May 18, 2016

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Quantitative Methods for Business

Kenneth Bell

Precise versus imprecise Promotional rewards at small Probabilities:

Moderating from purchase value and Promotion budget

The Businesses use variety of marketing strategies for boosting their sales. Promotion

being a key element of the marketing mix is given special consideration for the marketing and

boosting of the sales. The companies use a number of promotional activities from advertising to

promotional rewards for this purpose. The paper “Precise versus imprecise Promotional rewards

at small Probabilities: Moderating from purchase value and Promotion budget” has aim to

investigate the response of the consumers to promotional rewards which are precise or are

imprecise at varying probabilities, and also analyzing its effect on the promotion budget and

purchase value.

The paper has found that the imprecise promotional rewards with a small wining

probability have been more attractive as compared to the precise reward. For the purchases with

high value, the imprecise reward promotion is better in performance as compared to the same

costly precise reward promotion with 100 percent probability. However, this is evident in the

article that the difference in the imprecise and precise reward promotion is less for the lower

value purchases. The promotional budget has also been analyzed as a factor, and the paper has

found that the increase in the promotional budget increases the ambiguity effect.
 The resultant of the paper shows that the imprecise reward promotion with the small

probability should be preferred on the precise reward promotions with the 100 percent

probability at both high and low level promotion budgets. The paper has used three types of

experimental studies based on the literature review of the certainty effect, ambiguity effect and

on the small probabilities.

The authors of the paper has initiated its research article by presenting the point that a

specific individual looking for a certain item to fulfill his or her need, has decided a certain

product to buy, but his or her decision is altered by the variety of promotional offers being

provided as complementary to the product purchased. The precise and imprecise offer is referred

by the authors of the paper as the exact claim, like 40 percent discount on the regular price, and

the imprecise as the claims which have a level of ambiguity like in the “save up to X percent”.

These promotional rewards, which use variety of ambiguity, affect differently on the purchasing

behavior and purchase decision of the customer.

In the paper the effect of the precise and imprecise reward on the purchase decision is

shown as quoted “When the probability of getting the promotional reward is small, promotion

with imprecise reward performs better than that with precise reward”. (Yao, Chen and Zhao

1010)This shows that the imprecise promotional rewards which tend to have higher risks and

higher ambiguity with lower probability is preferred and tends to have higher success rate in

terms of the purchase decision as compared to the higher probability promotional rewards with

precise claims.

The purchase prices have also been analyzed as a factor as depicted in the quote, “For

high value purchases, a small-probability promotion with imprecise reward performs better than
an equally costly 100 percent probability promotion with precise reward, and for low value

purchases, the difference is shortened.” (Yao, Chen and Zhao 1011) This shows that the

imprecise promotional reward with small probabilities for the high value purchases is preferred

as compared to its alternative.

The best strategies for promotion of the products are identified, certainty is important in

any promotion of any product, otherwise products can move towards failure, the growth of

spending on the advertisements are expected to explore more in recent years. In winning the

promotion campaigns to favor consumer responses are important, precise and imprecise

strategies should be designed according to the consumer’s demand. Decision-making is

important from every perspective and important to promote the product in the market, the

research shows that many of the companies fail to achieve their targets as their framework

cannot provide the systematic predictions, that what strategies should be used for the promotions.

The study has clearly examined the causes of failure and tells that how strategies could be

effective for the future growth of the products in the market, the study have stated the

promotional rewards value, and marketers should notice or consider the product prices. In my

point of view, the study provides us the knowledge about the expensive and reasonable products,

that how strategies need to designed, if the product or services have the higher prices then there

is need of discount or gift, should be given to the consumer, so the customer get attracts towards

the product. Bigger discount cannot offer all the time, so there is need to giveaway some gifts for

the involvement of the consumers. Whereas, the cheap or low price product need to designed

with the strategy of precise value of gift. Company should make the promotional strategies, if

company could afford the gifts because promotional budget can give advantages and will be

result in effective outcomes like productivity will be increases with the increases in the
profitability. For every purchase of the product, feedback from the customer is important, there

should be feedback about the prices of the product, that does the product has fair prices, or does

the quality compete with the prices or not. If customers are not satisfies then there is need to

design the strategies that could be effective and make the customers satisfied about the product

or services they are using, in this sense customers could be retain.

 Work Cited:

Yao, Qing, Rong Chen and Ping Zhao. "Precise versus imprecise promotional rewards at small
probabilities." European Journal of Marketing 47.5/6 (2013): 1006-121.