Journal of Marketing Management, 1995, 11, 419-441

Pierre Chandon Consumer Research on SalesSchool of Promotions: Af

Management, Paris State-of-the-Art LiteratureReview^*Many research traditions have dealt with consumer psychology andbehaviour vis-a-vis saks promotions. The consumer-orientedapproach seeks to identify the heavy users of promotions and to tracktheir purchasing strategies involving the choice of a promoted brand.The aim of the theory-oriented research traditions is to test theexplanatory power of various cognitive, attitudinal, behavioural andeconomic frameivorks, be it to explain why and how consumers reactto sales promotions or to understand when companies shouldpromote. This article exposes the specificity of each research tradition,its principal results and the most promising areas for futureresearch.

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). Thisdramatic rise in research can be explained by both the large increase in promotionalspending and the availability of scanner panel data.

Organization

This review takes an historical perspective rather than a thematic approach^, it isorganized by research tradition in order to mirror the innovation process of scienceat its best. A research tradition was defined by Laudan (1977) as "a frameworkhinging on a privileged theory, methodology or conception of the world". Thisnotion can help us understand the persistence of conflicting results on many keyissues: these conflicts are due to the fact that these results are the fruit of manydiverse research traditions. Besides, scholcirs can assess the problem-solvingpotential of each tradition so as to motivate, or deter, their insistence upon oneresearch tradition or another^.

The main disttnguishing factors between one research tradition and another areneither 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 (Chandon1994<!).^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 theconcept 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 empha-sizes the study of consumers' behaviours associated with sales promotions. It has twosubdivisions: the identification of frequent users of sales promotions and the studyof purchasing strategies involving sales promotions. In contrast, the aim of thetheory-oriented research tradition is to test various cognitive, behavioural oreconomic theories. This papier wiU further distinguish the reference-price theoriesfrom other more comprehensive models. This cluster is, of course, a compromisebetween the within-group cohesion and the clarity of exposition. It is, to someextent, subjective since no consensus about the adequate aggregation level ofresearch 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 ideathat sales promotions are a temporary and tangible modification of supply, the goalof which is to directly impact consumer, retailer and sales force behaviour. Thediversity of phenomena encompassed by this definition has led scholars to focus onone of ihe particular aspects indicated in Figure 1. Recent but sparse research hascompleted this panorama by emphasizing the direct-marketing and communicativeaspects 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 reduc-tions, coupwns, games, etc.) cind scholars are not certain whether we must studythem separately, as it is currently the case for price promotions and coupons, or if itmakes sense to spieak of sales promotions as a whole. The most widely acceptedtypwlogy to date makes three distinctions; (a) retail promotions; {}}) tradepromotions; and (c) consumer promotions (Figure 2). However, this "natural"typology is not completely relevant to corwumer research. For example, price-cuts

Decisions Medianisms

Firms

—Promotionalpolicy

/ \

Theautho

—Conwelfi

Hties

sumerire

N,y

y

Salespromotions

\ /

Priceproductadvertising

Custonters

—Consumers

—Retailers—Sales force

Effects

On sales andprofitahility

Onhehavicmrsand attitude

Figure I. Different levels of analysis of sales promotion.

Consumer Research en Sales Promotions 421

TVade promotionB

DiscountsManufacturers Retailers and

sales force

EetaHers'promotions

Price promotionsT)isp]syBFeatures

ConsumersGames, anniversarysales

Ckinsumers' promotions

Coupons, refunds, premiumsMore 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 differentreactions. Only price-cuts are spontaneously associated with the word "salespromotions" by the vast majority of consumers (Guilbert 1991). What is needed is aa posteriori typology, based on consumers' reactions to sales promotions. Theexploratory research of Diamond and Johnson (1990) is a useful first step in thisdirection which could be replicated using real promotions instead of abstractdefinitions. Their typology is based on the nature of the gain (whether it is monetaryor not), the amount of effort required to attain it, and the relationship of the gain tothe product (more of the same product, gain of a prize or anything other than theproduct). These criteria permit distinction of price-cuts from quemtity gains andfrom 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 ofsales promotions, with few, if any, conclusive results. For example, the effect ofincome is not clear (Blattberg and Neslin 1990, pp. 73-76). As a result, the morerecent studies have relied on: (a) perceived risk theory (Bauer 1960); (b) economictheory; or (c) psychographics (Tables 1-3, respectively). Overall, these studies havesketched a rather coherent portrait of the frequent users of promotions: they areprice sensitive; receptive to price and promotion information; bremd switchers; andheavy buyers of the category. Besides, they stodqjile and accelerate their purchasesin reaction to sales promotions. These studies eire also useful for, e.g. targeting theheavy users of promotions or deterring buyers from taking advantage ofpromotions^

^ e percentage of redemptions made by buye^ depends on various coupon characteristics (Henderson1%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 Pierre Chandon

TaUe 1. Identification of tke frequent users of sales promotions tkanks to perceived risk theory

Dependent variable Independent variable References

Intention to redeem the offeredcoupon (1)

Redemption of diiect-maiJcoupon (2,3)

Increase in the repurchaselikelihood of new buyers (3)

Self-declared familiarity (1)

Brand purchases (paneldata) (23)

(1) Shoemaker and Tibrewala 1985

(2) Bawa and Shoemaker 1987!J

(3) Bawa and Shoemaker 1989

Tahle 2. Identification ef the ftequent users of sales promotions thanks to economic theory

ReferencesMediating variables:Perceived costs and benefitsof promotions usages

Independent variables:Household characteristics

Costs:

- Substitution of a preferredbrand for a less preferred,promoted brand (1-3);

- Opportunity costs of time(cUpping and holdingcoupons) (3-5);

- Inventory of stockpiledpromoted brands.

Benefits:

- Smart shopper feelings (3,5).

House ownership: (+) for (3).

Living in large dties: (+) for (5).

Higher education: (+) for (3-5).

Price sensitivity: (+) for (6).

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).

(4) Narasimhan 1984

(5) Bawa and Shoemaker 1987B

(6) Jolson el ai 1987

(7) Henderson 1985

Table 3. Identification of ike frequent users of sales promotions thanks to psychographics

Dependent variables Independent variables References

Coupon usage: (+) for (8),(n.s.) for (10).

Prediction of futurepron^otions: (+) for (9).

Search and memorization ofprices, purchase of generics:(n.s.) for (10).

"Market mavenism": possessionand transmission of marketexpertise (Feickand Price 1987)(8-10).

(8) Price et al 1988

(9) Krishna ef a/. 1991

(10) Lichtenstein et al. 1993

n.s., not significant.

Purchase Situation and Purchasing Strategies Involving Sales Promotions

The literature on purchasing strategies has taken a situational approach, as opposedto the former stream of research which assumes that a "natural" deal-pronenessexplains consumers' responses to sales promotions. For example, the economicmodel reviewed above predids that such a penchant should not vary across productcategories, since the costs associated with coupons are the same, and since it is inconsumers' best interests to spread these costs over the maximum number ofpurchases (Bawa and Shoemaker 1987fl). These authors find that, contrary to theiroriginal hypothesis, up to 31% of consumers use coupons in some product categoriesbut 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 varyingperception of and sensidvity to sales promodons. This study shows that promodonalactivity: the number of displays and the width of the assortment in the preferredstore, are correlated with overall deal-proneness and price sensidvity. Familiaritywith promodons is also employed, along with store familiarity and inventory level,to predict the "dedsion state" of a consumer on a particvilar shopping trip (Buckhnand 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 featureswhen 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 employingvarious purchasing strategies (Tellis and Gaeth 1990), Currim and Schneider (1991)have established a typology of the purchasing strategies used by consumers whenthey encounter promotions on their preferred brands or on other brands (e.g. inertia,brand switching, stockpiling, etc). Of the five purchasing strategies mentioned intheir study, two involve promodons: (a) passive deal-proneness (stockpiling of thepreferred brand displayed); and (b) acdve deal-proneness (brand switching andpurchase acceleration for any brand featured, or holding coupons). Their researchshows that three out of four consumers use more than one purchasing strategy, atleast one of which involves sales promodons. Another study by the same authorsshows that acdve deal-prone consumers may become passively deal-prone but thatthe reverse is rare (Schneider and Currim 1991), They did not find any pure, i.e, notprovoked by promodons, variety-seeking purchasing strategy because of dataaggregation problems in household (in contrast to individual) panels (Kahn et al.1986), or simply because this kind of behaviovir has become less frequent with thepervading of sales promodons.

Synthesis and Areas Jot Future Research

This literature has shown that the diversity of promodon usage patterns betweenand within consumers can be partly explained by the percepdon of the costs andbenefits of promodons, StiU, the most promising area for future research in theidentification of frequent and infrequent users of promotions is in the use ofpsychographics. Smart-shopper self-concept, role percepdon (homemaker pride)persorality traits (need for cognidon, need for variety) or other price-relatedschemata 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), Thefeelings (fun, entertainment, anger) or moods created by many consumer promo-tions and the influence of sodal fadors are other imder-researched areas that couldimprove 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 frombu)Tng the brand when they know that they will need to justify their choice to othersof their social group. There are probably individual differences in this phenomenonworth exanuning. Finally, a very interesting direction is to enhance the explanatorypower of demographics through the use of consumer self reports on "perceivedbusyness" or "perceived finandsil wellness" (Mittal 1994).

424 Pierre Chandon

This literature has also shown that, if each consumer is indeed inherently prone todeals, his behaviotir also depends on the point-of-purchase promotional environ-ment. Future research is needed to determine which of these two sources of varianceis domiiuuit. By favouring the personality explanation, scholars may have beenvictims of the fundamental attribution error, that is the tendency to attribute one'sbehaviour to personality rather than to environment. The next step in this Une ofreseetrch could be to study the long-term effect of the multiplication of salespromotions; luunely, do they encourage active deal-proneness?

The major limitation of this reseaidi tradition is to have measured deal loyaltyinstead of deal-proneness. However, we know that consumers may be heavy dealusers if their preferred brands are frequently on sale, or if they take advantage ofpromotions only when satisfying their desire for variety (lichtenstein et al. 1990;Froloff 1992). Other findings are rather tautological. It is obvious, for instance, thatbrand loyalty is inversely related to overall promotion usage*. The present tendencytowards more theory and non-observable constructs should help surpass theseUmits. Furthermore, enhancing our knowledge of why promotions are used will notonly improve our knowledge of the deal-prone consumers, but Jilso approach criticalissues like the long-term effects of promotions on brand equity or on therelationships 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 onthe 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 thatindividuals compare prices, or any other attribute, to a personal reference levelinstead of valuing their absolute amount. Cognitive psychology has supported thisabandon of the notion of objective price by showing that the human perceptualapparatus is best suited to the evaluation of changes than to absolute values(Kahneman and Tversky 1979). The assimilation-contrast theory (Sherif andHovland 1953) adds that there is a "just-noticeable" difference within which there isno reference effed but assimilation. Gupta and Cooper (1992) have shown that thisthreshold is larger for retailers' brands, a conclusion which corroborates thehypothesis 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 manycontroversies 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 whichthey 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 self-confident consumers tend to stick to their internal (temporal) reference prices,whereM brand switchers use mainly external (contextual) reference prices (Puto1987; Rajendran and Tellis 1994). Let us highlight the fniitfulness of the forward-looking reference-price concept in the domain price promotions. Being temporary,sales promotions induce consumers to think about future prices, not only past orcurrent prices. This, in tum, explains both purchase acceleration (anticipating futurepurchases) or deceleration (postponing of planned purchases) phenomena.

Reference prices are not only influenced by the amount of the deal, but also bytheir frequency and their pattern. In a computer experiment, Krishna (1991) foundthat consumers can assess the frequency of regular price promotions, but under-estimate frequent promotions and over-estimate the frequency of a rarely promotedbrand if other brands are frequently promoted. Because the external validity of suchcomputerized experiments is weak (Burke et al. 1992), Krishna et al. (1991) havereplicated this result with a field experiment. Response accuracy appears to be betterfor 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 apromotion is substantially larger when unexpected (Latdn and Buckiin 1989;Kalwcini and \ lm 1992). AU in all, these studies recommend random promotions sothat consumers cannot plan ahead.

The perceptual encoding of price promotion is a topic of importance forunderstanding wecir-out effects. Prospect theory assumes a utility function that isconcave over gains (Kahneman and Tvereky 1979), which predicts that people prefera 50 cent coupon and a $5 price than simply paying $4-5. TTiat is why the promotionis separated from the price, i.e. promotion and price are put into two separate"mental accounts" (Mazumdar and Jun 1993). The type of sales promotionmoderates this principle: non-monetary promotions (premiums, lotteries) areframed as gains, whereas price reductions are framed as reduced losses, and thusaggregated with the price of the product (Diamond and Johnson 1990; Diamond andSanyad 1990). This tjrpe of aggregation is important because sales promotions framedseparately 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, itsmemorization and the resulting confidence in consumers' estimates are globallyvery weak, even when they are collected at the point of purchase just Jifter a choiceis made. Contrary to common knowledge, consumers do not take more time whenchoosing a brand on sale, and their price estimates are not less precise butsystematically under-valued. The same thing applies for purchases made withcoupons (Buzas and Marmorstein 1988). These results challenge the economic viewof a rational consumer since the vast majority (at least) don't have precise internalreference prices. However, these internal reference prices can be easily replaced withcontextual reference points. In addition, it appeeirs that consumers easily rememberif 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 427

prices unless they want to make comparisons with other stores or make choicesregarding quandty. In most common brand choice decisions, consumers only need tobe 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 whichconsumers discount price reducdons, the quality of promoted brands or thepurchase of a brand. Recent research has focused on causal attribudons, i,e, "Why isthis 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 theonly 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 (1) Moore and Olshavasky 1989with the brand. On the contrary, store familiarity has no effect.

Same results with purchase intention and perceived value of the (2) Gupta and Cooper 1992discount as dependent var^bles.

Beyond a certain level, the perceived value of a price cut is higher (3) Lichtenstein and Bearden 1989when this type of discount is rare.

The perceived value of a price reduction is higher for national brands (4) Biswas and Blair 1991and non-discount stores.

Perceived quality of a brand is hampered by defirutive price (5) Schindler 1992reductions but not by couporw,

Penreived value of a price-cut and attitude towards the promotion (6) tichtenstein and Bearden 1989are better ii consumers think that manufacturers want to attractcustomers rather thaji if they think that it is to get Hd ofunwanted goods.

in other stores). Table 5 summarizes the few studies that have applied attributiontheory to sales promodons, A recurrent finding is that consumers familiar with theprodud are less prone to the discount of price-cuts. The "discounting prindple" saysthat it is because these consumers can imagine many reasons for the occurrence ofsales promotions (competition, etc.) that, in turn, dintinish the credit granted to eachof the possible explanations and thus prevent negative attributions (e,g, poorquality) 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 inthe influence of sales promodons. This area has been reladvely thoroughly covered.

428 Pierrt Chandon

Nevertheless, the long-term effects of repeated price promotions are worthinvestigating (e.g. how long before the effects of price promotions wear-off andconsumers dedde to accelerate or decelerate ptirchases?). Moreover, attributionsappear to moderate the effects of price promotions, but this area needs furtherresearch. The abundant literature on cognitive psychology (Hilton 1991) could beused to differentiate causal attributions ("Why did it happen?") from attributionslinked to the intrinsic propensity of a brand to be on sale ("Why is this brand oftenon sale?"). Other studies are necessary to examine the impact of prior beliefs, andnot only information, related to attributions. Finally, no one has studied the impactof attributions on mood, attitude towards the brand, or towards the promotion. Oneparticularly interesting case is that of sweepstakes which announce a certain gain of,for most consumers, a deceptive prize. What are the effects of attributionsconcerning the reasons for the loss (e.g. bad luck or dishonesty) on mood andattitude towards the sponsor?

Attitudinal, Cognitive and Behavioural Sales Promotion Models

Many theories have been employed to expkun why consumers are sensitive to dealsbeyond the price reduction explanations. These theories postulate different levels ofinformation 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 itsreference to rationality (Fishbein and Ajzen 1975). It posits that attitude stems frompersona! beliefs, while sodai pressures form subjective (perceived) norms. Attitudeand subjective norms are then at the origin of behavioural intentions. In applicationto coupon usage, Shimp and Kavas (1984) measured beliefs of the buyer and herhusband about the costs and benefits of coupons. Overall, the perceived economiesand the smart-shopper feelings attributed to coupon usage are the variables whichcorrelate most with attitude towards coupons and self-dedared behaviour (see alsoTat 1994). Shimp and Kavas' study is one of the few to acknowledge the influence offamilial 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 greateramong action-oriented individuals, and, conversely, that subjective norms arecritical for state-oriented people. By incorporating tWs jjersonality trait, as well asprior 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 aspecial case to be made for the concept of deal-proneness. Deal-proneness is anattitudinal construct caused by beliefs and attitude toward promotions. It has beenmeasured by Froloff (1993) at the level of self-declared behaviours ("I am influencedby promotions at the time of purchase"). Her exploratory research suggests, inaddition, distinguishing attitude and deal-proneness vis-i-vis {jrefeiTed brands fromattitude 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 whatThaler (1983) calls acquisition utility (pleasure due to the utility of the product itselfrelative to the price paid), and the latter from transaction utility (pleasure due topaying less than the reference price). Deal-prone consumers are experts who havewell-defined internal reference points and who dedare lasing coupons only if theyincrease the price-quality ratio. Coupon-prone consumers pay attention to pricesand features, have a lower income, and dedare using coupons to pay less than otherconsumers (Lichtenstein et al. 1991; Lichtenstein et al. 1993). It is interesting to notethat these two groups use an equal number of coupons.

Cognitive Models of Light Information Processing

Historically, attitude models were developed for highly involved situations thatbring about intensive information processing, whereas in consumer goods, mostdedsions 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 promotionalinformation. The ELM acknowledges that situational and individual fadors candiminish the likelihood of information elaboration and divert one's attention awayfrom central elements. Their study showed that high need-for-cognition consumers(Capioppo et al. 1984) process all the information of promotional messages and donot read to promotional signals (e.g. displays) which are not accompanied by aprice-<ut. In contrast, low need-for-cognition consumers are influenced by the mereannouncement of a sale: they buy the produd without checking the price. Moreover,there is much evidence to suggest that there are circumstances in which promotionsmay serve as cues (Moriarty 1983; Currim and Schneider 1991;Schneider and Currim1991; Schindler 1992; Cheong 1993). Besides, the coeffident of a dummy variableindicating the presence of a promotion is always significant in logit-type models ofchoice.

The notion of schema is a recent alternative to the ELM model. According toNorman and Bobrow (1975), a schema is "a framework for tying together theinformation about a given concept or event with specifications about the types ofinter-relations and restrictions upon the ways things fit together". A schema is oftenbased on past experiences and encoded as a prototype that will be compared to theactual 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 "Apromotion is a gain"), then perceptual processing (e.g. cheap/expensive categoriza-tion) and, finally, complex schemata using cognitive algebra (e.g. multi-attributemodels). Finally, scripts are schemata which also involve behavioural sequences(Shank and Abelson 1975). Henderson (1988) argues that some consumers use diescript "Buy the brand for which I have a coupon", and other consumers use the morecomplex purchase strategy "Buy the cheapest brand", but these hypotheses were notconfirmed. The model of Gardner and Strang (1984) assodated the two routes topromotional 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. Thisphenomenon fits well into the behavioural learning paradigm (Rotschild and Gaidis1981; Gaidis and Cross 1987; Rotschild 1987; Blattberg and Neslin 1990). Operantconditioning theory argues that reinforced behaviours tend to be repeated moreoften than other behaviours. In this view, promotions are rewards that reinforce thepurchase of a brand if both the reward and the behaviour to be reinforced are doselyand regularly linked. When conditioning is effective, its effects last even after thereward has ended. Moreover, behavioural learning theory distinguishes primaryreinforcers which have intrinsic utility (product usage) from secondary reinforcerswhich have none (coupons). This theory states that promotion usage can replacebrand usage as the reinforced ("learned") behaviour if promotions become theprimary reinforcers. This phenomenon is likely to take place when there are noperceived differences between brands, when it is a mature brand and whenpromotions are j>ervasive. In other cases, brand usage reinforces brand purchase.Finally, immediate reinforcement, continuous and then random, produces the mostdurable effects.

Synthesis and Areas for Future Research

These reviewed theories offer various explanations as to the effectiveness ofpromotions beyond price reduction. Ten years after Sawyer and Dickson (1984), itcan still be said that they are reasonably complementary. On one hand is the robustmulti-attribute model of attitude change suited to extensive information processingsituations. It could be extended to other involved promotions like loyaltyprogrammes. One important and not yet resolved issue is the postulate of cognitive-evaluative-behavioural sequence. Knowing that the costs of clipping coupons areperceived as being lower for more frequent users of coupons (Jolson et al. 1987; Tat1994) does not indicate whether beliefs cause behaviours or the reverse. Generallyspeaking, our knowledge of consumere' beliefs about promotions cind promotedproducts is very poor. Further research is needed to investigate their beliefs aboutthe amount of effort necessary, the sincerity of the sponsor and his motivations(Alpert 1993; Froloff 1993; Tat 1994). Turning to deal-proneness, future researchcould link the two types of deal-proneness with each consumer's conception ofvalue (Zeithaml 1988). However, by articulating the distinction between coupon-proneness and vedue-consdousness, attitude research has demonstrated the limits ofits earlier postulates of a rational consumer.

On the other hand, scholars have proposed the notions of signal, schema andscript, as well as behavioural learning ttieories that are suited to succinct informationprocessing situations. These models deserve future research. Specifically, we havemedium involvement situations in mind, where promotional signals can serve toattract consumers' attention, which would in turn result in the brand entering theconsideration set and its information being centrally processed. Besides, consumerbehaviour theories adapted to routine purchases like the Hoyer Purchasing TacticModel (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 salespromodons: 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 MarketingSdence (EUashberg and Lilien 1993), The objective of these models is to helpmarketers understand the market mechanism by concentrating on some of themultiple forces that rule it (Moorthy 1993; Schmitdein 1994), They are based onnormative assumptions, "stylized" for pedagogical purposes, and aimed atcapturing the essence of the reladons between firms and markets, Prescripdonsconcerning the optimal behaviour of firms are then mathemadcally derived.Generally speaking, theoredcal models explain when and why it is in the bestinterest of firms to promote rather than to lower prices. The first line of researchviews promodons as long-term equilibrated discriininadon strategies (Gijsbrechts1993), The interest of the second line of research is in the role of promodons incompeddve games.

Static Models

Sales promodons can take advantage of consumer heterogeneity in three ways (Table6), The first way is for retailers to use this heterogeneity to reduce inventory costs orthe opportunity costs entailed by too frequent sales. The second consists in onlyoffering coupons to consumers who have a low opportunity cost of time and highdemand. By doing this, monopolistic firms can reap high profits on those consumerswho don't want to spend time and effort clipping coupons and who eire less price-sensitive. This promotion-as-a-discriminating-tool view is original because it arguesthat promodons can be profitable long-term strategies even if they do not convertnew buyers into loyal ones. They are simply a way of charging prices adapted to thedemand of the different segments of consumers. Lasdy, promodons can be a way totest the demand for a temporary produd, such as dothes, by reducing prices as soonas those consumers willing to pay higher prices have bought.

Other researchers have investigated the presence of cross-promotional asjfmme-tries. The model of Blattberg and Wisniewslci (1989) links udbty to quality, price andwillingness to pay for quality (which results in nadonal brand loyalty). It assumesthat markets eire composed of three levels within which quality is similar: nadonalbrands, regional brands and generics. If willingness to pay for quality has a bi-modaldistribudon, promoted brands attrad buyers of brands belonging to the same levelor to an inferior level but have no effects on buyers of superior-level brands. Thisexplains why private labels don't tend to promote. In addidon, it nullifies thecomparison to a prisoner's dilemma because neither party loses as much if theydon't co-operate (i,e. if they promote). Finally, Sivakumar and Raj (1993) show thatnadonal brand's promodons are the only promodons to attract new buyers to thecategory, which largely explains the asymmetric pattern of brand compedtiondiscovered by Blattberg and Wsniewski,

432 Pierre Chandon

TaUe 6. Taking advantage of consumer heterogeneity iinth promotions

Mechanisms Operationalizations Empirical evidences

Cost reduction

Sales promotions cost lessthan everyday-low-pricepoUcy.

Consumer price-discrimination

Price promotions permit tocharge prices adapted to thelevel of demand of eachconsumer segment, which ismore profitable.

Testing the demand level

Sales promotions can helpassess an unknown demand.

(1) Transfer of storage costs to thecoiteumers who have cheaperstorage costs than the retailerfBlattbergrfflf. 1981).

(2) Improving the efficiency ofprice promotions through pseudoprice-cuts if there are enough lightinformation processors amongconsumers.

(3) People with high demand havehigjier opportunity costs of time.Companies can use the foQovnngcosts to discriminate theircustomers:

— Cost of collecting coupons(Narasimhan 1984; VUcassimand Wittink 1987);

— Transaction costs of coupons(Geistner and Holtausen 1986);

— Storing promoted productsOeuland and Narasimhan 1985).

(4) If they don't ki^own how todiscriminate consumers, firms canbegin by charging a high priceand then reduce it in accordancewith market size, competition andcosts of the information search.

(1) Non-perishabk productshave greater promotionalelasticity (Litvack rtfl/. 1985).

(2) Simulation in a universityretail outlet. The recommendedpromotioral policy yields higherreturns (Irunan and McAUster1991).

(3) Coupons are offered onexpensive products (Wlcassimand TOttink 1987). Consistentwith the discriminationhypothesis, promotions areoften random, of similarnaagnitude and, above all,ptirdiase probabilities don'tchange after a promotionalpurchase (Tellis 1989).

(4) Anecdotal evidence ofmarkets where prices are setvery high but promoted soonbecause competition is weak,suggests that consumers arenumerous and informationsearch is expensive.

Dyruimic Modeb

One recent contribution of theoretical stylized models to the study of pricepromotions has been the incorporation of time. Kahn and Raju (1991) studied theimpact of promotion frequency on bremd switching. Their model shows that, for asmall brand, increasing the frequency of price reductions raises the share of purchaseamong inert consumers. Krishna (1992) models the strategic behaviour of consumersover an infinite horizon. She predicts that, in produd categories with frequentpromotions and little brand loyalty, consumers know when the next promotion willoccur. Consequently, consumers antidpate promotions and stockpile less. Assun^aoand Meyer (1990) derive optimal stockpiling strategies from a theoretical model,al thou^ they show that actual consumers' stockpiling strategies are systematicallybiased as predided by the Prosped theory (Meyer and Assun^ao 1990). Comparedto theoretical norms, consumers tend to consistently buy the same qucmtities whenprices are stable, to buy too much when prices decrease and not enough when theyincrease. Lastly, Krishna (1994) found in a computerized experiment that expectedprices directly influence how much consumers stockpile. When they expect apromotion tomorrow, they either buy less today or buy a small quantity of a less-preferred brand on promotion.

Other research has demonstrated that promotions can be op>tiinal in infinitecompetitive 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 thesetwo segments exist, national bremds should promote randomly to preventcompetitors from antidpating their promotions and from following them. Optimalfrequency and amount depend, respectively, on the number and the strength ofpreferences of non-loyal buyers (Villas-Boas 1993). Raju et al. (1990) widen thepreceding model to the study of oligopoly and empirically verify that there are manymore promotions in product categories with many brands and where bremd loyaltyis weak. Their model argues that bigger brands lose more by promoting becausethey have, proportionally, a greater niunber of loyal consumers. However, Rao(1991) shows that poor quality private labels should not promote since they cannotattract many quality-sensitive consumers. Lastly, Lai (1990a) shows that theopportunity costs of promotions can be reduced by alternating them with othernational brands. This way, private labels face the competition from one or the othernational brands each week. This author shows that this de facto co-operation can beachieved without expUdt collusion between the two national brands. The Sfunescholar (Lai 1990b) replicates these results when retailer's objectives (i.e. to obtain thelargest 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 (Sethura-man and Tellis 1991) and the modelling of retailers' behaviovtr (Sethuraman andTellis 1993). This research tradition has nevertheless come under fierce criticism forits lack of systematic empirical testing (Schmittlein 1994). Future studies in thisresearch tradition should strive to formulate testable predictions, and should also tryto relax the assumptions that go against the most documented results. For instance,the assumption oi stationary markets, of perfect information or even of distinctmarket segments is very questionable. This research tradition must take into accountthe empirical generalizations that we are aware of (Blattbeig et al. 1994) to avoidbeing called "armchair economists" by scholars from other research traditions.

Conclusion

This literatiu* review suffers from two major limitations. The first is not to haveincorporated all the working papers and professional works completed during thepast 10 years. This restriction has been partially compensated by dting the mostrecent working papers. The second limitation has to do with the organization byresearch tradition which cannot satisfactorily account for the substantial overlap ofthe various research traditions. Neither does it show how some studies originatefrom a controversy about a specific issue rather than capiteilize on a researchtradition'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 UnitedStates but common in Europe. These studies would be particularly welcomed sincethese promotions have important implications in little researched areas Uke theimpact of promotions on brand equity, usage, and manufacturer-retailer pwwerrelations.

—The consumer-oriented research tradition wiU no longer continue with themethods exposed here. It is presently being replaced by logit models of individualchoice. These models are both more precise and richer because they use single-source scanner psrnel data; i.e. data combining individual (purchase history) andcausal (price, promotions) information (for review, see Chandon 1994b).

— The theory-oriented research tradition is very unbalanced. One one hand, priceperception theories have been thoroughly tested but lack external validity. On theother hand, the many very interesting attitudinal, cognitive and behavioursJ theorieslack empirical replications.

— The theoretical economic models have made major contributions to research onsales promotion. It is the only researtJi tradition to have investigated salespromotions from the company's side, an area where pre-conceived notionsproliferate. Three widespread assumptions, aU worthy of investigations are: (a) therestriction of sales to shori-term weapons harmful over the long term; (b) the viewof purchase acceleration as a worry; and (c) the assumption that promotions areprofitable. Ironically, research on sales promotions exhibits one oi the most criticizedbias of sales promotion programmes: their reliance on sales as the ultimate measureof the performance of sales promotions.

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