorporation of time. Kahn and Raju (1991) studied the impact of promotion frequency on bremd switching. Their model shows that, for a small brand, increasing the frequency of price reductions raises the share of purchase among inert consumers. Krishna (1992) models the strategic behaviour of consumers over an infinite horizon. She predicts that, in produd categories with frequent promotions and little brand loyalty, consumers know when the next promotion will occur. Consequently, consumers antidpate promotions and stockpile less. Assun^ao and Meyer (1990) derive optimal stockpiling strategies from a theoretical model, althou^ they show that actual consumers' stockpiling strategies are systematically biased as predided by the Prosped theory (Meyer and Assun^ao 1990). Compared to theoretical norms, consumers tend to consistently buy the same qucmtities when prices are stable, to buy too much when prices decrease and not enough when they increase. Lastly, Krishna (1994) found in a computerized experiment that expected prices directly influence how much consumers stockpile. When they expect a promotion tomorrow, they either buy less today or buy a small quantity of a lesspreferred brand on promotion. Other research has demonstrated that promotions can be op>tiinal in infinite competitive games. Narasimhan (1988) shows that, in the case of a duopoly, the

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existence of a segment of loyal consumers conditions tiie optimal pricing strategy. The rationale is that price-cuts can help compete in the price-sensitive segment, while not decreasing the margin made with loyal consumers by too much. If these two segments exist, national bremds should promote randomly to prevent competitors from antidpating their promotions and from following them. Optimal frequency and amount depend, respectively, on the number and the strength of preferences of non-loyal buyers (Villas-Boas 1993). Raju et al. (1990) widen the preceding model to the study of oligopoly and empirically verify that there are many more promotions in product categories with many brands and where bremd loyalty is weak. Their model argues that bigger brands lose more by promoting because they have, proportionally, a greater niunber of loyal consumers. However, Rao (1991) shows that poor quality private labels should not promote since they cannot attract many quality-sensitive consumers. Lastly, Lai (1990a) shows that the opportunity costs of promotions can be reduced by alternating them with other national brands. This way, private labels face the competition from one or the other national brands each week. This author shows that this de facto co-operation can be achieved without expUdt collusion between the two national brands. The Sfune scholar (Lai 1990b) replicates these results when retailer's objectives (i.e. to obtain the largest trade promotions and to pass-through the smallest part), are incorporated.

Synthesis and Areas for Future Research

This research tradition has been successful in opening new areas for research. Among those issues that were not reviewed here, let us dte consumer welfare (Levedahl 1988; Gerstner and Hess 1990), advertising-promotion trade-off (Sethuraman and Tellis 1991) and the modelling of retailers' behaviovtr (Sethuraman and Tellis 1993). This research tradition has nevertheless come under fierce criticism for its lack of systematic empirical testing (Schmittlein 1994). Future studies in this research tradition should strive to formulate testable predictions, and should also try to relax the assumptions that go against the most documented results. For instance, the assumption oi stationary markets, of perfect information or even of distinct market segments is very questionable. This research tradition must take into account the empirical generalizations that we are aware of (Blattbeig et al. 1994) to avoid being called "armchair economists" by scholars from other research traditions.

Conclusion This literatiu* review suffers from two major limitations. The first is not to have incorporated all the working papers and professional works completed during the past 10 years. This restriction has been partially compensated by dting the most recent working papers. The second limitation has to do with the organization by research tradition which cannot satisfactorily account for the substantial overlap of the various research traditions. Neither does it show how some studies originate from a controversy about a specific issue rather than capiteilize on a research tradition's previous results.

434

Pierre Chandon

Nevertheless, four important points may be made: —There is ample room for research on the following sales promotions techruques: twin packs, three for the price of two, more product for the same price, premiums, games and, generally, on all the promotional techniques little used in the United States but common in Europe. These studies would be particularly welcomed since these promotions have important implications in little researched areas Uke the impact of promotions on brand equity, usage, and manufacturer-retailer pwwer relations. —The consumer-oriented research tradition wiU no longer continue with the methods exposed here. It is presently being replaced by logit models of individual choice. These models are both more precise and richer because they use singlesource scanner psrnel data; i.e. data combining individual (purchase history) and causal (price, promotions) information (for review, see Chandon 1994b). — The theory-oriented research tradition is very unbalanced. One one hand, price perception theories have been thoroughly tested but lack external validity. On the other hand, the many very interesting attitudinal, cognitive and behavioursJ theories lack empirical replications. — The theoretical economic models have made major contributions to research on sales promotion. It is the only researtJi tradition to have investigated sales promotions from the company's side, an area where pre-conceived notions proliferate. Three widespread assumptions, aU worthy of investigations are: (a) the restriction of sales to shori-term weapons harmful over the long term; (b) the view of purchase acceleration as a worry; and (c) the assumption that promotions are profitable. Ironically, research on sales promotions exhibits one oi the most criticized bias of sales promotion programmes: their reliance on sales as the ultimate measure of the performance of sales promotions.

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