Raju Edit Literature Review

8/18/2019 Raju Edit Literature Review

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SALES PROMOTION TECHNICS

REVIEW OF LITEIIATURE

Sales promotion has become an integral part of the promotion schemesof both manufacturers and retailers of durable as well as non-durable consumer goods. It consumes a very significant portion of the promotional expenses of marketers. In some of the developed countries allocation of promotion budgetto sales promotion has far exceeded spending on advertisement. Brandmanagers are now relying heavily on sales promotion because its impact onsales is more direct, immediate, and quantifiable as compared to advertisement.

arketers use both price and non-price promotions either independently or inassociation with each other. !rice promotions allow buyers to make somesavings of money where as non-price promotions like premium add value to theoffer. !oint-of-!urchase promotions like feature advertisements and displayslead to impulse buying. "he dynamic nature of sales promotion has inspiredmany researchers to turn their attention to study the various issues related tothis element of promotion mix. any studies have been conducted on the

planning, implementation and evaluation aspect of sales promotion worldwide."hese studies are reviewed and presented briefly under suitable heads likeStudies on #onsumer !romotion, Studies on Sales $orce !romotion, Studies on

"rade !romotion and %ther Studies on !romotion.

2.1 Studies On Consumer Promotions

a&ority of the studies on sales promotion encompass consumer sales promotion strategies of marketers. #onsumer sales promotion techniques arealso called 'pull strategies' as they attract or pull customers towards the

promoted brand or promoted store as the case may be. (ccording to one study,

consumer sales promotions are the most researched topic ahead of trade promotion and sale force promotion. Important issues examined in thesestudies include the consumer's perception of marketers sales promotionactivities, effect of promotion on consumption, trial purchase, categoryexpansion, brand switching, brand evaluations, stock piling and consumptionrelationship, long term impact of promotions, incentive-outlay ratio, etc.#onsumer sales promotion literatures are e r classified in to three categories,vi).l.Studies on Impact of Sales promotion* +.Studies on !erception about Sales!romotion* and . Sales !romotion valuation, elationship and %ther

(spects.

2.1.1. Studies on Impact o Promotion

BHEEMI REDDY INSTITUTE OF MANAGEMENT SCIENCE, ADONI (2014-16)


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Studies relating to the impact of consumer sales promotion on consumer behavior, sales, profit, market share, etc. are included in this section. "hese

studies provide guidelines to managers on various issues such as theappropriate tools that may be used for achieving a specific marketing ob&ective,improve their sales promotion effectiveness and so on.

/ecchio, 0el, 0evon et.al. !2""#$ 'report the results of the study, whichexamined the effect of sales promotion on brand preference through etaanalysis. esults of 12 studies had been integrated. (s per the study sales

promotions do not affect post promotion brand preferences in general. Butdepending upon characteristics of sales promotion and the promoted product,

promotion can either increase or decrease preference for a brand.

3dubisi, %ly, 3elson and oi, "ung, #hiew !2""%$ in their study evaluated theimpact of sales promotional tools, namely coupon, price discount, free sample,

bonus pack, and in-store display, on product trial and repurchase behaviour of consumers. "he moderation role of fear of losing face on the relationship

between the sales promotional tools and product trial was also examined. "heresults of study show that price discounts, fiee samples, bonus packs, and in-

store display are associated with product trial. #oupon does not have anysignificant effect on product trial. "rial determines repurchase behaviour andalso mediates in the relationship between sales

promotions and repurchase. $ear of losing face significantly moderates therelationship between in-store display and product trial.

4umar, /. and Swaminathan, Srinivasan !2""%$ 'studied the impact of couponson brand sale and how that impact decays over the life of the coupon. "heauthors use an econometric model to demonstrate the coupon effect in terms of equivalent price reduction, account for coupon effect over time, allowinference of coupon effects when retailers decide to double or triple the couponvalue and provide both self-coupon and cross-coupon elasticities at differentlevels of aggregation. esults indicate that the effect of doubling the face valueof coupon result in more than a proportionate increase in elasticity and bothself and cross- coupon elasticities are much smaller in magnitude than theaverage self-cross price elasticity.

positive long-run effect5 but reduced future purchases by established customers6a negative long- run effect5



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0awes, 7ohn 6+8895 'reported the result of his study on the effect of amassively successfbl price promotion in a consumer goods category.Specifically, he sought to determine if this large price promotion had any long-

term impact on brand value* short-term impact on total category volume for theretailer* short-term effect on competing retailers* and long-term effect oncategory sales for the retailer who runs the promotion. esults of the studyshowed that a very successfbl promotion did not have any longer-term effecton the brand 6positive or negative5, but it did expand the total category for theretailer, though temporarily. Sales dropped slightly for one competing retailer at the time of promotion out of the three units studied. It was observed that the

promotion was followed by a decline in the total category volume for theretailer, suggesting some degree of purchase acceleration or stockpiling byconsumers, :onger-term negative effect on category cancelled outapproximately two third of the gain of the price promotion to the retailer.

Baohong et.al. 6+88 5 'reviewed various studies relating to the impact of promotion on brand switching and found that these studies used choicemodels, especially logit. (ccording to these studies promotion has a strongeffect on brand switching. "he authors show that logit choice model cansubstantially over estimate brand switching because they do not take in to

account the rational ad&ustments that customers make to take advantage of promotion. :ogit models do not take in to account stock piling anddeceleration strategies. "hey use a dynamic rational model and compare it witha logit model. "he result was that logit models over estimate brand switching,that nested logit helps address the problem but not completely and thatdynamic rational model provide the most accurate estimate of switching.

Swait, 7ofie and rden, "ulin 6+88+5

particular aspect of marketing mix consistency overtime for frequently

purchased packaged consumer goods, the impact of temporal consistency of store promotions as well as the availability of the product on the shelf* onconsumer product evaluations 6utilities5 and choices. "he empirical results,

based on fabric softener panel data, indicate that hture insert and availabilityconsistency increase systematic utility in a statistically significant way over andabove the positive effects that displays and feature have on choice.

Soman, 0ilip and ;ourville, ". 7ohn 6+8825 &O investigated how and why price bundling affect the consumption of a service based product such as a sporting



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event or a theatre performance. "he results of the study showed that price bundling leads to a decoupling of the sunk cost and pending benefits of atransaction there by reducing the likelihood of down stream consumption.

Smith, $. ichael and Sinha, Indra&it 6+8885 ' ( examined the relationship between different types of promotions 6straight price promotion, extra-productor volume promotion and mixed promotion5 across four supermarket productcategories controlling separately for the effect of two category-basedmoderating factors vi). product stock-up characteristics and price level.

esults showed that a ma&ority of consumers preferred mixed promotions *type of promotions does influence store preference 6with price and volume

promotions having the greatest influence5. #onsumers generally preferred price promotion for higher priced product categories and they preferredvolume promotions for lower priced categories.

$eame, (ndrew et.al. 62 +. If yes, are these changes associated withchange in manufacturer's advertising and retailer's promotional policies> "heir

results are consistent with the hypothesis that consumers become more priceand promotion sensitive over time because of reduced advertising andincreased promotions.



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;ould, ?. Brim !1**-$ in his study, focused on the dynamics of the consumer purchase process and examined the effect of coupon-based price deals on inter

purchase times. @e used econometric models of duration to a formally purchased food commodity, cheese. esults suggested that use of couponresults in reduced inter-purchase time for all varieties of cheese products.

Sethuraman, a& !1**#$ (# developed a Separate ffect odel that separatesthe total discount effect of competing high-priced brand on the sale of thefocal low-priced brands in to discount effect. $indings fiom empirical analysisis that the leading national brand can draw sales fiom competing brandswithout reducing its price below the price of other brands.

7efii-y, 7. and c.(lister, :eigh !1** $ (- tested the hypothesis that couponredemptions are greatest in the periods immediately following the coupon dropand decline monotonically. (s per the study the hypothesis was re&ected and itwas proved that expiration dates induce a second mode in the redemption

pattern &ust prior to the expiration dates.

;rover, a&iv and Srinivasan, /. !1**2$ (' investigated the multiple effect of

retail promotion on brand loyal and brand switching segment of consumer."hey found that the market can be characterised by brand loyal segment andswitching segments* promotional variable have significant effects on segmentmarket shares, the effect being different across segments* store share is relatedsignificantly to promotional attractiveness of a store* the overall promotionalattractiveness of the product category has significant current and lagged effecton category volume and the lagged effects resulting from consumer purchaseacceleration and stock-up last longer for brand loyal segments than for switching segments.

)a/n0 . Barbara and :oouise, (. "herse !1**"$ (* investigated how in-store price promotions affect market share after the promotion have been retracted."hey find that the effects of promotion are contingent on both the choice

pattern of sub&ects- whether or not sub&ects switch among brands- and theubiquity of promotions in a product category. If only one brand is being

promoted and sub&ects are generally loyal to the last brand purchased, brandchoice probability declines from pre-promotion levels once the promotion is

withdrawn. @owever if sub&ects tend to switch among brands in the absence of promotion, or several brands are being promoted, this decline is mitigatedandlor does not occur.



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;uptha, Sunil 62


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parts of the state. /arious mathematical and statistical tools were used for anlysing the data including #hi-square test, t-test, (3%/( and 0uncan test.(ccording to thi findings of the study consumers belonging to different

categories are very much aware of the various sales promotional strategiesadopted by marketers. $urther, of the different tools used for sales promotion,

price-offs and gifts and complements are most attractive to consumers. oreover, for creating brand awareness, trial purchase, repeat purchase and brandloyalty, gifts and complements, fiee samples, price-offs and premium offer respectively are the best tools suggested.

attitudes, patronage intentions or switching intentions. (mong women, therewere greater differential effects of company reputation on their attitude ascompared to the case with men, where the differential effects were not as great.

!eter, . 0arke and #indy, E. #hung 6+8815 25 examined the extent to whichdifferent promotional fiames increased perceptions of deal value. esults of thestudy showed that negative equity inference moderates discount framing effectsand undermines deal value, particularly when no assurance of product qualitywas provided. very-day-low-price offers were also vulnerable to negativequality inference, while fiee gifts fiames maintained quality perceptions and

increased deal value. !roduct trial acts to further magnify promotional fiamingeffects.

/yas, @. !reeta 6+8815 26 attempted to study consumer preferences withrespect to sales promotion in $ #; category. It was found that sales

promotion offers which is unique, which offers immediate incentive preferablyof price-cut nature is likely to appeal to all consumer segments.

7anis)ewski, #hris and rcus, #unha 6+8895 2- examined the argument thatthe impact of price discount on the perceived attractiveness of the product

bundle depends on which product is discounted i.e., the discounts are effectivewhen they are assigned to the product that will receive the most weight in theoverall evaluation of the bundle. esults of six studies show that the perceivedvalue of the discount may also depend on referent specific to each product.regret in the face of a subsequent negative outcome realised via a switch than inone realised via a repeat purchase. esults also suggest that feelings of regretare mitigated when the consumer reflects and concludes that the decision was

appropriate under circumstances.



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4ureshi, Sonal and /yas, !reetha 6+88+5 ,2 examined the nature of sales promotion activities in toilet soap category in India and studied retailer andconsumer perception with respect to these activities. It is reported that

premiums 6fiee gifts5 are the most frequently used scheme in both premiumand popular toilet soap categories, followed by price-offs. ore over retailers

perceive price-offs as the tool having greater impact. #onsumers perceive price-off as the most attractive tool of sales promotion for toilet soaps.

Srivastava, 7oydeep and 3icholas, :urie 6+8825 ,, reported the result of threestudies that examined price-matching refund policies from a consumer

perspective. "he frrst study shows that consumers perceive price matchingrefund policies as signals of low store prices and the presence of a refundincrease the likelihood of discontinuing price search. Second and third Studiesshow that when search costs are low, the number of stores searched increasesin the presence versus absence of a price-matching r e h d policy. ?hen searchcosts are high, consumers appear to accept the price-matching signals at facevalue and search less in the presence of a refimd.

/ibhas, adan and a&esh, Suri 6+8825 , anlysed the price discounts andfixed price offers in terms of their comparative impact on consumer valuation

of products. Fsing a model of consumer valuation they explored theinteraction between the negative quality effect and the positive monetarysacrifice effect associated with price discount. "heir study suggested thatimmediate levels of price discounts are more desirable than a fixed price offer.@owever, a fixed price offer is more desirable than both high and low levels of

price discounts.

7eanne, :auren, unger and 0hruv, ;rewal 6+8825 ,% examined the effect of bundling formats 6partially-bundled attributes vs. unbundled attributes5 andfiaming of promotional discounts 6rebate, discount and fiee-options5 on

perceived quality, price acceptability, perceived value and subsequent purchaseintentions. esults of their study indicated that price reductions that are fiamedas providing GfieeG product options are perceived more favourably t/anconventional discounts which, in turn, are more favourable than rebates,holding the total amount of a price reduction constant. "he results alsosuggested that unbundling of deals 6segregation of gains5 enhances these

perceptions.

"he model developed by them suggests that under some conditions price-matching policies lead to a more intense price competition. (ll firms may not



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find it profitable to offer refunds, and consistent with customer expectations thefm with lower price will offer refunds.

!riya, aghubir and )im0 #orfinan !1***$ G investigated whether price promotions affect the pre-trial brand evaluations by the people. "hey are of theopinion that price promotions affect pre-trial brand evaluations unfavourably insome specific conditions i.e., when the brand has not been promoted earlier*when promotions are used as a source of information about the brand, when theevaluator is not an expert* and when promotion is uncommon in the industry.

7ane, ?. :icata et.al. !1**+$ " examined the effect of plausible as well asimplausible or exaggerated tensil discount on consumer discounting behavior,

price perception and behavioral intentions. "hey compared the effects acrosstwo consumer segments, elder and non-elder, for a product and a service.$indings indicate that the age of the consumer had a significant interactionwith discount level for consumers discounting behavior regarding the productoffer. "he effect of implausible and high-plausible discount on price perceptionwas higher than that of low-plausible discount. "here were no significantdifferences between the implausible and high-plausible discount level for price

perception behavior or behavioral intentions.

#hung,-4ue, @su and Ben, S. :iu !1**+$ G examined the role of mood in price promotions. esults of their study show that mood influences the effectivenessof price promotions through consumers perceived transaction value in a moodcongruent direction. ood effects are asymmetric in positive and negativeconditions. #onsumers perceived quality has been found not influenced by pre-shopping mood of the consumer.

4apil, Bawa, et.al. !1**-$ 2 suggested a framework for modeling couponredemption that makes it possible to evaluate the relative merit of different coupon promotions and examined how consumer response to couponsvaries by coupon characteristics. mpirical application of the model showedthat important insight into consumer response to coupon can be obtained andthat consumer response can be predicted for nearly


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name brand is lower than that for store brand. In other words stores can attractconsumers by offering a small discount while a large discount is needed for similar effect for store brand. "he study also indicates the existence of

promotion saturation point above which effect of discounting on changes inconsumer purchase intention is minimal. "hese results confirm consumers Sshaped response to promotions.

anohar, S. et.al. !1**2$ - report results fiom a controlled experimentdesigned to investigate the impact of a brand's price promotions frequency andthe depth of promotional price discounts on the price consumer expect to payfor that brand. (s per the study, both the promotion fiequency and depth of

price discounts have a significant impact on price expectations. "here is aregion of relative price insensitivity around the expected price such that only a

price change outside that region has a significant impact on consumer brandchoice.

Scott, 0avis, et.al. !1**2$ + re-examined the findings of earlier studies that a brand which is promoted would be evaluated lower and therefore have reducedrepurchase probability. "hey re&ect this theory and found that promotion doesnot have a negative impact on consumer repurchase and the overall evaluation

of promoted brands remain unaffected.

(radhana, 4rishna, et.al. !1**1$ * investigated several aspects of consumer perceptions of deal fiequency and deal prices. esults indicate that manyconsumers are reasonably accurate about deal fiequency and sale price. ecallon deal fiequency and sale price is higher for consumers with larger family si)e and those who read weekly fliers for items on sale, devote a higher

percentage of product class purchase to the brand, and purchase the packagesi)e more frequently, it is lower for old buyers.

Inman,.7.7eBey et.al. 62


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In addition to the impact of consumer sales promotion techniques andconsumer's perception of the same, various other dimensions have also beenresearched worldwide.

psychographic traits associated with deal-proneness. esults of a consumer survey indicate that there are relationships between some psychographicscharacteristics of consumers and deal-proneness. "hough price consciousconsumers are found more deal-prone, savings are not the only reason to buy a

product on promotion. %ther aspects as impulsiveness, innovativeness andshopping en&oyment also influence deal proneness.

!riya, aghubir 6+8815 52 conducted two laboratory experiments to examinehow the consumers respond to products that have been offered as a Gfree giftwith purchaseG of another product. esults of the first study showed that whenan economically identical offer is framed as a &oint bundle compared withwhen it is framed as a GBuy one, ;et one freeG offer, consumers are willing to

pay less for the product offered GfieeG. ?hen a product is given away GfreeGthen consumers are willing to pay less for it as a



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stand alone product, especially when the original promotion offer does notinclude the price of the gift, according to the result of the second study.

intention to redeem coupon is affected by the face value of the coupon for mostcommon grocery items on the basis of data colleted using a self-administeredquestionnaire fiom a convenience sample of students and non-students. esultsof the study suggested that, for low face value of coupon, the intention remainmore or less unchanged. "he correlation between intention to redeem thecoupon and the perceived sticker price of the product is positive at the lower levels of coupon face value, but becomes negative for higher face value.

!reeta, @emang, /yas 6+8815 % . in her study, mainly examined the ratio of incentives and outlays when consumers buy fast moving consumer goodsunder various sales promotion offers. "he ma&or finding of the study is thatvariation exists in I28 ratio across product categories and the non-foodcategory exhibits more variation than the food category. It was also found thatthe level of incentives in the non-food category is higher than that of the foodcategory.

@eather, @onea and 0arren, ?. a/( 6+8815 G examined the psychometric properties of consumer affect that is produced by a sales promotion offer. "hey proposed and tested a +A-item scale instrument, the !romotion (ffect Sales6!(S5, which measures affective response to promotions. esults indicatedthat the +A- item !(S is a parsimonious and effective measurement tool of theaffect produced by sales promotion.

!riya, 7ha ,0ang, et.al. 6+8815 present an empirical view of various consumer promotions launched in the Indian market for the period 2


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purchase behavior and the impact of price promotion on future purchase. "heystate that customisation method of promotion can greatly improve theeffectiveness of current promotion practices.

!erer, @.. :eeflang and 0ick, . ?ittink 6+8895 %+ proposed a store levelregression model that decomposes the sales promotion bump in to three parts=cross brand effect 6secondary demand5, cross period effect 6primary demand

borrowed fiom other time periods5 and category expansion effect 6remaining primary demand5. %n the basis of data obtained fiom four stores, they suggestthat each of the three parts contribute about one-third on an average. ( modelis also proposed for separation of category expansion effect into cross-storeand market expansion effect. $eatures supported price discounts are strongly

associated with cross-period effect while display-only supported pricediscounts have especially strong category expansion effects. ?hile the role of category expansion effect tends to increase with higher price discounts the roleof cross brand and cross-period effects tend to decrease.

7orge, . Silva et.al 6+8895 59 developed and illustrated a model to capturethe effect of coupon activity in logit models of brand choice applied to scanner

panel data. "hey presented the empirical application of the model on two

categories of scanner panel data, catsup and liquid laundry detergent. "heyfound that price elasticity is higher for coupon users than non-users.

!eter, Boatwright et.al. 6+8895 60 studied the determinants of sensitivity to the promotional activities of temporary price reductions, displays and featureadvertisement based on a unique data base with all FS markets and all ma&or retail grocery chains represented. "hey also investigated the role of retailcompetition, account retail strategy and demographics in determining

promotional response. esults suggest that retail strategic variables such as price format are the most important determinants of promotional response,followed by demographic variables.

Sandrine, ace and Scott, (. 3elsin 6+8895 #1 empirically studied therelationship between pre and post promotion dips in weekly store data andFniversal !roduct #ode 6F!#5 category and store trading-area customer characteristics. "hey report that, on an average, pre and post-promotion dipsaccount for . of the current-week promotion bump, with a range of

2A.A 6hand detergent5 to DA.9 6canned tuna5.



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!riya, eghubir 6+8895 #2 reported the results of three experiments thatexamined whether the economic value of a coupon is a source of informationto infer the prices of the product l services and the quality of the product I

services, which inference can under cut the economic value, with resultingconsequences for deal evaluation and purchase intentions. esults show thatincreasing the value of coupons does not always improve deal evaluations or

purchase intentions. "he presence of past price information about the brand,information about prices of other brands offered by the company, informationabout competitive prices moderate the impact of coupon value on brand relatedinferences.

!reeta, /yas 6+8895 reviewed recent contributions in the area of sales

promotion through eta analysis, classified them and reported the keyfindings. It is reported that ma&ority of the articles addressed manufacturer's

perspectives* almost all studies were done in developed countries* coupon as aconsumer promotion tool was widely researched* and more than half of thearticles were addressing planning related issues.

ichel, #aroche et.al. 6+88 5 # proposed a multi-dimensional model, whichis based on two different promotional tools- coupons and two-for-one

promotions- supposed to trigger different promotional response. %n the basis

of their study they highlighted cornmonalities and differentialities in the process of promotion use.

@arald, 7. et.al. 6+88 5 G analysed the result of the previous studiesdecomposing the effect of sales promotion that the ma&ority of the sales

promotion elasticity is attributed to secondary demand effects 6brandswitching5 and the reminder is attributed to primary demand effect 6timingacceleration and quantity increases5. "he authors offer a complementarydecomposition measure based on unit sales. "he measure shows the ratio of thecurrent cross-brand unit sales loss to current own-brand unit sales given during

promotion. (pproximately of the unit sales increase is attributable tolosses incurred by other brands in the same category.

ichard, :. %liver and ikhael, Shor 6+88 5 G studied the effect of usingdigital coupons in prompting the customers to enter a promotional code and itsinfluence on shopper's perception and behavior such as shopping cartabandonment. esults showed that providing a code and its attendant price

reduction had a positive effect on perception of fairness and satisfaction whencompared to traditional couponing.



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4ureshi, Sonal and /yas, !reeta 6+88 5, #- in their study try to understand the position of &oint sales promotion in India and problems and prospects of thistype of promotion. #ontent analysis done by the researchers revealed thattarget market commonality relationship is the prime reason for companiesoffering &oint sales promotion. $urther, &oint sales promotion is most prevalentin consumer durable category.

behavior of firms. "o study this, they developed a model of price competition between firms in a setting that accommodate the primary demand effect of stockpiling and increased consumption. "he authors report that the presence of flexible consumption effect causes more intense price competition and deeper

promotion.

!ierre, #handon and Brian, ?ansink !2""2$ 69 developed a framework of post purchase consumption behavior, which they used to examine when and howexogenous product stockpiling increases the short-term rate of consumption.Fsing results fiom a scanner study, a field study and two laboratory studies !2"different products5 they found that stock piling indeed causes people toconsume products at a faster rate, especially when the product is convenient to

consume. "his is because stock piling accelerates both consumption incidenceand quantity when the product is convenient to consume but only influencesconsumption quantity when the product requires preparation. In addition theauthors show that stock piling triggers impulse consumption incidences

because it raises the salience of these products at the point of consumption.?hen a product is being consumed, however, stockpiling increases thequantity consumed because the product is perceived as relatively inexpensiveto consume.

Re erences



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2. /ecchio, 0el, 0evon et.al, 6+88D5 G"he ffect of Sales !romotion on!ost-!romotion Brand !reference= ( eta (nalysisG, 7ournal of etailing,A+, , pp. +8 -+2 .

+. 3dubisi, %ly, 3elson and oi, Tun30 #hiew 6+8815 G#ustomersBehavioural esponse to Sales !romotion= "he ole of $ear of :osing $aceG,(sia !acipc 7ournal of arketing and :ogistics, /ol. 2C, 3umber 2, pp. +-9


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Smith, $. ichael and Sinha, Indra&it 6+8885, G"he Impact of !rice and xtra!roduct !romotions on Store !referenceG, International 7ournal of etail and0istribution anagement, /ol. +A, 3o. +, pp. A -


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+8. ;uptha, Sunil62


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!romotionsG, uropean 7ournal of arketing, /olume= C, 3umber 22, pp.2C9D - 2CD2.

8. $red, $einberg et.al. 6+88+5, G0o ?e #are ?hat %thers ;et> (Behaviorist (pproach to "argeted !romotionsG, 7ournal of arketing esearch,/ol.


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!riya, aghubir and )im0 #orfinan 62


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(radhana, 4rishna et.al. 62


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2 A. ;eoring, and !articia, (. 62

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