Information can signal price and quality Since price promotions may signal

Information can signal price and quality since price

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Information can signal price and quality. Since price promotions may signal lower quality, otherinformation should be given in the offer to reducethe negative effect on brand evaluations.Providingcontextual information about prices can reduce theseeffects.Communication(continued)
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FIGURE 8.Do’ s and Don’ts of Promotion DesignManagerialDecisionDo’s and Don’tsShould I promote?Promote if others in the industry are offering a promotion and you are competing on price.Do not promote if you are the only firm in your industry offering a promotion.Do not promote if you have a high-quality/high-price position.Once you have offered a promotion, stopping the practice can hurt.What productshould I promote?Promote a product for which you want to increase trial or repurchase rates.Promote a product where additional inventory at home will increase consumption levels(e.g., discretionary food items such as yogurt or cookies).Do not promote a product that many consumers would have purchased anyway at fullprice.Do not promote a “flagship” brand as that can lead to cheapening of the product line.To whom should Ioffer a promotion?In the initial stages of a product life cycle, offer a promotion to non-buyers of the productcategory to increase industry sales and accelerate the growth of the product life cycle.In the mature stages of the product life cycle, offer a promotion to competitors’ consumersto induce them to switch to your brand.In the mature or decline stages of a product life cycle, offer a loyalty promotion to existingconsumers to retain them and discourage them from switching to competitors.What discount levelshould I offer?Consumers expect a good deal to be in the region of 20-40%. Deals at higher discountrates could actually backfire and lead to negative quality inferences. Deals at lower levelsmay not be sufficiently attractive to induce switching, but may be effective at retaining loyalcustomers.What form ofpromotion should I offer?Matching the promotion to the product category is useful. If it is a utilitarian productcategory (e.g., dishwashing liquid), then a straight economic incentive (e.g., $ off) may besufficient, but if it is a hedonic category, then a promotion with excitement (e.g.,sweepstake) may be cheaper and more effective.“Free” offers are always effective (“buy one, get one free” offers usually outperform “1/2off” promotions).Coupons are increasingly less effective due to their inconvenience and the embarrassmentassociated with using them.For frequently purchased goods, a loyalty program (with a hedonic reward) is very effective.What features shouldI include in thepromotion?The presence of a “restriction” (time limit, purchase limit, or purchase precondition) cantypically increase sales if the deal is reasonable to start with.
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