Chinese Consumer Preference for Price Based Sales Promotion Techniques – the
Impact of Gender, Income and Product Type
Lisa S. McNeill, University of Otago.
Abstract
Customer satisfaction is known to have a positive impact on market share (Magi
2003) may be moderated by factors such as price sensitivity and perceived value
(Rajagopal 2007). Transaction utility theory suggests post cognitive judgements
about a price-based promotion drive the intention to repeat the process in the future.
Studies show a link between unexpected product promotions and increased cognitive
processing of satisfaction and pleasure (e.g. Kahn and Louie 1990; Krishna, Currim
and Shoemaker 1991), however, few studies consider personal consumption factors
such as income, cost, nature of the item and gender in regard to impact on acquisition
and transaction utility. This study explores these factors in regard to satisfaction and
pleasure with, and resultant preference for, price-based sales promotion in China.
Introduction
In the past decade manufacturers and retailers have been gradually switching from above
the line mass media advertising to a variety of below the line sales promotions. This
trend reflects an ongoing disenchantment with mass media advertising based on the
difficulty of measuring its effectiveness. However, the trend also reflects a desire by
manufacturers and retailers to get closer to customers in some form of relationship
marketing. A number of explanations have been forwarded for the increasing
popularity of promotions (Dickson and Sawyer, 1990; Quelch, 1983; Low and Jakki,
2000; Dawes, 2004). One of the key factors is the changing relationship with
advertising. Previously advertising and sales promotion were viewed as alternatives to
one another, but “this has changed as increased use by market leaders such as Proctor
and Gamble and McDonald’s have given promotion a newfound ‘respectability’, and
as rising prices and increasing ‘ad clutter’ have raised doubts about advertising’s costeffectiveness” (Peattie, 1998, p. 43). Other factors include the increasing power of
retailers (Toop, 1992), matching competitors’ promotions (Lal, 1990), changed in
marketing culture where short term gain is becoming more attractive than long term
consumer franchise building through advertising (Peattie, 1998), and the desire of
manufacturers and retailers in influencing consumers’ buying behaviour (Alvarez and
Casielles, 2005).
Despite the growth in sales promotions, there is a scarcity of literature devoted to the
use of sales promotion techniques, particularly in the Asia Pacific region.
Understanding customer motivation, behaviour patterns, decision making
characteristics and value orientations in relation to sales promotions in different
countries is however vital to predicting the effectiveness of said promotions in
different markets (Foxman, Tansuhaj and Wong 1988). This paper attempts to fill
some of the key gaps in sales promotion theory by exploring the concept of consumer
satisfaction with price-based sales promotion in the burgeoning market of China.
Sales Promotion
1
Sales promotions can be loosely defined as ‘special offers’ which essentially aim to
stimulate demand during the period in which they are set (e.g. Peattie and Peattie,
1994; Lehman and Winer 2002; Walsh, 2000). The potential benefits of using sales
promotion can range from attracting new customers from competitors, to persuading
customers to switch to brands with higher profit margins or simply inducing existing
customers to buy more. Although sales promotions take up a large share of total
marketing expenditure in most consumer goods firms, they remain an area given less
strategic consideration or attention than any other aspect of the promotion mix
(Srinivasan and Anderson, 1998). In addition, at odds with this importance in the
consumer goods industries, there is a notable lack of research into the use of sales
promotions outside of Europe and the US (Huff and Alden, 1998).
The consumer goods manufacturer has long seen sales promotions as a necessary evil,
with price-based sales promotion particularly said to have the potential to erode the
image of the company, as consumers often use price as a surrogate measure of quality
(Tellis and Gaeth, 1990). The advocate of brand advertising proclaims that sales
promotions are a bad thing since they don’t contribute to the brand building needed
for future success and profitability (Dawes, 2004). At the same time, those involved in
running the sales promotion focus on the tactical issue of getting the greatest amount
of short-term sales for the least promotional investment (Davies, 1992). In order to
better understand whether sales promotions, and specifically price-based promotions,
are useful to the consumer goods marketer, it is essential to first explore likely
customer satisfaction with such tools.
Customer Satisfaction with Sales Promotions
Customer satisfaction is known to have a positive impact on market share (e.g. Magi
2003) and satisfaction levels may be moderated by factors such as price sensitivity
and perceived value (e.g. Rajagopal 2007). Established means of evaluating sales
promotions as developed in the US are said to be “inadequate to guide formulation of
sales promotion strategy internationally” (Foxman, Tansuhaj and Wong 1988, p. 7)
and that the notable lack of research into consumer response to sales promotion
outside of North American and European markets needs to be addressed (Huff and
Alden 1998) in order to deepen our knowledge of how satisfaction with different
forms of promotion is likely to be exhibited in different markets (Kaynak and
Mitchell 1981, p. 25).
Satisfaction, or indeed pleasure, with a promotion can not only be linked to
repurchase, but may in fact be able to be linked to a transfer of satisfaction to the
brand or company offering the promotion (Tat and Schwepker 1998). When
consumers are satisfied, this generates positive word of mouth and purchase
recommendations (Wirtz and Chew 2002) and thus the sales promotion achieves its
target by directly impacting buying behaviour (Alavarez and Casielles 2004).
Transaction utility theory tells us that consumers will make overall satisfaction or
dissatisfaction judgements about a price-based promotion after the experience, driving
their intention to repeat the process in the future. Overall judgements about price
promotion are formed through consideration of the acquisition utility of the deal
(satisfaction or dissatisfaction with the intrinsic utility of the item purchased less its
price) and transaction utility (pleasure or displeasure associated with the deal) (Tat
and Schwepker 1998). This suggests that not only is general observed satisfaction of
the consumer important (in that it can impact on perceived acquisition utility), but
2
overall pleasure with the price-promotion should be considered (in relation to forming
transaction utility), and thus intention for repeat behaviour (or uptake of future pricepromotion offers).
One issue that causes some problems in regards to transaction utility theory and price
promotions however is the fact that many consumers have become so used to
experiencing price-based sales promotion that they are effectively conditioned to
expect them (Tat and Schwepker 1998), and thus may not cognitively process
pleasure or satisfaction signals in association with them. Studies have shown a link
between unexpected product promotions and increased cognitive processing of
satisfaction and pleasure (e.g. Hastie 1984; Kahn and Louie 1990; Krishna, Currim
and Shoemaker 1991), however, few studies have considered personal consumption
factors such as income, cost and nature of the item purchased and gender in regards to
their impact on acquisition and transaction utility. This study aims thus to extend
current knowledge in regards to the role of personal consumption factors in driving
satisfaction and pleasure with, and resultant preference for, price-based sales
promotion in China.
Methodology
Data was collected in China using a multi-item questionnaire which required
respondents to answer rating scaled questions in relation to their attitudes towards
sales promotion techniques. Scale items were drawn from existing, pre-tested
marketing scales relating to consumption satisfaction and sales promotion (Bearden
and Netemeyer 1999). To increase the realism of the task, respondents were first
asked to describe two recent purchasing experiences that utilised a price based and a
non-price based sales promotion. Respondents were asked to name the product they
purchased, the price of the product and the extent of the discount (in regards to pricebased sales promotion techniques). This allowed the researchers to eliminate
responses whereby promotional discounts were overly generous (such as a price
discount of more than 30% or a free gift of a greater face value than the item
purchased).
Respondents were selected to provide a cross-section of the ‘purchasing enabled’ in
China, with participants surveyed in person in Shanghai, Beijing and Jilin.
Consumers in the 25 to 65 year old age group were identified as sampling targets, as
these consumers are likely to be employed and have independent means for
consumption of consumer goods. In addition, by sampling within these age groups,
biases related to the younger, tertiary study and retired populations (such as financial
pressures that may influence purchasing habits) can be lessened. Respondents, where
possible, were drawn from a wide range of occupations and lifestyles. Demographic
information (including age, gender, occupation, family size and income) was also
collected to allow for the representative nature of the samples to be reviewed and
sampling frames adjusted where necessary. Overall, 318 questionnaires were
collected.
Results
Table 1: Chinese Consumers’ Satisfaction towards Price-Based Sales Promotion
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Independent variables
Sex: female
male
Product category
Durable
Non-durable
Product price
<1000
≥ 1000
Household income
<50K
50-100K
>100K
Generally
Satisfied
with PricePromotion
5.07
5.17
Very
Pleased with
Price
Promotion
4.88
4.96
Resultant
preference
for Price
Promotion
5.01
5.12
Grand means (satisfaction
towards price-based
promotion)
5.09
5.15
4.86
4.97
5.00
5.12
4.98
5.08
5.11
5.19
4.91
5.00
5.03
5.23
5.02
5.14
5.01*
5.23*
5.25*
4.75*
5.08*
5.06*
4.96**
5.13**
5.29**
4.91
5.15
5.20
4.99
5.08
Table 2: Chinese Consumers’ Satisfaction towards Different Price-Based Sales
Promotion Techniques
Independent variables
Promotion techniques
dollar discount
percentage discount
refund/rebate
coupon
combination offer
others
Generally
Satisfied
with
Promotion
Technique
Very
Pleased
with
Promotion
technique
Resultant
preference
for
Promotion
technique
Grand means (satisfaction
towards promotion technique)
5.12
5.16
5.20
5.22
5.02
5.22
5.00*
4.84*
5.80*
5.11*
4.74*
5.44*
5.11
5.02
5.60
5.56
5.00
5.00
5.08
5.01
5.53
5.30
4.92
5.22
The multivariate tests of significance reveal that there are significant differences in
our dependent variables across household income (Wilks’ lambda = 0.056, Roy’s
largest root = 0.015). Examinations of the univariate/between-subject tests for each
dependent variable indicates that ‘Very Pleased’ is the only variable that differs
significantly (p = 0.009) across household income when the significant is measured at
an alpha level of 0.05. An examination of the means for this variable reveals that
those with household income of above 50K/annum have higher scores for ‘Very
Pleased’ than those with incomes below 50k.
Similarly, the multivariate tests reveal that there are significant differences in our
dependent variables across price promotion techniques (Wilks’ lambda = 0.208,
Roy’s largest root = 0.018). Tests of between-subject effects for each dependent
variable indicate significant difference for the ‘Very Pleased’ variable (p<0.05). As
shown in Table 2, Chinese respondents are most pleased towards the refund/rebate
technique (mean = 5.80) and least pleased towards combination offers (mean = 4.739)
and percentage discounts (mean = 4.836). Chinese respondents also showed the most
satisfaction towards the refund/rebate technique (grand mean = 5.53).
Overall, gender (Pillai’s Trace = 0.701), product type (Pillai’s Trace = 0.637) and
product price (Pillai’s Trace = 0.424, Wilks’ lambda = 0.424) appear to have no
significant impact on consumers’ satisfaction towards priced-based sales promotion in
China.
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Conclusions
The results of this study show no major impact of gender or initial product price on
whether Chinese consumers are likely to feel satisfied or pleased with a price
promotion experience. Income of the respondent does, however, appear to impact on
pleasure towards a promotional deal and overall satisfaction with the promotion.
Those respondents with a higher income tended to be more satisfied with their
promotional deal experience (and thus transaction utility is increased) and are
significantly more likely to feel very pleased with the promotion overall (increasing
acquisition utility also). Those respondents in higher income brackets also exhibited a
greater preference towards similar price promotions in the future than those in the
lowest income bracket. These findings support transaction utility theory in that they
highlight the link between after-purchase satisfaction with repeat satisfaction seeking
intention.
Further support for transaction utility theory amongst this Chinese sample is seen in
responses to individual price promotion techniques, where refunds and rebates were
found to be the most pleasing technique and combination offers or percentage
discounts less so. In the case of refunds and rebates as described by the respondents,
these price promotions were generally unexpected and came as a ‘pleasant surprise’ in
the purchasing situation. Combination and percentage discount offers however,
tended to be expected in that they were heavily promoted and indicated at the point of
purchase. Transaction utility theory tells us that cognitive processing of satisfaction
and pleasure is likely to be heighted in situations where a promotion is unexpected,
thus preference for ‘unexpected’ sales promotions is likely to result.
The finding that a higher income leads to higher perceived satisfaction or pleasure
with a price based sales promotion is an interesting one, perhaps explained by the
‘expect less be pleased more’ idea – those consumers who are not actively looking for
a cheaper deal are more likely to be appreciative of a price promotion ‘bonus’ than
their counterparts on lower incomes, who may actively seek out the best deal before
making a purchase decision. This highlights the potential for further research into the
impact of income on responses to sales promotion overall.
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