Consumer response to sales promotion programs

1. Consumer response to sales promotion programs

2. Outline • Definition of sales promotion • Types of sales promotions • Benefit-congruency model of sales promotions • Instrumental conditioning and sales promotions • Behavioral influence strategies

3. Sales promotions • directed at either marketing intermediaries or consumers; • designed to affect behavior directly (not through intervening mental processes); Trade promotions Manufacturer Trade Consumer promotions Retailer promotions Consumer

4. Types of consumer promotions • coupons: different types of coupons; • sampling: full- or trial-size products delivered via direct mail, print media, door to door, in or on packages, etc.; • premiums: goods or services offered free-in-the-mail or in self-liquidating form or in-, on-, or near-pack; • price-offs: reduction in a brand’s regular price by about 10 to 25 percent; • bonus packs: offer of extra quantities of the product at the regular price;

5. Types of consumer promotions (cont’d) • refunds and rebates: cash discounts or reimbursements for the purchase of packaged goods or durable goods; • sweepstakes and contests: opportunity to win cash, merchandise, travel prizes, etc. purely on the basis of chance or for solving the contest problem; • overlay and tie-in promotions: use of multiple sales promotion tools (combination programs) and promotion of multiple brands by the same (intra-company pooling) or different (inter-company tie-ins) manufacturers (joint or group promotions);

6. Types of retail promotions • price discounts: reduction of regular price, “2 for” or “3 for”, etc. • displays: end-of-aisle, front-of-the-store, in-aisle, shelf-talker and other POP displays; • feature advertising: announcements of specials in local newspapers or circulars (e.g., on “Best food days”), often paid for by co-op or advertising allowances; • other promotions: “in-ad” coupons, special financing charges, premiums/contests, free goods, free trial, etc.

7. Benefit-congruency model of sales promotions • Benefits offered by sales promotions • Utilitarian benefits • Hedonic benefits • Benefit congruency • Basic idea • Moderating influence of brand equity

8. Sales promotion benefits Utilitarian Hedonic Enter- tainment Value expression Quality Convenience Savings Exploration

9. Sales promotion benefit matrix high Hedonic benefits Free gifts Free product offers Sweepstakes Coupons Price reductions Rebates low high Utilitarian benefits

10. Instrumental (operant) conditioning R1 R2 Rx R4 R5 stimulus situation organism reinforcement the likelihood that Rx will be emitted again in the same stimulus situation increases Basic idea: Behavior is a function of its consequences!

11. Instrumental conditioning (cont’d) • instrumental conditioning (IC) involves learning of relationships between responses and their consequences; • IC deals with operant behaviors (i.e., usually voluntary responses that are emitted because of the consequences they produce); • pleasant or unpleasant consequences can be used in IC; • consequences can be administered according to different schedules of reinforcement; • immediate reinforcement is usually more effective than delayed reinforcement; • complicated behaviors can be learned through shaping;

12. Types of consequences used in IC response causes [(un)pleasant] consequence to be presented removed negative reinforcement positive reinforcement increase of target behavior response influence positive punishment negative punishment decrease of target behavior

13. Consequence strategies for promoting safety belt use (Geller et al. 1982) Response based: • vehicle voice-synthesizer responds with “Thank you” upon buckling; • aversive buzzer in vehicle avoided by buckling up; • child receives reprimand from parent when observed sitting next to an unused safety seat; • child loses TV privileges when refusing to sit in child safety seat; Outcome based: • car raffled off when 70% belt usage reached at a plant; • severe injury avoided as a result of being buckled in a collision; • employee receives letter of reprimand from corporate safety office when observed unbuckled; • teenager loses driving privileges when parent observes him unbuckled;

14. Schedules of reinforcement • continuous reinforcement schedules: every occurrence of the response of interest is reinforced; • intermittent (partial) reinforcement schedules: only some of the responses of interest are reinforced; • ratio vs. interval schedules (frequency of reinforcement depends on either the rate at which responses are emitted or the passage of time); • fixed vs. variable schedules (reinforcement is administered either regularly or probabilistically);

15. Examples of reinforcement schedulesin a promotional context • a rebate is offered for each purchase of a product; • get a free frozen yoghurt with 10 proofs of purchase; • scratch-off coupon with a chance of winning a free drink (probability of winning is 1 in a 1000); • 10% off on one purchase a month; • special deals are available when a particular light in the store is on, with the light turned on every couple of hours on average;

16. Behavioral influence strategies • foot-in-the-door technique: based on the notion that once a person has been induced to comply with a small request, (s)he is more likely to comply with a larger demand; the theoretical rationale for this effect may be found in self-perception theory, which argues that people infer their attitudes from self-observation of their own behavior; • door-in-the-face technique: based on the notion that initial noncompliance with an extreme demand may increase subsequent compliance with a more moderate request; the effect can be explained by assuming that the second request is perceived as a concession which creates normative pressures to reciprocate;

17. On inducing compliance with requests (Reingen) • 224 students at the University of South Carolina were approached by volunteers of the Heart Association with a request to make a donation; • the following types of requests were investigated: • donation request only: direct request for a donation; • small-then-donation request: first request to answer four short questions as part of a survey (e.g., have you heard of the Heart Association?), then request for a donation; • extreme-then-donation request: first request to pledge 3 $ per month for a year, then request for a donation; • even-a-penny condition: direct request for money, with addition that “Even a penny will help”; • small-then-donation and extreme-then-donation requests with addition of even-a-penny condition;

18. Inducing compliance with requests (cont’d) percent compliance total donations average donations donation-request only 19 3.07 0.51 small-then-donation request 34 6.50 0.59 extreme-then donation request 34 6.75 0.61 even-a-penny 47 4.64 0.31 small-then-donation request, even-a-penny 50 7.20 0.45 extreme-then-donation request, even-a-penny 44 5.60 0.40