02 The three faces of consumer promotions - The Three Faces of Consumer Promotions Priya Raghubir J Jeffrey Inman Hans Grande C onsumer promotions now

02 The three faces of consumer promotions - The Three Faces...

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The Three Faces ofConsumer PromotionsPriya RaghubirJ. Jeffrey InmanHans GrandeConsumer promotions now account for almost a quarter of themarketing budget of consumer product companies.1From theconsumer point of view, this means that consumers are beingbombarded by consumer promotions aimed at persuading them to purchase and purchase now. In 2001, an estimated 239 billion coupons2weredistributed in the U.S. and consumers redeemed 4 billion of these—an exposurerate of over 2,000 coupons per household per year, or nearly 6 coupons per day.To put this in perspective, coupons are just one of a variety of consumer promo-tions tools used by manufacturers and retailers to induce trial, encourage repeatpurchase, or induce brand switching. Other common forms of promotionsinclude sweepstakes, competitions, price discounts around calendar events (e.g.,Christmas Sale, President’s Day Sale), annual discount events by manufacturersor retailers (e.g., semi-annual Nordstrom’s sale), free gifts, free samples, trialpackages, and membership rewards. Companies are becoming increasingly creative in the types of promotionsthat they are offering consumers. The range, variety, and depth of discountsflooding the marketplace today suggest that processing these is far from an easytask for consumers. Apart from the amount of money that companies are spend-ing on these activities, the volume of sales promotions begs the question: Howdo consumers blitzed by promotional stimuli multiple times a day, 365 days ayear, react to these promotional stimuli? The consumer is being bombarded by a range of promotions in almost every product category and in every media23CALIFORNIA MANAGEMENT REVIEWVOL. 46, NO. 4SUMMER 2004This research was funded by a grant from the Research Grants Council of Hong Kong via the HongKong University of Science and Technology: HKUST609/96H in September 1996, and supportthrough the COR grants at the University of California at Berkeley. Hans Grande was an MBA studentat the Haas School of Business prior to his appointment at Adobe. We thank two anonymous review-ers for their comments.
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form—TV, radio, newspapers, mail, point of purchase material, the internet, and e-mail. Most promotions carry an economic incentive to purchase a specificbrand, purchase it now, or purchase more of it. Despite the economic incentivesoffered by promotions, it is clear that consumers will be unable to take advan-tage of every offer that they receive. This article delineates three ways thoughwhich a promotion affects a consumer, and provides guidelines to manufacturersand retailers to design more effective promotions.Promotions may no longer represent simply an economic incentive topurchase, but also have other effects on consumers’ deal evaluations (positive or negative attitudes towards a consumer promotion) and purchase intentions—only some of which may be intended by the manufacturer or retailer. Othereffects, positive or negative, may be com-pletely unintentional and managers may
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