Journal of Marketing Management, 1995, 11, 419-441
Pierre Chandon
School off
Management, Paris
Consumer Research on Sales
Promotions: A
State-of-the-Art Literature
Review^*
Many research traditions have dealt with consumer psychology and
behaviour vis-a-vis saks promotions. The consumer-oriented
approach seeks to identify the heavy users of promotions and to track
their purchasing strategies involving the choice of a promoted brand.
The aim of the theory-oriented research traditions is to test the
explanatory power of various cognitive, attitudinal, behavioural and
economic frameivorks, be it to explain why and how consumers react
to sales promotions or to understand when companies should
promote. This article exposes the specificity of each research tradition,
its principal results and the most promising areas for future
research.
Introduction
More than 200 studies on sales promotions have been published in the past 10 years,
compared to about 40 studies between 1965-1983 (Blattberg and Neslin 1990). This
dramatic rise in research can be explained by both the large increase in promotional
spending and the availability of scanner panel data.
Organization
This review takes an historical perspective rather than a thematic approach^, it is
organized by research tradition in order to mirror the innovation process of science
at its best. A research tradition was defined by Laudan (1977) as "a framework
hinging on a privileged theory, methodology or conception of the world". This
notion can help us understand the persistence of conflicting results on many key
issues: these conflicts are due to the fact that these results are the fruit of many
diverse research traditions. Besides, scholcirs can assess the problem-solving
potential of each tradition so as to motivate, or deter, their insistence upon one
research tradition or another^.
The main disttnguishing factors between one research tradition and another are
neither its concepts nor the methodologies employed, but the cognitive aims and the
*A French version of this paper was published in Redierdies el Applications en Marketing (Chandon
1994<!).
^For a thnnadc approach on how promotions work, see BUtd>eig et al. (1994).
*rhis explicit reference to a rational criterion for the choice of a research tradition distinguishes it from the
concept of paradigm, whose choice would eventually amount to an act of faith.
a267-257X/95/050419 + 23 $08.00/0
©1995 The Dryden Press
420
Pierre Chmdon
viewpoints each of them favour. The consumer-oriented research tradition emphasizes the study of consumers' behaviours associated with sales promotions. It has two
subdivisions: the identification of frequent users of sales promotions and the study
of purchasing strategies involving sales promotions. In contrast, the aim of the
theory-oriented research tradition is to test various cognitive, behavioural or
economic theories. This papier wiU further distinguish the reference-price theories
from other more comprehensive models. This cluster is, of course, a compromise
between the within-group cohesion and the clarity of exposition. It is, to some
extent, subjective since no consensus about the adequate aggregation level of
research traditions in marketing exists, despite the recent interest in this area
(Laurent et al. 1994).
Definition and Typology
The numerous definitions of sales promotions available have in common the idea
that sales promotions are a temporary and tangible modification of supply, the goal
of which is to directly impact consumer, retailer and sales force behaviour. The
diversity of phenomena encompassed by this definition has led scholars to focus on
one of ihe particular aspects indicated in Figure 1. Recent but sparse research has
completed this panorama by emphasizing the direct-marketing and communicative
aspects of sales promotions, but they will not be reviewed here (Vemette 1990;
Desmet 1991; Guilbert 1991; Ward and Hill 1991; Jones 1992).
The above definition encompasses many promotional techniques (price reductions, coupwns, games, etc.) cind scholars are not certain whether we must study
them separately, as it is currently the case for price promotions and coupons, or if it
makes sense to spieak of sales promotions as a whole. The most widely accepted
typwlogy to date makes three distinctions; (a) retail promotions; {}}) trade
promotions; and (c) consumer promotions (Figure 2). However, this "natural"
typology is not completely relevant to corwumer research. For example, price-cuts
Decisions
Medianisms
Firms
—Promotional
policy
N,
Sales
y
promotions
Effects
Custonters
—Consumers
/ \
—Retailers
—Sales force
\/
The
autho Hties
—Consumer
welfi ire
On sales and
profitahility
y
Price
product
advertising
Figure I. Different levels of analysis of sales promotion.
Onhehavicmrs
and attitude
Consumer Research en Sales Promotions
TVade promotionB
EetaHers'
promotions
Price promotions
T)isp]syB
Features
Discounts
Manufacturers
421
Retailers and
sales force
Consumers
Games, anniversary
sales
Ckinsumers' promotions
Coupons, refunds, premiums
More product, two for the price of one
Figure 2. "Natural" typology t^sales promotions.
and games are both targeted to coiwumers but they bdng about very different
reactions. Only price-cuts are spontaneously associated with the word "sales
promotions" by the vast majority of consumers (Guilbert 1991). What is needed is a
a posteriori typology, based on consumers' reactions to sales promotions. The
exploratory research of Diamond and Johnson (1990) is a useful first step in this
direction which could be replicated using real promotions instead of abstract
definitions. Their typology is based on the nature of the gain (whether it is monetary
or not), the amount of effort required to attain it, and the relationship of the gain to
the product (more of the same product, gain of a prize or anything other than the
product). These criteria permit distinction of price-cuts from quemtity gains and
from gains of cmother product.
The Consumer-oriented Research Tradition
Identifying the Frequent Users cf Promotions
Demographics were the first variables employed to identify the frequent users of
sales promotions, with few, if any, conclusive results. For example, the effect of
income is not clear (Blattberg and Neslin 1990, pp. 73-76). As a result, the more
recent studies have relied on: (a) perceived risk theory (Bauer 1960); (b) economic
theory; or (c) psychographics (Tables 1-3, respectively). Overall, these studies have
sketched a rather coherent portrait of the frequent users of promotions: they are
price sensitive; receptive to price and promotion information; bremd switchers; and
heavy buyers of the category. Besides, they stodqjile and accelerate their purchases
in reaction to sales promotions. These studies eire also useful for, e.g. targeting the
heavy users of promotions or deterring buyers from taking advantage of
promotions^
^ e percentage of redemptions made by buye^ depends on various coupon characteristics (Henderson
1%5; Neslin and Clarke 19S7) as well as on Qie time period used to define who is a buyer of the brand
(Ehrenbeiig and Uncles 1993).
422
TaUe 1.
Dependent
Pierre
Chandon
Identification of tke frequent users of sales promotions tkanks to perceived risk theory
variable
Independent
variable
References
Intention to redeem the offered
coupon (1)
Self-declared familiarity (1)
(1) Shoemaker and Tibrewala 1985
Redemption of diiect-maiJ
coupon (2,3)
Brand purchases (panel
data) (23)
(2) Bawa and Shoemaker 1987!J
Increase in the repurchase
likelihood of new buyers (3)
Tahle 2.
(3) Bawa and Shoemaker 1989
Identification ef the ftequent users of sales promotions thanks to economic theory
Mediating variables:
Perceived costs and benefits
of promotions usages
Independent
variables:
Household
characteristics
References
Costs:
House ownership: (+) for (3).
(4) Narasimhan 1984
- Substitution of a preferred
brand for a less preferred,
promoted brand (1-3);
Living in large dties: (+) for (5).
(5) Bawa and Shoemaker 1987B
- Opportunity costs of time
(cUpping and holding
coupons) (3-5);
- Inventory of stockpiled
promoted brands.
Benefits:
- Smart shopper feelings (3,5).
Higher education: (+) for (3-5).
(6) Jolson el ai 1987
Price sensitivity: (+) for (6).
(7) Henderson 1985
Size: (+) for (3), (n.s.) for (5).
Brand and store loyalty: (-) for (5,7).
Children: (-) for (4), (n.s.) for (5).
Working housewife: (n.s.) for (4,5).
Income: (n.s.) for (4-6).
Age: (n.s.) for (5,6).
Sex: (n.s.) for (6).
Table 3.
Identification of ike frequent users of sales promotions thanks to psychographics
Dependent variables
Independent
Coupon usage: (+) for (8),
(n.s.) for (10).
"Market mavenism": possession
and transmission of market
expertise (Feickand Price 1987)
(8-10).
Prediction of future
pron^otions: (+) for (9).
variables
References
(8) Price et al 1988
(9) Krishna ef a/. 1991
(10) Lichtenstein et al. 1993
Search and memorization of
prices, purchase of generics:
(n.s.) for (10).
n.s., not significant.
Purchase Situation and Purchasing Strategies Involving Sales Promotions
The literature on purchasing strategies has taken a situational approach, as opposed
to the former stream of research which assumes that a "natural" deal-proneness
explains consumers' responses to sales promotions. For example, the economic
model reviewed above predids that such a penchant should not vary across product
categories, since the costs associated with coupons are the same, and since it is in
consumers' best interests to spread these costs over the maximum number of
purchases (Bawa and Shoemaker 1987fl). These authors find that, contrary to their
original hypothesis, up to 31% of consumers use coupons in some product categories
but not in others. Bawa et al. (1989) show that a single consumer experiences varied
Consumer Research on Sales Promotions
423
marketing environments in different stores which then translate into varying
perception of and sensidvity to sales promodons. This study shows that promodonal
activity: the number of displays and the width of the assortment in the preferred
store, are correlated with overall deal-proneness and price sensidvity. Familiarity
with promodons is also employed, along with store familiarity and inventory level,
to predict the "dedsion state" of a consumer on a particvilar shopping trip (Buckhn
and Lattin 1991), While an opportunisdc decision state leads to deal-proneness,
consumers only read to their own preferences when they are on a "planned"
shopping trip. Similarly, consumers use less coupons but read more to features
when on an unplanned shopping trip (for a refill, for instance) than on a regular trip
(Kahn and Schmitdein 1992),
Consumers adapt themselves to a changing marketing environment by employing
various purchasing strategies (Tellis and Gaeth 1990), Currim and Schneider (1991)
have established a typology of the purchasing strategies used by consumers when
they encounter promotions on their preferred brands or on other brands (e.g. inertia,
brand switching, stockpiling, etc). Of the five purchasing strategies mentioned in
their study, two involve promodons: (a) passive deal-proneness (stockpiling of the
preferred brand displayed); and (b) acdve deal-proneness (brand switching and
purchase acceleration for any brand featured, or holding coupons). Their research
shows that three out of four consumers use more than one purchasing strategy, at
least one of which involves sales promodons. Another study by the same authors
shows that acdve deal-prone consumers may become passively deal-prone but that
the reverse is rare (Schneider and Currim 1991), They did not find any pure, i.e, not
provoked by promodons, variety-seeking purchasing strategy because of data
aggregation problems in household (in contrast to individual) panels (Kahn et al.
1986), or simply because this kind of behaviovir has become less frequent with the
pervading of sales promodons.
Synthesis and Areas Jot Future Research
This literature has shown that the diversity of promodon usage patterns between
and within consumers can be partly explained by the percepdon of the costs and
benefits of promodons, StiU, the most promising area for future research in the
identification of frequent and infrequent users of promotions is in the use of
psychographics. Smart-shopper self-concept, role percepdon (homemaker pride)
persorality traits (need for cognidon, need for variety) or other price-related
schemata have already been used in the theory-oriented literature (Cadoppo et al.
1984; Kahn and Louie 1990; Schindler 1992; Lichtenstein et al. 1993; Mittal 1994), The
feelings (fun, entertainment, anger) or moods created by many consumer promotions and the influence of sodal fadors are other imder-researched areas that could
improve our understanding of who exactly uses them. For instance, Simonson et al.
(1994) found, in an experiment, that a "useless" premium may deter cor\sun:»ers from
bu)Tng the brand when they know that they will need to justify their choice to others
of their social group. There are probably individual differences in this phenomenon
worth exanuning. Finally, a very interesting direction is to enhance the explanatory
power of demographics through the use of consumer self reports on "perceived
busyness" or "perceived finandsil wellness" (Mittal 1994).
424
Pierre Chandon
This literature has also shown that, if each consumer is indeed inherently prone to
deals, his behaviotir also depends on the point-of-purchase promotional environment. Future research is needed to determine which of these two sources of variance
is domiiuuit. By favouring the personality explanation, scholars may have been
victims of the fundamental attribution error, that is the tendency to attribute one's
behaviour to personality rather than to environment. The next step in this Une of
reseetrch could be to study the long-term effect of the multiplication of sales
promotions; luunely, do they encourage active deal-proneness?
The major limitation of this reseaidi tradition is to have measured deal loyalty
instead of deal-proneness. However, we know that consumers may be heavy deal
users if their preferred brands are frequently on sale, or if they take advantage of
promotions only when satisfying their desire for variety (lichtenstein et al. 1990;
Froloff 1992). Other findings are rather tautological. It is obvious, for instance, that
brand loyalty is inversely related to overall promotion usage*. The present tendency
towards more theory and non-observable constructs should help surpass these
Umits. Furthermore, enhancing our knowledge of why promotions are used will not
only improve our knowledge of the deal-prone consumers, but Jilso approach critical
issues like the long-term effects of promotions on brand equity or on the
relationships between manufacturers and retailers.
The Role of Price: Reference Price and Attribution Theory
There is an abundant literature on price and jwidng. This paper will now focus on
the theories that have been specifically applied to price promotions^.
Theoretical Foundations of the Reference-price Concept
The adaptation-level theory (Helson 1964) was the first theory to argue that
individuals compare prices, or any other attribute, to a personal reference level
instead of valuing their absolute amount. Cognitive psychology has supported this
abandon of the notion of objective price by showing that the human perceptual
apparatus is best suited to the evaluation of changes than to absolute values
(Kahneman and Tversky 1979). The assimilation-contrast theory (Sherif and
Hovland 1953) adds that there is a "just-noticeable" difference within which there is
no reference effed but assimilation. Gupta and Cooper (1992) have shown that this
threshold is larger for retailers' brands, a conclusion which corroborates the
hypothesis that consumers have a reference price for each level of quality.
Formation and Encoding of Reference Prices
However largely accepted the reference-price concept may be, there are many
controversies concerning its formation (Table 4). There is reason to believe that
'Note that if consumers aie very receptive to the promotions oSeied on their preferred brand (to which
they are loyal), generally speaking "brand loyal" consumers are not deal-prone.
^Fot a review of the general literahjre on price and pricing, see Gijsbrechts (1993).
Consumer Besearch on Sales Promotions
425
consumers form and use more than one reference price. Brand loyal and selfconfident consumers tend to stick to their internal (temporal) reference prices,
whereM brand switchers use mainly external (contextual) reference prices (Puto
1987; Rajendran and Tellis 1994). Let us highlight the fniitfulness of the forwardlooking reference-price concept in the domain price promotions. Being temporary,
sales promotions induce consumers to think about future prices, not only past or
current prices. This, in tum, explains both purchase acceleration (anticipating future
purchases) or deceleration (postponing of planned purchases) phenomena.
Reference prices are not only influenced by the amount of the deal, but also by
their frequency and their pattern. In a computer experiment, Krishna (1991) found
that consumers can assess the frequency of regular price promotions, but underestimate frequent promotions and over-estimate the frequency of a rarely promoted
brand if other brands are frequently promoted. Because the external validity of such
computerized experiments is weak (Burke et al. 1992), Krishna et al. (1991) have
replicated this result with a field experiment. Response accuracy appears to be better
for loyal buyers of the brand, those with lower incomes and lai^er households
(Wakefield and Irunan 1993). These results are importemt because the impact of a
promotion is substantially larger when unexpected (Latdn and Buckiin 1989;
Kalwcini and \lm 1992). AU in all, these studies recommend random promotions so
that consumers cannot plan ahead.
The perceptual encoding of price promotion is a topic of importance for
understanding wecir-out effects. Prospect theory assumes a utility function that is
concave over gains (Kahneman and Tvereky 1979), which predicts that people prefer
a 50 cent coupon and a $5 price than simply paying $4-5. TTiat is why the promotion
is separated from the price, i.e. promotion and price are put into two separate
"mental accounts" (Mazumdar and Jun 1993). The type of sales promotion
moderates this principle: non-monetary promotions (premiums, lotteries) are
framed as gains, whereas price reductions are framed as reduced losses, and thus
aggregated with the price of the product (Diamond and Johnson 1990; Diamond and
Sanyad 1990). This tjrpe of aggregation is important because sales promotions framed
separately tend to lower less reference prices (Diamond and Campbell 1989).
Evolutitm in the Conception of Reference Prices
The reference-price concept has been ciitidzed in present years. In a field survey,
Dickson and Sawyer (1990) found that the attention devoted to price information, its
memorization and the resulting confidence in consumers' estimates are globally
very weak, even when they are collected at the point of purchase just Jifter a choice
is made. Contrary to common knowledge, consumers do not take more time when
choosing a brand on sale, and their price estimates are not less precise but
systematically under-valued. The same thing applies for purchases made with
coupons (Buzas and Marmorstein 1988). These results challenge the economic view
of a rational consumer since the vast majority (at least) don't have precise internal
reference prices. However, these internal reference prices can be easily replaced with
contextual reference points. In addition, it appeeirs that consumers easily remember
if a price was cheap or expensive, even if they cannot remember the exact figure.
Mazumdeir and Monroe (1990) found that consumers don't pay attention to absolute
426
Pierre Chandon
1 III
Consumer Research on Sales Promotions
prices unless they want to make comparisons with other stores or make choices
regarding quandty. In most common brand choice decisions, consumers only need to
be aware of reladve (cheap/expensive) prices (Krishnamurthi and Raj 1988),
Attribution Theory
Price reducdons are not neutral. They bring about inferences and attribudons which,
in turn, moderate the reference-price effeds mentioned above (Lichtenstein et al.
1991), Generally speaking, attribudon theory deals with the mechanisms by which
consumers discount price reducdons, the quality of promoted brands or the
purchase of a brand. Recent research has focused on causal attribudons, i,e, "Why is
this brand promoted?" When consumers encounter an unusual promodon,
Lichtenstein and Bearden (1986) found that they use counterfactual reasoning
(Kelley 1973), To assess whether this has something to do with the produd
(respectively, the situadon, the store), they check whether the promoted brand is the
only one to be on sale (respecdvely, has already been on sale in the past, is promoted
Table S.
Works on attribution theory applied to sales promotions
Experimental results
References
Consumers discount very large discounts uidess they are familiar
with the brand. On the contrary, store familiarity has no effect.
(1) Moore and Olshavasky 1989
Same results with purchase intention and perceived value of the
discount as dependent var^bles.
(2) Gupta and Cooper 1992
Beyond a certain level, the perceived value of a price cut is higher
when this type of discount is rare.
(3) Lichtenstein and Bearden 1989
The perceived value of a price reduction is higher for national brands (4) Biswas and Blair 1991
and non-discount stores.
Perceived quality of a brand is hampered by defirutive price
reductions but not by couporw,
(5) Schindler 1992
Penreived value of a price-cut and attitude towards the promotion
are better ii consumers think that manufacturers want to attract
customers rather thaji if they think that it is to get Hd of
unwanted goods.
(6) tichtenstein and Bearden 1989
in other stores). Table 5 summarizes the few studies that have applied attribution
theory to sales promodons, A recurrent finding is that consumers familiar with the
produd are less prone to the discount of price-cuts. The "discounting prindple" says
that it is because these consumers can imagine many reasons for the occurrence of
sales promotions (competition, etc.) that, in turn, dintinish the credit granted to each
of the possible explanations and thus prevent negative attributions (e,g, poor
quality) from predominating.
Synthesis and Areas for Future Research
AU in all, research on price perception has highlighted the multiple facets of price.
It has also specified the rules of reference points formadon as well as their share in
the influence of sales promodons. This area has been reladvely thoroughly covered.
427
428
Pierrt Chandon
Nevertheless, the long-term effects of repeated price promotions are worth
investigating (e.g. how long before the effects of price promotions wear-off and
consumers dedde to accelerate or decelerate ptirchases?). Moreover, attributions
appear to moderate the effects of price promotions, but this area needs further
research. The abundant literature on cognitive psychology (Hilton 1991) could be
used to differentiate causal attributions ("Why did it happen?") from attributions
linked to the intrinsic propensity of a brand to be on sale ("Why is this brand often
on sale?"). Other studies are necessary to examine the impact of prior beliefs, and
not only information, related to attributions. Finally, no one has studied the impact
of attributions on mood, attitude towards the brand, or towards the promotion. One
particularly interesting case is that of sweepstakes which announce a certain gain of,
for most consumers, a deceptive prize. What are the effects of attributions
concerning the reasons for the loss (e.g. bad luck or dishonesty) on mood and
attitude towards the sponsor?
Attitudinal, Cognitive and Behavioural Sales Promotion Models
Many theories have been employed to expkun why consumers are sensitive to deals
beyond the price reduction explanations. These theories postulate different levels of
information pnxessing intensity and, thus, operate at the comprehensive attitudinal,
purely cognitive or even behavioural levels of analysis.
The Theory of Reasoned Action and the Concept of Deal Proneness
The theory of reasoned action is an expectancy-value model distinctive for its
reference to rationality (Fishbein and Ajzen 1975). It posits that attitude stems from
persona! beliefs, while sodai pressures form subjective (perceived) norms. Attitude
and subjective norms are then at the origin of behavioural intentions. In application
to coupon usage, Shimp and Kavas (1984) measured beliefs of the buyer and her
husband about the costs and benefits of coupons. Overall, the perceived economies
and the smart-shopper feelings attributed to coupon usage are the variables which
correlate most with attitude towards coupons and self-dedared behaviour (see also
Tat 1994). Shimp and Kavas' study is one of the few to acknowledge the influence of
familial pressure, even if spouse beliefs were found to be very inter-correlated.
Finally, Bagozzi et al. (1992) found that the influence of personal beliefs is greater
among action-oriented individuals, and, conversely, that subjective norms are
critical for state-oriented people. By incorporating tWs jjersonality trait, as well as
prior experiences with coupons, the percentage of explained variance reaches 58%,
10 points above Shimp and Kavas' model.
Among the literatiu^ on the influence of sales promotions on attitude, there is a
special case to be made for the concept of deal-proneness. Deal-proneness is an
attitudinal construct caused by beliefs and attitude toward promotions. It has been
measured by Froloff (1993) at the level of self-declared behaviours ("I am influenced
by promotions at the time of purchase"). Her exploratory research suggests, in
addition, distinguishing attitude and deal-proneness vis-i-vis {jrefeiTed brands from
attitude and deal-proneness vis-d-uis any brand. Further, Lichtenstein et al. (1990)
Consumer Research on Sales Promotions
429
distinguish deal-proneness from coupon-proneness. The former stems from what
Thaler (1983) calls acquisition utility (pleasure due to the utility of the product itself
relative to the price paid), and the latter from transaction utility (pleasure due to
paying less than the reference price). Deal-prone consumers are experts who have
well-defined internal reference points and who dedare lasing coupons only if they
increase the price-quality ratio. Coupon-prone consumers pay attention to prices
and features, have a lower income, and dedare using coupons to pay less than other
consumers (Lichtenstein et al. 1991; Lichtenstein et al. 1993). It is interesting to note
that these two groups use an equal number of coupons.
Cognitive Models of Light Information Processing
Historically, attitude models were developed for highly involved situations that
bring about intensive information processing, whereas in consumer goods, most
dedsions are rapid and involve little processing (Olshavsky and Granbois 1979).
Inman et al. (1990) used Petty and Cadoppo's Elaboration Likelihood Model (ELM)
(1986) to reconcile conflicting evidence regjirding the processing of promotional
information. The ELM acknowledges that situational and individual fadors can
diminish the likelihood of information elaboration and divert one's attention away
from central elements. Their study showed that high need-for-cognition consumers
(Capioppo et al. 1984) process all the information of promotional messages and do
not read to promotional signals (e.g. displays) which are not accompanied by a
price-<ut. In contrast, low need-for-cognition consumers are influenced by the mere
announcement of a sale: they buy the produd without checking the price. Moreover,
there is much evidence to suggest that there are circumstances in which promotions
may serve as cues (Moriarty 1983; Currim and Schneider 1991;Schneider and Currim
1991; Schindler 1992; Cheong 1993). Besides, the coeffident of a dummy variable
indicating the presence of a promotion is always significant in logit-type models of
choice.
The notion of schema is a recent alternative to the ELM model. According to
Norman and Bobrow (1975), a schema is "a framework for tying together the
information about a given concept or event with specifications about the types of
inter-relations and restrictions upon the ways things fit together". A schema is often
based on past experiences and encoded as a prototype that will be compared to the
actual situation, sometimes even mindlessly (Langer et al. 1978; Pinson 1986).
According to Wamond (1990), there are three schemata associated with promotions.
The simplest are non-algebraic heuristics (semantic statements such as "A
promotion is a gain"), then perceptual processing (e.g. cheap/expensive categorization) and, finally, complex schemata using cognitive algebra (e.g. multi-attribute
models). Finally, scripts are schemata which also involve behavioural sequences
(Shank and Abelson 1975). Henderson (1988) argues that some consumers use die
script "Buy the brand for which I have a coupon", and other consumers use the more
complex purchase strategy "Buy the cheapest brand", but these hypotheses were not
confirmed. The model of Gardner and Strang (1984) assodated the two routes to
promotional influence: scripts and attitude change. It has not yet been tested.
430
Pierre Chandon
Behavioural Learning Theories
Sales promotions create changes in behaviours thanks to tangible stimuli. This
phenomenon fits well into the behavioural learning paradigm (Rotschild and Gaidis
1981; Gaidis and Cross 1987; Rotschild 1987; Blattberg and Neslin 1990). Operant
conditioning theory argues that reinforced behaviours tend to be repeated more
often than other behaviours. In this view, promotions are rewards that reinforce the
purchase of a brand if both the reward and the behaviour to be reinforced are dosely
and regularly linked. When conditioning is effective, its effects last even after the
reward has ended. Moreover, behavioural learning theory distinguishes primary
reinforcers which have intrinsic utility (product usage) from secondary reinforcers
which have none (coupons). This theory states that promotion usage can replace
brand usage as the reinforced ("learned") behaviour if promotions become the
primary reinforcers. This phenomenon is likely to take place when there are no
perceived differences between brands, when it is a mature brand and when
promotions are j>ervasive. In other cases, brand usage reinforces brand purchase.
Finally, immediate reinforcement, continuous and then random, produces the most
durable effects.
Synthesis and Areas for Future Research
These reviewed theories offer various explanations as to the effectiveness of
promotions beyond price reduction. Ten years after Sawyer and Dickson (1984), it
can still be said that they are reasonably complementary. On one hand is the robust
multi-attribute model of attitude change suited to extensive information processing
situations. It could be extended to other involved promotions like loyalty
programmes. One important and not yet resolved issue is the postulate of cognitiveevaluative-behavioural sequence. Knowing that the costs of clipping coupons are
perceived as being lower for more frequent users of coupons (Jolson et al. 1987; Tat
1994) does not indicate whether beliefs cause behaviours or the reverse. Generally
speaking, our knowledge of consumere' beliefs about promotions cind promoted
products is very poor. Further research is needed to investigate their beliefs about
the amount of effort necessary, the sincerity of the sponsor and his motivations
(Alpert 1993; Froloff 1993; Tat 1994). Turning to deal-proneness, future research
could link the two types of deal-proneness with each consumer's conception of
value (Zeithaml 1988). However, by articulating the distinction between couponproneness and vedue-consdousness, attitude research has demonstrated the limits of
its earlier postulates of a rational consumer.
On the other hand, scholars have proposed the notions of signal, schema and
script, as well as behavioural learning ttieories that are suited to succinct information
processing situations. These models deserve future research. Specifically, we have
medium involvement situations in mind, where promotional signals can serve to
attract consumers' attention, which would in turn result in the brand entering the
consideration set and its information being centrally processed. Besides, consumer
behaviour theories adapted to routine purchases like the Hoyer Purchasing Tactic
Model (1984) would benefit from explidt accoimt of sales promotions. Finally,
behavioural theories, and especially recent ones (Shimp 1992), deserve further
Consumer Research on Sales Promotions
431
attendon since they have highlighted one of the major long-term issues of sales
promodons: do they teach people to buy products on sale?
The Economic Approach: Stylized Theoretical Models
"Stylized" theoredccil modelling is the emerging line of research in Marketing
Sdence (EUashberg and Lilien 1993), The objective of these models is to help
marketers understand the market mechanism by concentrating on some of the
multiple forces that rule it (Moorthy 1993; Schmitdein 1994), They are based on
normative assumptions, "stylized" for pedagogical purposes, and aimed at
capturing the essence of the reladons between firms and markets, Prescripdons
concerning the optimal behaviour of firms are then mathemadcally derived.
Generally speaking, theoredcal models explain when and why it is in the best
interest of firms to promote rather than to lower prices. The first line of research
views promodons as long-term equilibrated discriininadon strategies (Gijsbrechts
1993), The interest of the second line of research is in the role of promodons in
compeddve games.
Static Models
Sales promodons can take advantage of consumer heterogeneity in three ways (Table
6), The first way is for retailers to use this heterogeneity to reduce inventory costs or
the opportunity costs entailed by too frequent sales. The second consists in only
offering coupons to consumers who have a low opportunity cost of time and high
demand. By doing this, monopolistic firms can reap high profits on those consumers
who don't want to spend time and effort clipping coupons and who eire less pricesensitive. This promotion-as-a-discriminating-tool view is original because it argues
that promodons can be profitable long-term strategies even if they do not convert
new buyers into loyal ones. They are simply a way of charging prices adapted to the
demand of the different segments of consumers. Lasdy, promodons can be a way to
test the demand for a temporary produd, such as dothes, by reducing prices as soon
as those consumers willing to pay higher prices have bought.
Other researchers have investigated the presence of cross-promotional asjfmmetries. The model of Blattberg and Wisniewslci (1989) links udbty to quality, price and
willingness to pay for quality (which results in nadonal brand loyalty). It assumes
that markets eire composed of three levels within which quality is similar: nadonal
brands, regional brands and generics. If willingness to pay for quality has a bi-modal
distribudon, promoted brands attrad buyers of brands belonging to the same level
or to an inferior level but have no effects on buyers of superior-level brands. This
explains why private labels don't tend to promote. In addidon, it nullifies the
comparison to a prisoner's dilemma because neither party loses as much if they
don't co-operate (i,e. if they promote). Finally, Sivakumar and Raj (1993) show that
nadonal brand's promodons are the only promodons to attract new buyers to the
category, which largely explains the asymmetric pattern of brand compedtion
discovered by Blattberg and Wsniewski,
432
TaUe 6.
Pierre
Chandon
Taking advantage of consumer heterogeneity iinth promotions
Mechanisms
Cost reduction
Sales promotions cost less
than everyday-low-price
poUcy.
Operationalizations
(1) Transfer of storage costs to the
coiteumers who have cheaper
storage costs than the retailer
fBlattbergrfflf. 1981).
(2) Improving the efficiency of
price promotions through pseudo
price-cuts if there are enough light
information processors among
consumers.
Consumer pricediscrimination
Price promotions permit to
charge prices adapted to the
level of demand of each
consumer segment, which is
more profitable.
(3) People with high demand have
higjier opportunity costs of time.
Companies can use the foQovnng
costs to discriminate their
customers:
— Cost of collecting coupons
(Narasimhan 1984; VUcassim
and Wittink 1987);
— Transaction costs of coupons
(Geistner and Holtausen 1986);
Empirical evidences
(1) Non-perishabk products
have greater promotional
elasticity (Litvack rtfl/. 1985).
(2) Simulation in a university
retail outlet. The recommended
promotioral policy yields higher
returns (Irunan and McAUster
1991).
(3) Coupons are offered on
expensive products (Wlcassim
and TOttink 1987). Consistent
with the discrimination
hypothesis, promotions are
often random, of similar
naagnitude and, above all,
ptirdiase probabilities don't
change after a promotional
purchase (Tellis 1989).
— Storing promoted products
Oeuland and Narasimhan 1985).
Testing the demand level
Sales promotions can help
assess an unknown demand.
(4) If they don't ki^own how to
discriminate consumers, firms can
begin by charging a high price
and then reduce it in accordance
with market size, competition and
costs of the information search.
(4) Anecdotal evidence of
markets where prices are set
very high but promoted soon
because competition is weak,
suggests that consumers are
numerous and information
search is expensive.
Dyruimic Modeb
One recent contribution of theoretical stylized models to the study of price
promotions has been the incorporation of time. Kahn and Raju (1991) studied the
impact of promotion frequency on bremd switching. Their model shows that, for a
small brand, increasing the frequency of price reductions raises the share of purchase
among inert consumers. Krishna (1992) models the strategic behaviour of consumers
over an infinite horizon. She predicts that, in produd categories with frequent
promotions and little brand loyalty, consumers know when the next promotion will
occur. Consequently, consumers antidpate promotions and stockpile less. Assun^ao
and Meyer (1990) derive optimal stockpiling strategies from a theoretical model,
althou^ they show that actual consumers' stockpiling strategies are systematically
biased as predided by the Prosped theory (Meyer and Assun^ao 1990). Compared
to theoretical norms, consumers tend to consistently buy the same qucmtities when
prices are stable, to buy too much when prices decrease and not enough when they
increase. Lastly, Krishna (1994) found in a computerized experiment that expected
prices directly influence how much consumers stockpile. When they expect a
promotion tomorrow, they either buy less today or buy a small quantity of a lesspreferred brand on promotion.
Other research has demonstrated that promotions can be op>tiinal in infinite
competitive games. Narasimhan (1988) shows that, in the case of a duopoly, the
Consumer Research on Sales Promotions
433
existence of a segment of loyal consumers conditions tiie optimal pricing strategy.
The rationale is that price-cuts can help compete in the price-sensitive segment,
while not decreasing the margin made with loyal consumers by too much. If these
two segments exist, national bremds should promote randomly to prevent
competitors from antidpating their promotions and from following them. Optimal
frequency and amount depend, respectively, on the number and the strength of
preferences of non-loyal buyers (Villas-Boas 1993). Raju et al. (1990) widen the
preceding model to the study of oligopoly and empirically verify that there are many
more promotions in product categories with many brands and where bremd loyalty
is weak. Their model argues that bigger brands lose more by promoting because
they have, proportionally, a greater niunber of loyal consumers. However, Rao
(1991) shows that poor quality private labels should not promote since they cannot
attract many quality-sensitive consumers. Lastly, Lai (1990a) shows that the
opportunity costs of promotions can be reduced by alternating them with other
national brands. This way, private labels face the competition from one or the other
national brands each week. This author shows that this de facto co-operation can be
achieved without expUdt collusion between the two national brands. The Sfune
scholar (Lai 1990b) replicates these results when retailer's objectives (i.e. to obtain the
largest trade promotions and to pass-through the smallest part), are incorporated.
Synthesis and Areas for Future Research
This research tradition has been successful in opening new areas for research.
Among those issues that were not reviewed here, let us dte consumer welfare
(Levedahl 1988; Gerstner and Hess 1990), advertising-promotion trade-off (Sethuraman and Tellis 1991) and the modelling of retailers' behaviovtr (Sethuraman and
Tellis 1993). This research tradition has nevertheless come under fierce criticism for
its lack of systematic empirical testing (Schmittlein 1994). Future studies in this
research tradition should strive to formulate testable predictions, and should also try
to relax the assumptions that go against the most documented results. For instance,
the assumption oi stationary markets, of perfect information or even of distinct
market segments is very questionable. This research tradition must take into account
the empirical generalizations that we are aware of (Blattbeig et al. 1994) to avoid
being called "armchair economists" by scholars from other research traditions.
Conclusion
This literatiu* review suffers from two major limitations. The first is not to have
incorporated all the working papers and professional works completed during the
past 10 years. This restriction has been partially compensated by dting the most
recent working papers. The second limitation has to do with the organization by
research tradition which cannot satisfactorily account for the substantial overlap of
the various research traditions. Neither does it show how some studies originate
from a controversy about a specific issue rather than capiteilize on a research
tradition's previous results.
434
Pierre Chandon
Nevertheless, four important points may be made:
—There is ample room for research on the following sales promotions techruques:
twin packs, three for the price of two, more product for the same price, premiums,
games and, generally, on all the promotional techniques little used in the United
States but common in Europe. These studies would be particularly welcomed since
these promotions have important implications in little researched areas Uke the
impact of promotions on brand equity, usage, and manufacturer-retailer pwwer
relations.
—The consumer-oriented research tradition wiU no longer continue with the
methods exposed here. It is presently being replaced by logit models of individual
choice. These models are both more precise and richer because they use singlesource scanner psrnel data; i.e. data combining individual (purchase history) and
causal (price, promotions) information (for review, see Chandon 1994b).
— The theory-oriented research tradition is very unbalanced. One one hand, price
perception theories have been thoroughly tested but lack external validity. On the
other hand, the many very interesting attitudinal, cognitive and behavioursJ theories
lack empirical replications.
— The theoretical economic models have made major contributions to research on
sales promotion. It is the only researtJi tradition to have investigated sales
promotions from the company's side, an area where pre-conceived notions
proliferate. Three widespread assumptions, aU worthy of investigations are: (a) the
restriction of sales to shori-term weapons harmful over the long term; (b) the view
of purchase acceleration as a worry; and (c) the assumption that promotions are
profitable. Ironically, research on sales promotions exhibits one oi the most criticized
bias of sales promotion programmes: their reliance on sales as the ultimate measure
of the performance of sales promotions.
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