Abstract

http://ssrn.com/abstract=875657
 
 

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The Marketing of Deals: Maximizing the Profit Impac of Sales Promotions


Sridhar Moorthy


University of Toronto - Rotman School of Management

Dilip Soman


University of Toronto - Department of Marketing

December 1, 2005

Rotman School of Management Working Paper No. 07-15

Abstract:     
Consumers often purchase products based on sales promotions that they can redeem only after making the purchase. Such deals typically offer consumers a reward contingent on their performing a certain quantity of consumer effort, and we use the term rebates to refer generally to this family of deals. In this paper, we replicate and extend prior research showing that the time delay between the purchase and the redemption has the potential to cause a perceptual distortion in the value of the future reward and effort. However, we further argue that the appropriate marketing of deals can result in an effect on purchase without an effect on the redemption rate. Using an analytical model and a controlled laboratory experiment, we demonstrate that the marketing of the reward (i.e., highlighting) and the demarketing of the effort can maximize the profit potential of the promotion. We also derive implications of our results for optimal rebate design.

Number of Pages in PDF File: 40

Keywords: mail-in rebates, sales promotions, purchase, redemption, consumer effort

JEL Classification: M30, M31

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Date posted: January 17, 2006  

Suggested Citation

Moorthy, Sridhar and Soman, Dilip, The Marketing of Deals: Maximizing the Profit Impac of Sales Promotions (December 1, 2005). Available at SSRN: http://ssrn.com/abstract=875657 or http://dx.doi.org/10.2139/ssrn.875657

Contact Information

Sridhar Moorthy (Contact Author)
University of Toronto - Rotman School of Management ( email )
105 St. George Street
Toronto, Ontario M5S 3E6
Canada
HOME PAGE: http://www.rotman.utoronto.ca/~moorthy
Dilip Soman
University of Toronto - Department of Marketing ( email )
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