European J

Marketing
Consumer evaluations of sales promotion: the effect on brand
choice Begoña Alvarez Alvarez Rodolfo Vázquez Casielles Article
information:
To cite this document:
Begoña Alvarez Alvarez Rodolfo Vázquez Casielles, (2005),"Consumer evaluations of sales prom
the effect on brand choice", European Journal of Marketing, Vol. 39 Iss 1/2 pp. 54 - 70 Permanent
this document: http://dx.doi.org/10.1108/03090560510572016
Downloaded on: 23 June 2015, At: 09:58 (PT)
References: this document contains references to 32 other documents.
To copy this document: permissions@emeraldinsight.com
The fulltext of this document has been downloaded 12235 times since 2006*
Users who downloaded this article also downloaded:
Simon Kwok, Mark Uncles, (2005),"Sales promotion effectiveness: the impact of consumer difference
at an ethnic-group level", Journal of Product & Brand Management, Vol. 14 Iss 3 pp. 170-186
http:// dx.doi.org/10.1108/10610420510601049
George S. Low, Jakki J. Mohr, (2000),"Advertising vs sales promotion: a brand management
perspective", Journal of Product & Brand Management, Vol. 9 Iss 6 pp. 389-414 http://
dx.doi.org/10.1108/10610420010356984
D.C. Gilbert, N. Jackaria, (2002),"The efficacy of sales promotions in UK supermarkets: a consumer
view", International Journal of Retail & Distribution Management, Vol. 30 Iss 6 pp. 315-322 http:
dx.doi.org/10.1108/09590550210429522

Access to this document was granted through an Emerald subscription provided by emerald-srm:26

For Authors
If you would like to write for this, or any other Emerald publication, then please use our Emerald f
Authors service information about how to choose which publication to write for and submission gui
are available for all. Please visit www.emeraldinsight.com/authors for more information.

About Emerald www.emeraldinsight.com

Emerald is a global publisher linking research and practice to the benefit of society. The company
manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as w
providing an extensive range of online products and additional customer resources and services.
 Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Comm
on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archiv
preservation.

*Related content and download information correct at time of dow

European Journal of Marketing 2005.39:54-
70.
 The Emerald Research Register for this journal is available atThe current issue and full text archive of this journal is
available at
www.emeraldinsight.com/researchregisterwww.emeraldinsight. com/0309-0566.htm

EJM Consumer evaluations of sales

39,1/2
promotion: the effect on brand choice
Begon˜a Alvarez Alvarez and Rodolfo Va´zquez Casielles
Department of Business Administration, University of Oviedo, Oviedo, Spain
54
Abstract
Received January 2004 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 strong
promotional 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 in
the short term, when the longer term is considered there are undesirable consumer actions.
Design/methodology/approach – The problem of consumer brand choice can be adequately described
with logit models that allow the use of discrete dependent variables. The probability that the
consumer chooses a brand depends directly on the capacity of satisfaction that the brand holds for
him/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
aim of obtaining the necessary information for the present study, a regional consumer panel was
European Journal of Marketing 2005.39:54-

used.
Findings – The results show that it is necessary to consider the product’s promotional state at the
moment of purchase as an explanatory element of the process. Promotion is a tool that can help
manufacturers and/or retailers in the achievement of their objectives (try the brand, help to decide
what brand to buy, etc.). Immediate price reduction is the technique that exerts greatest influence on
the brand choice process. It is possible that the consumer perceives a promotion, for example,
coupons or rebates, but does not modify his or her behaviour. In this case, manufacturers and/or
retailers will be investing 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 by the
authors. Because of this, the information collected is just what was necessary for this study. On the
other hand, the paper shows that is very important to know the consumer’s preferences and the
70.

actions that influence his or her behaviour. Considering the results, it seems that promotions based on
price have the greatest effectiveness.
Keywords Brands, Consumer behaviour, Prices, Advertising, Discounts, Promotional methods
Paper type Research paper

European Journal of Marketing Vol.
39 No. 1/2, 2005 pp. 54-70 q
Emerald Group Publishing Limited
0309-0566
DOI 10.1108/03090560510572016
Introduction
Prices 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 and
advertising campaigns. This is aimed at providing the consumer with a comparative
element to judge the different alternatives he or she has at his or her disposal when
making a purchase.
Similarly, it can be seen that establishments invest a large part of their budget in
sales promotion. The intention is to give the product greater appeal and value.
Although a lot of sales promotion alternatives exist, traditionally the most widely used
is immediate price reduction. However, this situation often depends on the country
involved.
 These ideas allow us to conclude that establishments wish to influence consumers’ buying behaviour, and
thus they launch strong promotional campaigns or introduce changes to their price policies, among other
actions. However, they are not always capable of achieving their goal, since although they may reach their
objective in the short 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. We analyse the influence of a series
of fundamental variables on the brand choice process: 55
price, reference prices, losses and gains and loyalty. Special attention is given to the
influence that sales promotion actions developed by manufacturers and distributors have on this process.
The structure of the present work is as follows. First we carry out a review of the
brand choice models, where the influence of price, reference prices, losses and gains
and loyalty is analysed. Then the study focuses on sales promotions, the alternatives
establishments have at their disposal, and those which are more acceptable to
consumers. Next, we formulate the hypotheses we wish to contrast as well as the
methodology used to this end and the results obtained. Finally, we expose the
conclusions and business implications derived from the study.

Brand choice models

Manufactures and retailers wish to understand the way marketing variables like price,
loyalty or promotions may affect their sales and therefore the market share of the
European Journal of Marketing 2005.39:54-

products they commercialise. In previous studies the most appropriate way to outline
brand choice behaviour has been sought. Following these studies, we can attest the
existence 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 a
fundamental variable. In the models of Winer (1985), Lattin and Bucklin (1989),
Kalwani and Yim (1992), Mayhew and Winer (1992), Briesch et al. (1996) or
Mazumdar and Papatla (2000), it appears as an essential matter of study.
Closely related to price is reference price. We can consider the reference price as a
subjective price level with which the consumer compares the prices observed at the
moment of purchase. That is, when the consumer plans to buy a product, he or she
70.

will judge prices comparatively in order to determine whether the price is acceptable
or not.
Authors are unanimous about the importance of considering reference prices in the purchasing
and brand choice process. Nevertheless, there is no agreement on their

Figure 1.
Process of brand choice
 Evaluations of
sales promotion
formation. Some authors contend that reference prices are formed from the prices the
consumer has faced on previous occasions, i.e. estimates based on the past (Mayhew
and 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
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
56 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
European Journal of Marketing 2005.39:54-

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
70.

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
 EJM
39,1/2
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 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 57 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
European Journal of Marketing 2005.39:54-

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
70.

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, long-term 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).
 Evaluations of
sales promotion

Figure 2.
Sales promotion strategy

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

Door-to-door Point- Door-to-door
of-sale Trial size
Direct mail
Rebates Free with product
Mail-in cash back Contests and sweepstakes
Free mail-in
Table I. Consumer Self-liquidating offer
sales promotion
methods Source: Brassington and Pettit (1997)
 Reduced price Extra product Loyalty schemes Demonstrations
Shelf Extra free
On pack Buy one, get one free
Coupon Samples Free in/on pack
On/in pack On pack
58 Print ads Print ads
EJM
39,1/2
The use of different sales promotion techniques varies substantially from one country
European Journal of Marketing 2005.39:54-70.

to another. Thus, while the use of coupons is widespread in countries like the United
Kingdom, in Spain it is immediate price reductions (price cuts) that are mostly used.
Promotions provoke two reactions in people. The first is an increase in
consumption, i.e. more quantity of a product is acquired. The second is storage of the
product for the future, i.e. the consumer acts anticipating his purchases. Chandon and
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
to acquire it because they are attracted by the sales promotion (Gupta, 1993).
However, Brandweek (1994) found that some people who change brand due to a
promotion change 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 and
product purchase and consumption has to be sufficient. However it is necessary to
stay alert, as the opposite effect could be provoked on certain occasions. This occurs
when the consumer perceives that he is paying for unnecessary activities to enhance
and position the product: this then provokes the opposite effect to the desired effect,
i.e. the consumer will stop buying the promoted brand (Simonson et al., 1994). It is
also possible that the consumer avoids buying the promoted brands so as not to have
to justify his behaviour to his peer group (Simonson, 1989). There is also another
reason why promotion may not obtain the expected results: the consumer may feel he
is being manipulated and will “punish” the retailer by not purchasing the promoted
brand or product.
The influence of sales promotions on the consumer will also depend on the
consumer’s characteristics. We can point to the existence of three types of consumer
segments:
(1) those who find these actions attractive and are therefore likely to buy the product;
(2) those who find them neither attractive nor necessary, and will therefore act by
reducing their choice probability; and
(3) those who remain indifferent and are therefore not affected by these actions in their
final decision.

Formulation of hypotheses
In view of the review carried out, we consider it necessary to approach the study of the 59
brand 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 promotional actions have on them. As has
been pointed out, promotions are frequently used by retailers for different purposes. Perhaps one of most
relevant is the brand change, i.e. it is 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
 Evaluations of
sales promotion
effort or participation on the part of the consumer (coupons, rebates or games). In
both cases these promotions are related to the purchase of a specific product or brand.
But we must also consider a series of promotions that are related to the situation at the
sale point (the environment), like the celebration of anniversaries or special dates.
Taking these aspects into account, we intend to contrast the following hypotheses
founded on the analysis of previous studies and research works that acknowledge the
need to introduce sales promotions into the brand choice models (Go´mez, 1997;
Mela et 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
of brand choice, as well as considering the effect of different types of technique that is
possible to use.
H1. Models that incorporate the effect of sales promotion on brand choice will obtain
better estimates that those that do not consider this effect.
H2. The effect price reduction promotions have on brand choice probability is greater that
the effect caused by the existence of any other type of promotion.
European Journal of Marketing 2005.39:54-

Research methodology
General formulation: the model
The problem of the consumer’s brand choice can be adequately described with logit
models that allow the use 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
70.

one that has the larger probability of being selected.

When the consumer faces a purchase decision, he/she assigns a utility to each one
of the available alternatives, opting finally for the alternative that provides him/her
with the largest utility (Guadagni and Little, 1983; Kamakura and Russell, 1989). In
this utility function, there are two types of components, one deterministic (represented
by Viht) and one random (represented by eiht). The expression to use would be:
Uiht ¼ Viht þ eiht;

Xz
Viht ¼ b0i þ bPVMPiht;
P¼1

60 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 the
utility (which will depend on the perception that the consumer has of the attributes of the brand and of the
 EJM
39,1/2
different marketing variables that are applied on this brand), VMPiht is the value of marketing variable P (P ¼ 1,
... , z) for brand i to household h at purchase occasion t, b0i is a specific coefficient for each brand, b P is a
coefficient for marketing variables, and eiht is the random error of household h in the utility of brand i at
purchase occasion t.
Thus, considering the theory of discrete choice, to know the probability of choice
of a brand is enough to know the probability that the utility of an alternative i (Uiht) is
higher than any other k (Ukht):

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

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

expðVihtÞ
Piht ¼ PI ;
i¼1 expðVihtÞ
European Journal of Marketing 2005.39:54-

where
XI
0 # Piht # 1 and Piht ¼ 1 ðfor all hÞ:
i¼1

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

Collection of information and sample characteristics

70.

With the aim of obtaining the necessary information for the present study, a regional
consumer panel was planned and elaborated. This panel was formed by a total of 200
consumers who collected information systematically about a total of 54 categories of
product during a 12-month period. The information required of the consumers was as
follows:
.
category of product;
.
brand;
.
type or modality;
.
date of purchase;
.
place of purchase;
.
number of units purchased;
.
price per unit;
.
type of promotion (if the product was promoted the individual had to select the specific
type of promotion);
.
total value of purchase made;
 Evaluations of
sales promotion
.
form of payment; 61
.
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.
European Journal of Marketing 2005.39:54-

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
70.

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 .
the price promotion model;
 EJM
39,1/2

62
European Journal of Marketing 2005.39:54-70.

Figure 3.
Methods of sales
promotion analysed in the
consumer panel

more advanced model where three variables that represent the different groups
promotions
of indicated are
introduced. losses and gains it was necessary to estimate reference prices. In
To calculate
work
a previous to the one presented here, different alternatives were analysed.
results
The showed that reference price estimates based on observation are the
appropriate.
most Specifically, the approach used here calculates the reference price as
arithmetic
the mean of the highest and lowest prices observed at the moment of
The models we proceed to compare
purchase.
the initial
are:
.

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 model
The initial model (model 1) is given by:

Uiht ¼ b0i þbPPiht þbLOSSLOSSiht þbL;LOSSðLhLOSSihtÞþbGAINGAINiht

þbL;GAINðLhGAINihtÞþ eiht:
 Evaluations of
sales promotion
Models with promotions
The price promotion model (model 2) is given by:

Uiht ¼ b0i þbPPiht þbLOSSLOSSiht þbL;LOSSðLhLOSSihtÞþbGAINGAINiht

þbL;GAINðLhGAINihtÞþbPROPRIPROPRIiht þ eiht:

The model for promotions related to the product (i.e. price promotions and other 63
promotions related to the product; model 3) is given by:

Uiht ¼ b0i þbPPiht þbLOSSLOSSiht þbL;LOSSðLhLOSSihtÞþbGAINGAINiht

þbL;GAINðLhGAINihtÞþbPROPTOPROPTOiht þ eiht:

The model for all types of promotions (i.e. price promotions, other promotions related
European Journal of Marketing 2005.39:54-

to the product and environment promotions; model 4) is given by:

Uiht ¼ b0i þbPPiht þbLOSSLOSSiht þbL;LOSSðLhLOSSihtÞþbGAINGAINiht

þbL;GAINðLhGAINihtÞþbPROTOTPROTOTiht þ eiht:

In the above equations, Uiht is the utility of brand i to household h at purchase occasion
t; Piht is the price of brand i for household h at purchase occasion t; Lh is a dummy
variable (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
i for household h at purchase occasion t; GAINiht is the difference given that the
70.

reference price is higher than the price of brand i for household h at purchase occasion
t; L is a dummy variable such that P ¼ 0 if Piht , PRht and P ¼ 1 if Piht . PRht; G is a
dummy variable such that G ¼ 0 if Piht . PRht and G ¼ 1 if Piht , PRht; PROPRIiht is a
dummy variable indicating that brand i was subject to a price promotion for household
h at purchase occasion t; PROPTOiht is a dummy variable indicating that that 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 of
promotion for household h at purchase occasion t; eiht is the random error of
household h in the utility of brand i at purchase occasion t; b0i is a specific coefficient
for each brand; bP is a coefficient for price; bLOSS is a coefficient for losses; bGAIN is a
coefficient for gains; bL,LOSS is a coefficient for losses (loyal consumers); bL,GAIN is a
coefficient for gains (loyal consumers); b PROPRI is a coefficient for price promotion;
bPROPTO is a coefficient for product promotion; and bPROTOT is a coefficient for all types
of promotion.
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
EJM
39,1/2
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
 European Journal of Marketing 2005.39:54-
70.

64
EJM
39,1/2

65
Modelwithprice Modelwithproduct Modelwithalltypesof
Modelwithoutpromotion promotio promotio promotio
Z Exp(b) Zn Exp(b) Zn Exp(b) Zn Exp(b)

Y i ¼ M0Price 2 8.296(0,000)0.938 2 8.518(0.000)0.934 2 8.535(0.000)0.934 2 8.479(0.000)0.935

h Gain5.387(0.000)1.0755.177(0.000)1.0735.189(0.000)1.0735.035(0.000)1.071
Loss1.438(0.150)1.0431.264(0.206)1.0381.291(0.197)1.0391.230(0.219)1.036
Lgain 2 2.506(0.012)0.968 2 2.493(0.013)0.968 2 2.490(0.013)0.968 2 2.372(0.018)0.969
Lloss0.782(0.434)1.0220.765(0.444)1.0220.790(0.430)1.0230.898(0.369)1.026
Promo 2 2.691(0.007)0.355 2 2.575(0.010)0.383 2 3.111(0.002)0.326
tConst5.225(0.000)2.982(0.003)3.180(0.001)2.922(0.003)
Y i ¼ M1Price4.663(0.000)1.0274.326(0.000)1.0264.263(0.000)1.0254.472(0.000)1.027
h Gain0.642(0.521)1.0090.743(0.458)1.0100.756(0.449)1.0100.657(0.511)1.009
Loss 2 1.855(0.064)0.977 2 1.760(0.078)0.978 2 1.661(0.097)0.979 2 1.825(0.068)0.977
Lgain 2 1.012(0.312)0.984 2 1.093(0.274)0.983 2 1.098(0.272)0.983 2 1.019(0.308)0.984
Lloss 2 1.484(0.138)0.983 2 1.551(0.121)0.982 2 1.571(0.116)0.982 2 1.481(0.139)0.983

Table II. Brand choice models: model without promotion versus models with promotions
Promo 2 1.436(0.151)0.649 2 1.635(0.102)0.619 2 0.760(0.447)0.828
tConst 2 5.849(0.000 2 5.694(0.000 2 5.816(0.000)5.661(0.000)
Y i ¼ M2Price 2 3.185(0.001)0.984
) 2 )3.529(0.000)0.981 2 3.615(0.000)0.981 2 3.555(0.000)0.982
h Gain1.519(0.129)1.0161.564(0.118)1.0171.563(0.000)1.0171.502(0.133)1.016
Loss 2 1.504(0.133)0.979 2 1.495(0.135)0.979 2 1.465(0.143)0.979 2 1.562(0.118)0.978
Lgain 2 2.043(0.041)0.976 2 2.144(0.032)0.975 2 2.145(0.032)0.975 2 2.100(0.036)0.975
Lloss 2 0.178(0.858)0.997 2 0.239(0.811)0.997 2 0.229(0.819)0.997 2 0.125(0.901)0.998
Promo 2 1.822(0.068)0.659 2 2.165(0.030)0.614 2 2.074(0.038)0.653
tConst2.749(0.006)1.965(0.049)1.863(0.062)1.989(0.047)
(continue
)
d
 EJM
39,1/2
Table II.

significant. It is possible that loyal and non-loyal consumers do not differ in their
response 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 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 66 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.
European Journal of Marketing 2005.39:54-

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
70.

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

Uiht ¼ b0i þbPPiht þbLOSSLOSSiht þbL;LOSSðLhLOSSihtÞþbGAINGAINiht

þbL;GAINðLhGAINihtÞþbPROPRIPROPRIiht þbOTHERPROOTHERPROiht þ eiht;

where PROPRIiht is a dummy variable that indicates that brand i was subject to a price
promotion for household h at purchase occasion t; OTHERPROiht is a dummy variable
that indicates that brand i was subject to another type of promotion (non-price
promotion) for household h at purchase occasion t; bPROPRI is a coefficient for price
promotion; and bOTHERPRO is a coefficent for any other type of promotion.
 Evaluations of
sales promotion
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 x2 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.

Yih ¼ M0 Yih ¼ M1 Yih ¼ M2

Z 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 Reference

Gain 5.177 (0.000) 1.073 0.744 (0.457) 1.010 1.552 (0.121) 1.017 brand
European Journal of Marketing 2005.39:54-

Loss 1.240 (0.215) 1.037 21.749 (0.080) 0.979 21.573 (0.116) 0.978

21.101 (0.271) 0.983 22.098 (0.036) 0.975

Lgain 22.493 (0.013) 0.967
Lloss 0.793 (0.428) 1.023 21.567 (0.117) 0.982 20.064 (0.949) 0.999
67
Propri 22.537 (0.011) 0.355 21.444 (0.149) 0.646 21.513 (0.130) 0.704
Otherpro 20.235 (0.814)0.899 0.319 (0.750) 1.101 21.689 (0.091) 0.633
Const 2.350 (0.019) 24.865 (0.000) 0.673 (0.501)

Global significance
Price 155.948 (0.000)
Gain 28.892 (0.000)
Loss 6.536 (0.088)
Lgain 7.335 (0.062)
70.

Lloss 3.401 (0.334)

Propri 8.347 (0.039)
Otherpro 3.666 (0.300)
Indicators of the model adjustment
LL(c) 2906.0526 LL(b)
2741.4539 Test RV
329.1973 (21
g.l.) r2 0.1817 r2 adj.
0.1585 AIC
762.4539
CAIC 1,641.8080 Table III.
SBIC 1,620.8080 Price promotions versus
other types of promotion
Note: x221:95%¼ 32:7
 EJM
39,1/2
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.

Conclusions and future research directions

As can be concluded from the number of existing studies on this matter, consumer buying behaviour is a
mystery for manufacturers and retailers, about which much remains to be learned. In the literature there are
numerous works that try to shed light on the way that consumers plan and develop the purchasing process. A
large number focus on the brand choice process. From them we can affirm that a series of relevant variables
exists in this process. Although the behaviour varies from one consumer to another, 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 the purchase constitutes a
variable of interest. It will act to favour the purchase or choice of a specific brand (low price), or reduce the
likelihood of its purchase or choice (high price). Similarly, given the importance of price, consumers usually
form a reference price. Thus, when the consumer must take a decision he or she will act after comparing the
European Journal of Marketing 2005.39:54-

price on offer with the reference price.

From a comparison of prices and reference prices, potential losses (reference price
lower than observed price) and potential gains (reference price higher than observed
price) emerge. Losses act to reduce the brand choice probability, while gains act to
increase it. It has been observed that these effects are of different intensity, i.e. they
68 produce an asymmetric response in consumers. However, there is no agreement on the
its direction. Some authors contend that the effect of losses will be greater that the
effect of gains, according to prospection theory. However, other authors defend the opposite 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 the
market by distinguishing between consumers who are loyal to a brand and consumers
70.

who are not loyal to a brand. It is necessary to take into account such differentiated
patterns of behaviour. Strategies that may be valid for one group are not necessarily
valid for the other.
These have been the most widely studied variables. However, it is necessary to
take into account other variables such as promotions. Thus, in the present paper, apart
from considering the effect of the variables already investigated, we have shown
evidence of how sales promotion techniques influence the consumer’s buying and
brand choice behaviour.
In this way, we have made clear the need to consider the product’s promotional
state at 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 that do not.
The consumer’s brand choice is affected by sales promotions. This fact is
outstanding in the measure that the techniques of sales promotion can be used to get
concrete objectives. Prior to taking a decision, the consumer will take into account
whether or not a promotion exists.
 Evaluations of
sales promotion
Promotions can have as a side effect the consumer acquiring a brand that he or she
would not otherwise try. Moreover, sales promotion can help to decide which brand to
buy when two brands are equally attractive to the consumer. Sales promotion is a tool
that 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
seems that promotions based on immediate price reductions are the most frequently
used. It has been proved that it is this technique that exerts a greater influence on the
brand choice 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 in
promotional actions that are not valued by consumers.
It is possible that the consumer perceives a promotion, for example coupons or
rebates, but does not modify his or her behaviour. In this case, the manufacturers
and/or retailers are investing resources in promotional activities that do not have any
European Journal of Marketing 2005.39:54-

effect on the consumer. It is very important to know the consumer’s preferences and
the actions that significantly influence consumer behaviour. So, resources invested in
sales promotion campaigns that are not valued by consumers should be diverted
towards other promotional activities which are valued by consumers (e.g. price cuts).
The present work needs to be extended to other categories of product in which
brand choice behaviour could vary. It would also be interesting to analyse the
influence that 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 in 69
which consumers show other preferences. It should possible to analyse categories of
product that are not bought with the same frequency. Also, it would be interesting to consider products
70.

where consumers show a strong brand preference. Maybe if categories of products whose buyers are very
loyal are considered, another type of sales promotion action would be preferred. This way, coupons or
promotions that reward the loyalty could have a bigger effect than price cuts.
Also, the characteristics of consumers could be another essential factor. How the
reactions of households to sales promotion activities varies according to the level of
consumption of the product category could be analysed. It would also be interesting to
analyse for a certain category of products how promotional behaviour varies
depending on the type of consumer (i.e. loyal or not loyal to a brand). Very revealing
results could be achieved: are loyal consumers sensitive to promotions? Do loyal and
non-loyal consumers prefer the same type of sales promotion activity?

References
Bell, D.R. and Bucklin, R.E. (1999), “The role of internal reference points in the category purchase
decision”, Journal of Consumer Research, Vol. 26, pp. 128-43.
Brandweek (1994), “Promotional influences spur buyers to try something new”, Marketing Science,
Vol. 21, March, pp. 32-3.
EJM
39,1/2
Brassington, F. and Pettit, S. (1997), Principles of Marketing, Pitman, London.
Briesch, R.A., Krishnamurthi, L., Mazumdar, T. and Raj, S.P. (1996), “A comparative analysis of
reference price models”, Journal of Consumer Research, Vol. 24, pp. 202-14.
Chandon, P. and Wansink, B. (1999), “When and why does consumer stockpiling accelerate consumption
volume?”, Business Strategy Review, Vol. 10 No. 2, pp. 72-5.
Erdem, T., Mayhew, G. and Sun, B. (2001), “Understanding reference price shoppers: a within
and cross category analysis”, Journal of Marketing Research, Vol. 38, November, pp.
445-57.
Gilbert, D.C. and Jackaria, N. (2002), “The efficacy of sales promotions in UK supermarkets”, International
Journal of Retail & Distribution Management, Vol. 30 No. 6, pp. 315-22.
Go´mez, C. (1997), “¿Que´ pasa con las promociones en el Punto de Venta?”, IPMARK, Vol. 482
No. 1-15, pp. 44-6.
Greenleaf, E.A. (1993), “The impact of reference prices effects on the profitability of price promotions”,
Marketing Science, Vol. 14, Winter, pp. 82-104.
Greenleaf, E.A. (1995), “The impact of reference price effects on the profitability of price promotions”,
Marketing Science, Vol. 14 No. 1, pp. 82-104.
Guadagni, P.M. and Little, J. (1983), “A logit model of brand choice calibrated on scanner data”,
Marketing Science, Vol. 2 No. 3, pp. 203-38.
Gupta, A. (1993), “Reflections on ‘Impact of sales promotions on when, what and how much to
buy’”, Journal of Marketing Research, Vol. 30, pp. 522-4.
Hardie, B.G.S., Johnson, E.J. and Fader, P.S. (1993), “Modeling loss aversion and reference
dependence effects on brand choice”, Marketing Science, Vol. 12 No. 4, pp. 378-94.
Kalwani, M.U. and Yim, C.K. (1992), “Consumer price and promotion expectations: an
experimental study”, Journal of Marketing Research, Vol. 29, pp. 90-100.
Kalwani, M.U., Yim, C.K., Rinne, H.J. and Sugita, Y. (1990), “A price expectations model of
customer brand choice”, Journal of Marketing Research, Vol. 27, pp. 251-62.

70 Kalyanaram, G. and Little, J. (1994), “An empirical analysis of latitude of price acceptance in
consumer package goods”, Journal of Consumer Research, Vol. 21, pp. 408-18.
Kamakura, W. and Russell, G. (1989), “A probabilistic choice model for market segmentation
and elasticity structure”, Journal of Marketing Research, Vol. 26, pp. 379-90.
Kopalle, P.K. and Winer, R.S. (1996), “A dynamic model of reference price and expected
quality”, Marketing Letters, Vol. 7 No. 1, pp. 41-52.
Krishnamurthi, L., Mazumdar, T. and Raj, S.P. (1992), “Asymetric response to price in
consumer brand choice and purchase quantity decisions”, Journal of Consumer Research,
Vol. 19, pp. 387-400.
Lam, S.Y., Vandenbosch, M., Hulland, J. and Pearce, M. (2001), “Evaluating promotions in
shopping environments: decomposing sales response into attraction, conversion, and
spending effects”, Marketing Science, Vol. 20 No. 2, pp. 194-215.
Lattin, J.M. and Bucklin, R.E. (1989), “Reference effects of price and promotion on brand
choice”, Journal of Marketing Research, Vol. 26, August, pp. 299-310.
Mayhew, G.E. and Winer, R.S. (1992), “An empirical analysis of internal and external
reference prices using scanner data”, Journal of Consumer Research, Vol. 19, pp. 62-70.
 Evaluations of
sales promotion
Mazumdar, T. and Papatla, P. (1995), “Loyalty differences in the use of internal and external
reference prices”, Marketing Letters, Vol. 6 No. 2, pp. 111-22.
Mazumdar, T. and Papatla, P. (2000), “An investigation of reference prices segments”, Journal
of Marketing Research, Vol. 35, pp. 246-58.
Mela, C.F., Gupta, S. and Jedidi, K. (1998), “Assessing long-term promotional influences on
market structure”, International Journal of Research in Marketing, Vol. 15, pp. 89-107.
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, I., 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
European Journal of Marketing 2005.39:54-

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.
70.