See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/235273101

Effect of product category on promotional choice: Comparative study of

discounts and freebies

Article  in  Management Research News · January 2009

DOI: 10.1108/01409170910927587

CITATIONS READS

30 3,801

1 author:

Subhojit Banerjee
Gautam Buddha University
14 PUBLICATIONS   59 CITATIONS   

SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Application of Partial Differential Equation in Brand Targeting View project

All content following this page was uploaded by Subhojit Banerjee on 03 November 2017.

The user has requested enhancement of the downloaded file.

 The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0140-9174.htm

MRN
32,2
Effect of product category on
promotional choice: comparative
study of discounts and freebies
120 Subhojit Banerjee
Institute of Business Management, VBS Purvanchal University, Jaunpur, India
Abstract
Purpose – Marketers have been using discounts and freebies for sales promotion strategy for a long
time, yet a dilemma concerning better promotion remains. The paper tries to address this issue
through empirical research by classifying sales promotion based on their utility and relatedness to
the product to which they are bundled.
Design/methodology/approach – Two hypotheses were drawn: there is a distinctive preference of
sales promotional offering, when it is bundled with a product, and the preference of promotion varies
with the product category it is bundled with; discounts by retailers are preferred over advertised
discounts, but they negatively affect the credibility of the product The hypotheses were tested by a
double-staged experimental protocol. The first stage standardized the perceived price of the freebies,
and the second stage consisted of a 2  2  2 mixed model experiment. The first hypothesis was
tested with Friedman’s Test and Wilk’s , and the second hypothesis was subjected to t-test and
factor analysis on a four-item scale.
Findings – Promotion type influences the rate of increase in market demand and is product category
dependent. Promotional offerings which can be readily converted into monetary terms are more
preferred to freebies but in the long-run, they can affect the overall value of the product. Retailer
discount is preferred over advertised discount but has a negative perception. Hedonic freebies are
least preferred; but have a higher perceived value.
Research limitations/implications – The study deals with the promotional choice of consumer
durables and consumables. It is applicability to other product categories needs confirmation.
Practical implications – The findings can be useful for marketers in designing promotional
strategies, especially in the consumer retail segment, new product marketing and brand extension
situations.
Originality/value – The paper will help marketers design better and appropriate promotion vis-à-
vis a product and its target consumers.
Keywords Promotional methods, Sales strategies, Advertising, Marketing
Paper type Research paper

Introduction
Marketers have since long tried to stimulate demand using various promotional tools
like cash discounts (CDs), volume discounts (VDs) and freebies. However, recently,
there has been an increase in interest towards sales promotion from both executives
and researchers (Currim and Schneider, 1989). Annual promotional budgets of many
MNC’s are in millions of dollars (billions of Rupees). But, an ideal combination of
freebies and products is still more a matter of chance. An understanding of how
consumers respond to promotions is important in developing effective strategies, not
only for sales promotions but also for other elements of the communications mix,
which are closely associated (Strang, 1976). Very few studies have been conducted to
ascertain the customer preference of sales promotion tools in relation to product
Management Research News categories.
Vol. 32 No. 2, 2009
pp. 120-131 This research study tries to quantitatively identify underlying relations between
# Emerald Group Publishing Limited different product categories and different sales promotion tools. The study also dwells
0140-9174
DOI 10.1108/01409170910927587 upon the different classification of promotions that have been proposed by various
authors on the basis of price, and proposes a classification based on the utility of the Promotional
promotion. choice
Objectives of the study
As there has been limited research on customer’s preference towards promotion type in
relation to product category, the study aims at finding and analyzing the relationships
between various product type and different promotion type. The broad objectives of 121
the study can be stated as follows:
. analyzing the variation in consumer preferences towards different types of
promotion, when they are bundled with different product categories;
. attempting to categorize the various types of sales promotion on the basis of
their utility, and relatedness of promotional offering with the product it is
bundled with;
. generalizing unaccredited price discounts given by retailers, and analyzing its
relative preference to advertised discounts;
. rationalizing the psychological processes that underly a consumer’s promotional
choice; and
. studying the relative effects of different promotion types on product credibility.

Conceptual background
Sales promotion is a short-term strategy to stimulate demand. There is ample evidence
both in trade press (Abrams, 1980) and the academic literature (Massy and Frank,
1965; Sunoo and Lin, 1978; Schindler, 1992) that promotions can serve to strongly
stimulate consumer sales. However, very little discussion has been attributed to
classify different promotions (Jha and Koshy, 2004). Most classifications tend to
differentiate the promotion types either on the basis of price vs non-price promotion
(e.g. Blattberg and Nestlin, 1990) or on the characteristics of the promotion i.e. cash,
goods or services (McDonald, 2003). The paper attempts to probe deeper into the
effects of discounts and freebies. Freebies have been further classified on the basis of
their utility, as well as their relatedness to the product they have been bundled with.
Some of the commonly used sales promotion techniques are as follows.

Cash discounts
This is a method of price promotion which eventually effects the retail price of the sold
product. These type of promotions commonly include price-offs (e.g. 10 per cent off), or
cash coupons which give money off on purchase of a product, and rebates, (Contests
and Sweepstakes) which provides a chance to win a large prize either through skill or
chance.

Volume discounts
These types of sales promotions are very common with fast moving consumer goods
(FMCGs) products. This type of strategy tries to stimulate demand by increasing
consumption. These types of promotions are characterized by adding an extra volume
to the existent product e.g. 15 per cent extra, Buy two shirts and get one free, coupons
which give extra volume on repurchase etc.
MRN Freebies
Freebies or free gifts are small items, usually having a fraction of the monetary value in
32,2 comparison to the product they are bundled with. Freebies are the most popular
promotion category used by marketers. They have accounted for >50 per cent of all
promotions in India. Although the freebies have a perceived value, they are given along
with the product without an extra charge. Freebies have been used in sales promotions
with great enthusiasm by marketing strategists, as they can be bundled to offer unique
122 combinations. Freebies can be kitchen utensils to toothbrushes to toys and games.
Freebies can also be used to draw attention of new customers as well as new customer
segments.
For the purpose of the study, freebies have been classified into two segments
utilitarian and hedonic. Utilitarian freebies are those which have some utility e.g. pens,
toothbrushes, torch etc. Hedonic freebies are ones which have no utility as such, except
that pertaining to pleasurable emotions or feelings. Examples of hedonic freebies
would be showpieces, toys, games, limited offer accessories, jewelry, superhero
cards etc.
Utilitarian freebies have been further divided into two sub classes, freebies that are
directly related to the product that they are being bundled with e.g. a cloth scrubber
bundled with a detergent, a toothbrush given along with a toothpaste. And freebies
that are not related with the product they are bundled with e.g. a mug with an insect
repellent or a toothbrush with a packet of tea. For the purpose of discussions, the
former has been addressed to as related utilitarian freebie (RUF) while the latter as non-
related utilitarian freebie (NRUF). Figure 1 shows the schematic representation of types
of promotions considered in the study.

Review of literature
Even though consumer promotion is an established marketing tool, most research has
focused on the post-mortem analysis of the promotion in terms of revenue (Gupta,
1988; Blattberg and Wiseniwiski, 1989; Nestlin et al., 1985; Strang, 1976) or branding
(Low and Mohr, 2000; Gedenk and Nestlin, 1999; Raghubir and Coffman, 1999; Putsis
and Williams, 1998). Very little literature is available on impact of promotions on
consumer behaviour (also Raju, 1992).
A number of studies have shown that promotions tend to give informational cues
about the products price, quality and brand image (Thaler, 1985; Kalwani and Yim,
1992; Blattberg and Nestlin, 1990; Diamond, 1992; Folkes and Wheat, 1995). Diamond
(1992) summarizes the psychological effects of promotions (Table I).
A study conducted by Simonson et al. (1994) suggests that a product’s choice
probability is affected by the addition of a promotion (without raising its price) as it

Figure 1.
Schematic representation
of the classifications of
promotions
may lead to inference about value and quality. The study further suggests that a Promotional
promotion that is not related to the products utility and also does not increase its price, choice
may adversely affect the products acceptability. In other words, a product attributes
and promotion should show a certain degree of coherence. Therefore, preference of a
type of promotion is a function of the type of product it is being offered with. Thus,
there exists an ‘‘ideal product promotion’’ combination.
H1. There is a distinctive preference of sales promotional offering, when it is 123
bundled with a product, and the preference of promotion varies with the
product category it is bundled with.
Scindler (1989) showed that people redeeming coupons feel good about themselves for
saving money. It was further argued that a ‘‘smart’’ self-attribution by these shoppers is
one of the causes for the preference of coupons over other promotions. Discounts may
lead to these ‘‘smart shopper feelings’’ more than extra product promotions. Taking the
arguments of Schindler, further we can say that any promotional deal that reinforces
the ‘‘smart-shopper’’ feeling will be preferred over other similar promotions. Thus, a
discount taken from a retailer will give more positive feelings from the purchase
decision, in comparison to a company advertised discount. This may be due to the ‘‘I
am special’’ feeling associated with the former deal. On the other hand, a company
sponsored discount is seen more as a routine strategy which is ‘‘given to all and used
by all’’.
Blattberg and Nestlin (1990) have shown that there is relative credibility of different
types of promotions. They have found that coupons are more credible than other types
of price discounts. This implies that consumers are more skeptical about unaccredited
price discounts. Further studies done by Chevalier and Curhan (1976) and Walters
(1991) show that <100 per cent of trade promotions are passed through the retailer.
Therefore, unaccredited discounts coming from the retailer can make a customer
suspicious of (a) not getting the equitable discounts that the retailer in turn had
received from the wholesaler and (b) lower quality goods.
H2. Discounts given by retailers are preferred over advertised discounts, but they
negatively affect the credibility of the product in terms of quality and worth.

Psychological perspective May lead to the preference of Comments

Framing and mental accounting Extra product promotions A variety of factors may affect
framing
Shopping goals Discounts A primary goal is to reduce
expenditure
Credibility of promotions Extra product promotions Coupon greatly increase the
credibility of discounts Table I.
Self attributions (‘‘Smart Shopper Discounts Positive feelings result from Summary of
Feelings’’) fulfilling shopping goals psychological factors
Reinforcement theory Extra product promotions These ‘‘feel’’ like rewards, but leading to preference for
discounts may be reinforcing discounts or ‘‘extra
if the help satisfy goals product’’ promotions
MRN Pretests
32,2 In selecting the specific freebies for the study, we sought to balance two important
goals – perceived value and utility. We wanted to choose freebies that would have
consistency in terms of perceived value, and their utility which we would use in our
study. This approach was also necessary as prior research shows that the perceived
value of the freebie tends to be lower than its actual value. This implies that a freebie
124 which has a lower perceived value will not equate in terms of promotional stimuli.
We collected 21 items that were commonly bundled as freebies. All the freebies were
brought from local retail shops at retail price. From the above mentioned 21 products, 18
were selected for the purpose of study. Of these 18 products, 14 had a price of Rs 5
(rupees), two had a price of Rs 4.50 and two had a price of Rs 6. The details of the items
along with their retail price and descriptive statistics are shown in Table II. The products
were tested for their value by showing them to 84 respondents (28.57 per cent females)
between the ages of 19 and 48 in a middle class locality as stand alone items. Respondents
were asked to guess the price of the item shown and the use the item can be put to. The
responses were noted down directly into a manual spreadsheet by volunteers who were
final year MBA students, and were given this task as part of a class assignment.
As can be observed from Table II, the mean perceived price of all the freebies was
near to the actual price of the freebie. This has been further confirmed by using the
t-test ( ¼ 0.05) with a test value equal to the actual price of the freebie.
When the respondents were asked about the use of the freebie, there was no
difference in the opinion of the respondents regarding utilitarian freebies. When they
were shown the hedonic freebies the responses were mixed from using them as toys or
keychain to showpieces. A few respondents had no clue regarding the usage of the
freebies. The number being negligibly small, these were excluded from the study.

S.no. Freebie Retail price (Rs) Use Mean SD t-value

1. Matchboxa 4.50 Stove/candle lighter 4.5286 0.20909 2.527

2. Scrubbera 5.00 Washing clothes 4.8524 .21424 2.037
3. Cloth whitener 5.00 Washing clothes 4.9023 0.28669 2.664
4. Hair oila 5.00 Personal care 4.9048 0.29531 2.956
5. Multi plug socketa 5.00 Electric connection 4.9643 0.18669 1.753
6. Steel cupa 5.00 Drinking tea 4.9762 0.15337 1.423
7. Pena 5.00 Writing 4.9167 0.27805 2.747
8. Balla 5.00 Playing 5.0167 0.27805 2.747
9. Pencil cella 6.00 Power source 5.8333 0.38492 4.074
10. Toy car 5.00 Playing/showpiece 5.1113 0.49531 0.656
11. Kaleidoscope 5.00 Playing 5.4929 0.7111 0.788
12. Prank lizarda 5.00 Playing/showpiece 5.0048 0.29531 2.956
13. Comba 5.00 Personal care 4.9286 0.25909 2.527
14. Heart showpiecea 5.00 Showpiece/keychain 5.1643 0.18669 1.753
15. Glass showpiecea 5.00 Showpiece/keychain 5.1881 0.10911 1.000
16. Tooth pastea 5.00 Personal care 4.8452 0.36385 3.898
17. Small packet of snacksa 5.00 Snacks 4.8929 0.31115 3.156
18. Celebrity doll 5.00 Playing 5.442 1.0115 0.9156
Table II. 19. Metal whistle 4.50 Playing 4.7810 0.82379 0.5349
Pretest for 20. Key chain torcha 6.00 Light source 4.7976 0.40419 4.589
standardization of
freebies Note: aFreebie considered for the study
Research methodology and design Promotional
The study consisted of a 2 (consumer durable and consumable)  2 (discount and choice
freebies)  2 (CD–VD; utilitarian–hedonic) mixed model experiment. We employed six
commonly used brands, which offered similar promotions. Three of the six brands
were those of consumer durables (Eveready torch, Ajanta wall clock, Philips energy-
saver CFL), whereas three were of consumables (Ariel detergent, Pantene shampoo,
Tata tea). Each brand carried five types of promotions viz CD, VD, RUF, NRUF and H. 125
All subjects were exposed to similar promotional and brand stimuli. Respondents were
randomly picked in a large residential university. We included those respondents who
had been involved in similar purchases earlier and are frequently involved in the
buying decision process of similar purchases in their household. The respondents were
also asked if they watched TV frequently, and only those respondents were considered
for the studies who were frequent TV viewers. This was done to exclude extraneous
factors arising due to varying levels of brand familiarity. Respondents were at least
graduates, and were well versed with both English and Hindi – spoken as well as
written.

Stimuli
We chose six brands from the consumer good segments. All the brands were well-
established brands having leading positions in their respective market segments. All
the brands were commonly used in households. These brands were frequently
advertised on TV and the print media. The respondents were exposed to all the six
brands in a single session one at a time. The product category of each of the products
was selected to have consistency in price (~Rs 100). The brand was represented by
large (quarter page or half page) advertisement which had been collected from local
Hindi/English News paper. The advertisements were chosen such that no clue
regarding the price of the product was shown. This was done to avoid interference
effects arising due to the minor dissimilarity of prices between brands. The exposure of
the durables and consumables did not follow any pattern and were randomly arranged.
Each brand was bundled with the five types of promotions discussed earlier. Each
product had a different set of freebies. The freebies were physically present and the
respondent had the freedom to feel and touch the freebie before responding. CDs and
VDs were appropriately displayed. All the five promotions bundled with a single brand
were exposed to the respondents simultaneously, so as to enable mutual comparison.
The cue used to denote discounts was direct and similar to those used by the
considered brands (Rs 5/- off and 10 per cent extra). The CD for each of the brand was
equal to the value of the bundled freebie i.e Rs 5/- and for similarly of VD, 10 per cent
extra was offered.

Procedure
Large advertisements of the brands under consideration were collected and stuck on
cardboard to make cutouts. Each of the cutouts was individually placed on a pedestal
and put at a sufficiently large distance from the next advertisement. In front of each
advertisement, the freebie bundled with the product was kept. The discounts were
written on two cards and kept along with the freebies. All the six advertisements along
with their respective freebies and discounts were arranged in a large hall so that the
respondent could walk in front of each advertisement and give their responses for that
brand and move on to the next one.
MRN A total of 56 respondents participated individually in the experiment. All
32,2 respondents were between the ages of 20 and 40. 30 respondents were females and the
rest were males. They were accompanied by volunteers who would note their
responses in a structured schedule. The volunteers were post-graduate marketing
students who were given the task as a part of a class assignment. The respondents
were asked to rank their preference of the promotion type. The promotion type which
was most favorable was given as Rank 1 and the least preferred as Rank 5. On their
126 way out, the respondents were asked to fill a small form containing five statements
relating to their purchase habits. These statements were ranked on a five-point scale
(5 ¼ strongly agree and 1 ¼ strongly disagree). The summarized statements are given
in Table III.

Discussion
We intended to see, if there existed a distinctive pattern in the preference of the five
types of promotions. For this purpose, we used the Friedmans test to check the
distribution of mean ranks across the different types of promotions. The summarized
result for the six brands is shown in Table IV.
We can observe that there exist distinct differences in distribution amongst the
mean scores of the various types of promotions (2 > 2¼0.5). This proves our initial
hypothesis that there is a distinct preference of promotion for consumer goods. In other
words, if the consumer is given a choice in choosing a combination of product and
freebie, his choice will fall into a distinct pattern, and will not be random.
Further examining the mode values (z) for the type of promotion preferred, we can
observe that for consumables the first and the second most preferred type of promotion
has been taken by VD and CD, whereas for consumer durables, preference of NRUF is
higher followed by CD. We can further observe from the mode distributions that
hedonic freebies are the least preferred promotion type across all category of product.
However, the deviation in perceived price of hedonic freebies is higher in comparison to
that of utilitarian freebies (Table II).

Factor
Items Cronbach’s  ¼ 0.6920, Kaiser-Meyer- loadings
Item no Olkin (KMO) measure ¼ 0.630 Measure 1 2

1 I Like getting a personal discount from the Unaccredited vs

retailer on my purchases rather than an credited discount 0.225 0.900
advertised discounts
2 I feel the retailers who give me a discount Feeling of inequity 0.851 0.083
get a larger discount from the wholesaler
3 Discounts and rebates are more often given Product quality 0.811 0.033
by brands which are being newly launched
or cheap brands
4 When a retailer gives me a discount I am Suspicion 0.910 0.181
conscious of the fact that the product might
be defective or nearing expiry date
Table III.
Factor loading scores of Notes: aMeasured on a five-point scale, in which 5 ¼ strongly agree and 1 ¼ strongly disagree;
b
scaled items factor loadings are from principal component analysis
Choices do not vary across ages. This can be observed from the Wilks  that has been Promotional
calculated keeping age as grouping variable. Values >0.5 show that, there is no group choice
difference. Therefore, same aged people show similar preference of promotions.
Next we perform the Levenes test to see for equality of variance. We consider the mean
ranks of the different types of promos that have been given in Table V for calculating
the F ( ¼ 0.05).
The test statistics for the same is displayed in the Table V. Since for the given set of
promotion, the significance is level is >0.05, we perform the t-test for equality of means
127
assuming equal variances for both the groups – consumables and durables.

Promotions Wilk’s 
Product category Brand (mean-ranks) N ¼ 56 df 2 Z (age-promotion)

Consumables Ariel detergent CD(2.77) 4 63.785 2 0.446

VD(2.21) 1 0.729
RUF(2.39) 3 0.863
NRUF(3.32) 4 0.542
H(4.30) 5 0.603
Pantene shampoo CD(2.55) 4 121.763 2 0.334
VD(1.64) 1 0.676
RUF(3.16) 4 0.566
NRUF(2.82) 3 0.667
H(4.82) 5 0.689
Tata Tea CD(2.59) 4 71.256 2 0.536
VD(1.68) 1 0.686
RUF(3.79) 4 0.827
NRUF(3.16) 2 0.508
H(3.79) 4 0.311
Consumer durable Eveready torch CD(1.75) 3 50.914 1 0.572
RUF(2.39) 2 0.682
NRUF(2.39) 2 0.744
H(3.46) 4 0.773
Ajanta clock CD(2.14) 3 94.172 2 0.622
RUF(2.8) 3 0.775
NRUF(1.39) 1 0.578
H(3.66) 4 0.536
Philips CFL CD(2.11) 3 103.114 2 729 Table IV.
RUF(2.64) 3 0.606 Summarized table for
NRUF(1.43) 1 0.724 mean rank, mode, 2
H(3.82) 4 0.764 and Wilk’s 

Promotion type F t df Significance (two-tailed) Mean difference SE difference

CD 2.481 4.471 4 0.011 0.6367 0.14240

RUF 2.204 1.193 4 0.299 0.5033 0.42203
NRUF 3.800 3.802 4 0.019 1.3633 0.35858
H 1.504 2.084 4 0.106 0.6567 0.31505
Table V.
Notes: CD ¼ Cash discount, RUF ¼ Related Utilitarian Freebie, NRUF ¼ Non-related Utilitarian Levene’s test and t-test
Freebie and H ¼ Hedonic Freebie statistics
MRN The t-test for equality of means shown in Table V has been calculated comparing the
means of the average ranks given to the consumable and the durable products. The test
32,2 points to the fact that the preference of CD, NRUFs and hedonic freebies is different for
consumables and durables. This proves our hypothesis – effectiveness of the promotion
type, is dependent upon the type of the product.
In developing our measurement items for measuring preference of discount given
by retailers and the associated credibility, we drew on the findings of Blattberg et al.
128 (1995) and came up with the four items given in table. The first item (I like getting a
personal discount from the retailer on my purchases rather than an advertised
discount.) intended to measure consumer’s preference of discount given by retailers
over advertised discount. Item 2 (I feel the retailers who give me a discount get a larger
discount from the wholesaler.) measured the feeling of inequity that the consumers
perceive in unaccredited discounts. Item 3 (Discounts and rebates are more often given
by brands which are being newly launched or cheap brands.) measured the feeling
associated with the quality of the product and item 4 (When a retailer gives me a
discount I am conscious of the fact that the product might be defective or nearing
expiry date.) measured the feeling of suspicion in the mind of the consumer. The four
items were asked in rotated orders. We assessed the construct validity of these
measures using factor analysis. The factor loading scores of the four items are shown
in Table III.
To analyze the customer’s preference of discounts given by retailers in comparison
to advertised discounts, we used the one sample t-test with the hypothesis that
discounts given by retailers are preferred over advertised discounts. We applied the
t-test with a test value of four which is the score for ‘‘agree’’ in the scale. The t-value
came as 1.385 (mean ¼ 3.667, SD ¼ 1.176, significance ¼ 0.359) proves the hypothesis
that there is no significant difference between the test value and the observed mean,
thus showing that customers prefer a discount from a retailer in comparison to an
advertised discount.
After all the data were collected, the four items were factor analyzed under the
hypothesis that the three items intended to measure the negative feelings associated
with discounts given by retailers would load together. As can be observed from Table
III items 2, 3 and 4 loaded strongly as we hypothesized. This proves our second
hypothesis that discounts given by retailers evoke negative feelings about the product.

Implications of the study

The study was undertaken to assess the preference of the consumer towards different
promotion types. Customers tend to evaluate the promotion campaign on the basis of
two parameters: the value of the attached freebie; and the utility of the freebie.
Consumers tend to make a buying preference for products and promotion campaigns
which increase the overall value of the offering. As CDs and VDs are easy to assess and
the gratification is also instant, they are amongst the top preferences for consumers in
all category of products. However, CDs may lead to a decrease in the overall value of the
product and thus have a risk of loosing out on product brand image. Gourville and
Soman (2002) have shown through their research that consumption is driven not so
much by the actual cost of a paid for product as by its perceived cost.
In consumable products, preference of VDs is associated with the assessment of the
perceived value of the extra volume. For a product of retail price Rs 100/-, 10 per cent
extra would imply an extra value of Rs 10/- in terms of savings made on retail price. On
the contrary, a CD of Rs 5/- would mean half in terms of savings to the customer. From
this, can we conclude that CDs and VDs are the best promotion types for all types of Promotional
products? The answer to this may not be so simple. As has been shown in the choice
experiment above, even though hedonic freebies are the least preferred, when it comes
to assessing their value, there is large variance in the actual and perceived value of the
hedonic freebie. Moreover, such freebie may not be high in usefulness, but they attach
novelty value to the product. Therefore, products bundled with a hedonic freebie may
be highly preferred by a segment of consumers who give more weightage to the 129
novelty value of the freebie. Thus, promotion type may be a strategy which marketers
can employ to gain entry in to newer market segments or to convert potential demand
in to actual demand.
Through this study, we have assessed that consumers prefer a discount given off by
a retailer in comparison to an advertised discount. Reasons attributed to this
phenomenon can be explained by arguing that discounts taken from a retailer add to
the ‘‘smart-shopper’’ feeling. Therefore, even though advertised discounts may increase
demand by lowering the affective price, they fail to make an impact at the cognitive
level of the consumer.
Discounts given by retailers also invoke certain negative feelings in the consumers
mind. Feelings such as near expiry, low quality and inequitable price comes to the
consumers’’ mind. If the retailer cannot continue with the discount the shopper may
look for other avenues of purchase. Thus, retail discounts can increase store traffic, but
do little to ensure long-term purchase loyalty.

Conclusions and suggestions

Consumers try to rationalize the promotion that is offered by the product. Hence,
promotion type can influence the rate of increase in market demand. The right
combination of product and promotion can be more effective in enhancing sale. It
would be prudent to decide on the promotion type after taking in to consideration the
product category, its features and the target segment.
The research also shows that promotional offerings which can be readily converted
into monetary terms (CD and VD) give instant gratification and hence are more
preferred in comparison to freebies, which have differential perceived values. In
discount promotion, the preference changes when advertised and discounts given by
retailers are compared. Discount given by retailer is associated with self-attribution
and is favored over advertised discounts. Thus, retail-off take can be influenced more
by giving the retailers a discount and asking them to pass it off to the consumers. But,
unaccredited discount given by the retailer also evokes feeling of suspicion in the
minds of the consumer.
Preference of promotional offering also varies with the product category and choice
of promotion shifts from discounts to utilitarian freebies. As CDs in the long run tend
to destabilize the retail price eventually affecting the brand image, freebies have an
advantage over discounts. It is suggested through the research that utilitarian freebies
can equally appeal to the targeted consumers.
Hedonic freebies have the least preference; however, they tend to have a higher
perceived value. Thus, value addition to the product it is bundled with is higher. If the
promotional budget is not large, using Hedonic freebie can be a good alternative. Since
the budget is not large enough, CDs and VDs might not be large enough to catch the
appeal of the consumers, in such a case, a hedonic freebie can add to the perceived
value of the promotional campaign.
MRN Preference of promotion type is also dependent on the age group of the consumer.
32,2 The research shows differences in preferences amongst groups but consistency within
groups. This implies that freebies can be very effectively used to increase market or to
include newer market segments. It is suggested on the basis of the research that
hedonic freebies have an edge over other types of promotional campaigns for
increasing acceptance in the younger age groups.
130 References
Abrams, B. (1980), ‘‘What happens if the product offers more than the user needs’’, The Wall
Street Journal, Vol. 196, 25 September, p. 35.
Blattberg, R. and Nestlin, S.A. (1990), Sales Promotion Concepts, Methods and Strategies,
Prentice-Hall, Englewood Cliffs, NJ.
Blattberg, R.C. and Wisenwiski, K.J. (1989), ‘‘Priced induced patterns of competition’’, Marketing
Science, Vol. 8 No. 4, pp. 291-309.
Blattberg, R.C., Briesch, R. and Fox, E.J. (1995), ‘‘How promotions work’’, Marketing Science,
Vol. 14 No. 3, pp. 122-32.
Chevalier, M. and Curhan, R.C. (1976), ‘‘Retail promotions as a function of trade promotions – a
descriptive analysis’’, Sloan Management Review, Vol. 18 No. 1, Fall, pp. 19-32.
Currim, I. and Schneider, L. (1989), ‘‘A taxonomy of consumer purchase strategies in a promotion
intensive environment’’, Marketing Science, Vol. 10, Spring, pp. 91-110.
Diamond, W.D. (1992), ‘‘Just what is a ‘‘Dollars worth’’? Consumers reaction to price discounts vs
extra product promotions’’, Journal of Retailing, Vol. 68, pp. 254-70.
Folkes, V. and Wheat, R.D. (1995), ‘‘Consumer’s price perception of promoted products’’, Journal of
Retailing, Vol. 71 No. 3, pp. 317-28.
Gedenk, K. and Neslin, S.A. (1999), ‘‘The role of retail promotion in determining future brand
loyalty – its effect on purchase event feedback’’, Journal of Retailing, Vol. 75 No. 4, Winter,
pp. 433-59.
Gourville, J. and Soman, D. (2002), ‘‘Pricing and the psychology of consumption’’, Harvard
Business Review, September, p. 5
Gupta, S. (1988), ‘‘Impact of sales promotions on brand loyal when, what and how much to buy’’,
Journal of Marketing Research, Vol. 25, November, pp. 342-55.
Jha, P.D. and Koshy, A. (2004), ‘‘An emperical view of the different types of consumer promotions
in India’’, IIMA working paper 2004-03-03.
Kalwani, M.U. and Yim, C.K. (1992), ‘‘Consumer price and promotion expectations. An
experimental study’’, Journal of Marketing Research, Vol. 29, February, pp. 90-100.
Low, G.S. and Mohr, J.J. (2000), ‘‘Advertising vs sales promotion – a brand management
perspective’’, Journal of Product and Brand Management, Vol. 9 No. 6, pp. 389-414.
McDonald, M.H.B. (2003), Marketing Plans: How to Make Them and How to Use Them, 5th ed.,
Butterworth-Heinemann, Stoneham, MA.
Massy, W.F. and Frank, R.E. (1965), ‘‘Short term price and dealing effects in selected market
segments’’, Journal of Marketing Research, Vol. 2, May, pp. 171-85.
Nestlin, S.A., Henderson, C. and Quelch, J. (1985), ‘‘Consumer promotions and the accelaration of
product purchases’’, Marketing Science, Vol. 4 No. 2, pp. 147-65.
Putsis Williams, P. Jr (1998), ‘‘Are brand promotions just a zero sum game or can they increase the
size of the pie’’, Business Strategy Review, Vol. 9 No. 3, pp. 21-32.
Raghubir, P. and Coffman, K. (1999), ‘‘When do price promotions affect pretrial brand
evaluatons?’’, Journal of Marketing Research, Vol. 36 No. 2, May, pp. 211-12.
 Raju, J.S. (1992), ‘‘The effect of price promotion on variability on product category sales’’, Promotional
Marketing Science, Vol. 11 No. 3, pp. 207-20.
Schindler, R.M. (1992), ‘‘A coupon is more than a low price: evidence from a shopping simulation
choice
study’’, Psychology and Marketing, Vol. 9, November-December, pp. 431-51.
Schindler, R.M. and Wiman, A.R. (1989), ‘‘Effects of odd pricing on price recall’’, Journal of
Business Research, Vol 19, November, pp. 165-177.
Simonson, I., Carmon, Z. and O’Curry, S. (1994), ‘‘Experimental evidence on the negative effect of 131
product features and sales promotions on brand choice’’, Marketing Science, Vol. 13 No. 1,
Winter, pp. 23-40.
Strang, R.A. (1976), ‘‘Sales promotion – fast growth faulty management’’, Harvard Business
Review, Vol. 54 No. 4, July-August, pp. 115-24.
Sunoo, D. and Lin, L.Y.S. (1978), ‘‘Sales effects of promotions and advertising’’, Journal of
Advertising Research, Vol. 18, October, pp. 37-40.
Thaler, R. (1985), ‘‘Mental accounting and consumer choice’’, Marketing Science, Vol. 4, Summer,
pp. 199-214.
Walters, R.G. (1991), ‘‘Assesing the impact of retail price promotions on product substitution,
complementary purchase and interstore sales displacement’’, Journal of Marketing, Vol. 55,
April, pp. 17-28.

About the author

Subhojit Banerjee is working as a Lecturer in the Institute of Business Mangement, VBS
Purvanchal University, Jaunpur, (UP) India. His doctorate is in the area of ‘‘Internet Branding’’
from Allahabad University, Allahabad, India. His areas of interest include branding and
promotion. He has published papers in national journals, book chapters and seminar
proceedings. He also has award winning cases in his name and some of them have found a place
in leading international publications. He has also been mentioned in the American Marketing
Association’s (AMA) Newsletter (Volume 8, Issue 3, July 2005) for innovative teaching practices.
Subhojit Banerjee can be contacted at: [email protected]

To purchase reprints of this article please e-mail: [email protected]

Or visit our web site for further details: www.emeraldinsight.com/reprints

View publication stats