Consumer Evaluations Of Sales Promotion: The Effect On Brand Choice

The Authors

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

Rodolfo Vбzquez Casielles, Department of Business Administration, University of Oviedo, Oviedo, Spain

Abstract

Purpose - This study evidences the influence that sales promotion has on brand choice behaviour. Establishments wish to influence consumers' buying behaviour, and thus they launch 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 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 actions that influence his or her behaviour. Considering the results, it seems that promotions based on price have the greatest effectiveness.

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Article Type: Research paper

Keyword(s): Brands; Consumer behaviour; Prices; Advertising; Discounts; Promotional methods.

European Journal of Marketing

Volume 39 Number 1/2 2005 pp. 54-70

Copyright © Emerald Group Publishing Limited ISSN 0309-0566

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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: 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 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 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 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,