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Table of contents
1. Consumer evaluations of sales promotion: the effect on brand choice........................................................ 1
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authors also take into account the tendency to buy in promotions, the price tendency or retailer characteristics
(Kalwani et al, 1990; Kopalle and Winer, 1996).
Other authors contend that it is difficult for the consumer to store information about old prices, and it is therefore
more likely that the consumer forms reference prices at the 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
towards different 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 reference price is higher than the observed price. If the
observed price is higher than the reference price, the consumer experiences a loss.
The repercussions of these variables on the brand choice process is clear. When the consumer perceives a
loss, the utility that the alternative provides (brand) will diminish, and with it the likelihood of the purchase. If, in
contrast, the consumer perceives a gain, he or she will be more inclined to purchase (Winer, 1986; Kalwani and
Yim, 1992; Briesch et al, 1996; Mazumdar and Papatla, 2000).
It has been observed that both effects are of different intensity, i.e. they produce an asymmetric 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 gains according to prospection theory (Hardie et al, 1993; Kalyanaram and Little, 1994).
However, other authors like Greenleaf (1993,1995) defend the opposite position, i.e. that the consumers will
react more strongly to gains than to losses.
It has been proved that the repercussions of both elements on consumers depend on the 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 loyal consumers will respond similarly to losses and gains. However, it seems that
non-loyal consumers will respond with more interest to gains (Krishnamurthi et al, 1992).
The variables considered so far constitute the basis of consumers' decisions. Models that study purchasing and
brand choice behaviour take these variables as a starting point in their utility functions.
In the present paper we consider sales promotion actions, together with the fundamental variables indicated
above (price, reference price, losses and gains and loyalty). Thus, in the next section we approach a series of
aspects related to sales promotions that it is necessary to take into consideration.
Influence of sales promotion on the brand choice process
The implementation of an adequate sales promotion may guarantee an increase in sales in a short period of
time. This justifies the tendency of establishments to invest a large part of their budget in these actions. A few
years ago, communication actions were more important, but they ended up saturating the final consumer and
lost their effectiveness. This has allowed sales promotion to acquire a greater prominence.
Sales promotion is a set of stimuli that are offered sporadically, and it reinforces publicity actions to promote the
purchasing of a certain product. Sales promotion techniques are intended to have a direct impact on buying
behaviour. The objectives of sales promotion will be reached to a greater extent when it is done sporadically,
when the consumer does not expect it. If the consumer is capable of anticipating when a sales promotion action
will take place, the results obtained will decrease. It is therefore necessary for the consumer not to be able to
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anticipate sales promotions, and thus not to incorporate these incentives into the product's characteristics.
However, this does not mean that sales promotion is something improvised by the establishment. Sales
promotion actions must be properly planned, organised and integrated into the establishment's marketing plan.
The establishment must study the characteristics of the sector where it operates as well as its own
characteristics. No less important is knowing the competitors' characteristics, the actions they carry out, the
promotions they employ, and the consumers' characteristics. It is essential to know the audience being
addressesed, their behaviour, psychological and demographic characteristics, among others (Figure 2).
In this way it is possible to determine and design the promotional strategy to be developed. 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 reached through sales promotion.
Once this has been established, the advisability of employing one promotion technique or another can be
derived. The objectives may in turn be of various kinds. The intention may be to increase the establishment's
visitors or to act on the consumer's loyalty to the brand, increase product's consumption or encourage trying out
a new brand, among others.
However, it is also relevant to distinguish between short-term and long-term objectives. The former are
generally aimed at responding to the competition's promotion incentives or getting rid of stock. However, longterm objectives usually focus on increasing the market share, the benefits and on developing an adequate
image to win renown.
The sales promotion technique to be developed will be different depending on the objectives. There is a wide
range of possibilities. In Table I we show one of the classifications of sales promotion techniques, specifically
that carried out by Brassington and Pettit (1997).
The use of different sales promotion techniques varies substantially from one country to another. Thus, while
the use of coupons is widespread in countries like the United Kingdom, in Spain it is immediate price reductions
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of discrete dependent variables. These models fulfil the assumptions of discrete choice theory. Then, the
probability of brand choice is a function of the market value of this alternative, compared with the market value
of the rest. Thus, the probability that a consumer chooses a brand depends directly on the capacity of
satisfaction that the brand holds for him or her. The brand that the consumer perceives to be the most suitable
alternative to satisfy his/her needs is the one that has the larger probability of being selected.
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* 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 consumer products for most
households. Nevertheless within the group of products studied we can 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 product present in most households'
shopping baskets.
In the process of database debugging and creation we eliminated those households which did not buy the
product on at least five occasions during the realisation of the panel (we intended to eliminate the influence of
sporadic shoppers). With reference to the brands under study we selected, together with the store's brands,
brands with a higher 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 the consumer panel. Regarding the sizes, we
have selected the most relevant ones (i.e. 250 and 500 grams).
Results
In order to proceed to the study of the aspects related to sales promotion and brand choice, we obtained
information about the promotional situation at the moment of purchase. In the collection of information we have
distinguished between promotions related to a certain product (product promotions or product-based) and those
related to the establishment's general offer (environment or store-based promotions).
Within each category (i.e. product promotions and environment promotions), we considered various types of
techniques, as summarised in Figure 3. To carry out a more adequate analysis they have been grouped into
three blocks, and thus we distinguish between price promotions, other product promotions and environment
promotions.
As we have previously pointed out, differences exist in the use of various promotional techniques in different
countries. Thus, in Spain there is frequent use of immediate price reductions (reduced price). In the household
panel analysed a clear difference 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 models
The first objective to achieve is to improve the estimate of brand choice models with their introduction into
promotions. Thus we compare a model that includes the fundamental variables (price, reference price, losses
and gains and loyalty), with a more advanced model where three variables that represent the different groups of
promotions indicated are introduced.
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To calculate losses and gains it was necessary to estimate reference prices. In a work previous to the one
presented here, different alternatives were analysed. The results showed that reference price estimates based
on observation are the most appropriate. Specifically, the approach used here calculates the reference price as
the arithmetic 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.
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The results obtained are summarised in Table II. In Table II we show information regarding the variables
involved in the model and the goodness of fit for each of the models estimated. In the first column in Table II we
present information about the initial model (with the fundamental variables) and in the next three columns the
information derived from the models in which promotions are introduced is shown.
The fundamental variables of the model as a whole have a remarkable influence on the brand choice process.
Specifically, the price, losses and gains are significant. With respect to loyalty, we must point out that it
influences perception and the consumer's response to potential gains. However, its influence on losses does
not seem to be significant. It is possible that loyal and non-loyal consumers do not differ in their response to a
loss situation.
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As can be seen, the incorporation of promotions improves the models' estimates. The goodness of fit indicators
point to slight increases. Similarly, through the likelihood ratio it is proved that the introduction of the new
variables contributes significant information to the initial model (in this ratio the information provided by the initial
model is compared to that derived from each of the extended models). As we can see, the variables that
represent the promotional state are significant for the model as a whole.
Therefore it is possible to state that the explicit consideration of promotions in brand choice models is adequate,
since they provide better approaches to the consumer's buying behaviour. As a result we have proved H1:
brand choice models that incorporate the effect of promotions obtain better estimates than those in which this
effect is not accounted for.
Influence of different sales promotion techniques
Now we have confirmed the influence of the inclusion of promotions on brand choice models, we intend to look
more deeply into some aspects related to the use of the different techniques. As we have pointed out, there are
various sales promotion techniques that can be employed, either individually or together. In the household panel
we collected information about the existing promotional state at the moment of the purchase. Specifically, we
focused on the most widespread sales promotion techniques (Figure 3). However, despite the variety of
promotion techniques, the most frequently used is immediate price reduction.
In H2, we stated that the effect of price promotions on brand selection will be greater than that caused by any
other type of promotional action. In order to prove this hypothesis, we introduce two new variables to the model
proposed initially (price, reference price, losses and gains and loyalty, model 1). The first represents price
promotions. The second includes other of promotional actions. In this way, we will be able to analyse which of
the two variables exerts greater influence on the model.
In Table III we show a summary of the estimate for the new model proposed model 5. In order to determine
which of the two variables representing the different types of promotion has the most weight in the purchasing
process we must first analyse whether each of them is significant. If this is so, we must verify the importance of
each variable through a ^sup 2^ value.
As can be observed in Table III, the variable that represents price promotions is significant, while the variable
that represents the other promotion techniques is not. Consequently, we can say that price promotions influence
buying and brand choice behaviour. In contrast, there is no evidence to support the influence of other sales
promotions. This leads us to confirm, as H2 put forward, that price promotions have a greater impact on
consumer behaviour than other promotions.
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Rajendran, K.N. and Tellis, G. (1994), "Contextual and temporal components of reference price", Journal of
Marketing, Vol. 56, pp. 22-34.
Simonson, I. (1989), "Choice based on reason: the case of atraction and compromise effects", Journal of
Consumer Research, Vol. 16, pp. 158-74.
Simonson, L, Carmon, Z. and O'Curry, S. (1994), "Experimental evidence on the negative effect of product
features and sales promotions on brand choice", Marketing Science, Vol. 13 No. 1, pp. 23-40.
Suri, R., Manchada, R.V. and Kohli, C.S. (2000), "Brand evaluations: a comparison of fixed price and
discounted price offers", The Journal of Product &Brand Management, Vol. 9 No. 3, pp. 193-207.
Winer, R. (1985), "A price model of demand for consumer durables; preliminary developments", Marketing
Science, Vol. 4 No. 1, pp. 74-90.
Winer, R. (1986), "A reference price model of brand choice for frequently purchased products", Journal of
Consumer Research, Vol. 13, pp. 250-6.
Further reading
Voss, G. and Seiders, K. (2003), "Exploring the effect of retail sector and firm characteristics on retail price
promotion strategy", Journal of Retailing, Vol. 79, pp. 37-52.
AuthorAffiliation
Begoa Alvarez Alvarez and Rodolfo Vzquez Casielles
Department of Business Administration, University of Oviedo, Oviedo, Spain
Received January 2004
Subject: Sales promotions; Effects; Brands; Product choice; Objectives; Mathematical models; Statistical
analysis;
Location: Europe
Classification: 7200: Advertising; 7100: Market research; 9175: Western Europe; 9130:
Experimental/theoretical
Publication title: European Journal of Marketing
Volume: 39
Issue: 1/2
Pages: 54-70
Number of pages: 17
Publication year: 2005
Publication date: 2005
Year: 2005
Publisher: Emerald Group Publishing, Limited
Place of publication: Bradford
Country of publication: United Kingdom
Publication subject: Business And Economics--Marketing And Purchasing
ISSN: 03090566
Source type: Scholarly Journals
Language of publication: English
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Bibliography
Citation style: APA 6th - American Psychological Association, 6th Edition
Begoa, A. A., & Rodolfo Vzquez Casielles. (2005). Consumer evaluations of sales promotion: The effect on
brand choice. European Journal of Marketing, 39(1), 54-70. Retrieved from
http://search.proquest.com/docview/237047648?accountid=50247
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