In an era when price rules as one of the most important factors on the path to purchase, is it fair to question the impact of constant price promotion? Leonard Lee and Claire Tsai, researchers at the University of Chicago think so. Their detailed analysis of consumer behavior and attitudes regarding price promotion, just published in the Journal of Consumer Research, draws significant conclusions about discounting and its impact on brand value and loyalty. The bottom line is that marketers who sell products intended for immediate use and consumption have the most to gain from this practice.
These researchers have discovered that consumer attitudes about discounts and the value of a specific product or service are closely linked to when the product is actually consumed. For example, when a consumer uses a coupon or code to obtain a product or experience that will be used right away, enjoyment and brand valuation increase. The consumer’s emotions are all about the excitement of having received a great deal. Those emotions are reinforced by the pleasant experience the consumer has immediately after making the purchase. This will be especially true for folks who are buying something like pizza or frozen yogurt.
However, these same feelings are not experienced when the consumer purchases something that will not be used or consumed for a while. The researchers offer the example of a discounted travel excursion. A consumer may initially be excited at the prospect of getting a great deal on an upcoming trip. However, by the time that trip comes around, the consumer’s good feelings about the discount have substantially subsided. Their attention is no longer focus on the good deal. Regardless of how much fun they had during the experience, any tendency they may have to buy again from that marketer will likely not be associated with price.
Do you agree with these findings? Have you had good success with price promotions or do you worry that it will gradually decrease profitability?
Kathy is the Vice President of Research for SalesFuel. She holds a Masters in Business Administration from the University of Vermont and oversees a staff of researchers, writers and content providers for SalesFuel. Previously, she was co-owner of several small businesses in the health care services sector.