Consumer Research on Sales Promotions

A State-of-the-Art Literature Review

Harsh (IM 18 / 191)

Research Traditions

Sales Promotions

Consumer Psychology

Consumer Behavior

Consumer Behavior

Users Of Promotions

Purchasing Strategies

Consumer Psychology

Cognitive

Attitudinal

Behavioral

Economic

Objective :

• Specificity of Research Traditions • Principal Results

• Most promising areas for Future Research

A research tradition can be defined as "a framework hinging on a privileged theory, methodology or conception of the world"

Distinguishing factors between two research traditions :

X Concepts X Methodologies

Cognitive Aims Viewpoints

Definition and Typology

Firms —Promotional policy

Sales promotions

Price product advertising

Customers —Consumers —Retailers —Sales force The

authorities —Consumer welfare

Decisions Mechanisms Effects

On sales and profitability

On behaviors and attitude

Different levels of analysis of sales promotion

Trade Promotions Retailers’ Promotions

Manufacturers Retailers and Consumers Sales Force

Discounts

Price Promotions Displays Features

Consumers’ Promotions

Coupons, Refunds, Premiums More products, two at the price of one

Natural Typology of sales promotions

Mechanisms Operationalizations Empirical Evidences

Cost reduction - Sales promotions cost less than everyday-low-price policy.

(1) Transfer of storage costs to the costumers who have cheaper storage costs than the retailer

(1) Non-perishable products have greater promotional elasticity

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

(2) People with high demand have higher opportunity costs of time. Companies can use the following costs to discriminate : — Cost of collecting coupons — Transaction costs of coupons — Storing promoted products

(2) Coupons are offered on expensive products . Consistent with the discrimination hypothesis, promotions are often random, of similar magnitude and, above all, purchase probabilities don‘t change after a promotional purchase.

(3) Improving the efficiency of price promotions through pseudo price-cuts if there are enough light information processors among consumers.

(3) Simulation in a university retail outlet. The recommended promotional policy yields higher returns

(4) If they don't know 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.

Taking advantage of consumer heterogeneity with promotions

• - Not incorporated all working papers and professional works completed during past 10 years

• Substantial overlap of various research traditions not accounted for

Limitations

• Ample room for research on the various sales promotions techniques

• Consumer-oriented research tradition will no longer continue with the orthodox methods

• Theory-oriented research tradition is very unbalanced

• Theoretical economic models have made major contributions to research on sales promotion

Takeaways

References

• Research Paper

– Consumer Research on Sales Promotions : A State-of-the-Art Literature Review

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

– Pierre Chandon, HEC School of Management, Paris

– URL : http://faculty.insead.edu/chandon/personal_page/Documents/Article-Consumer%20research%20on%20sales%20promotions.pdf

Disclaimer

• This document was prepared purely for academic purpose.