Price-Related Promotions are Mostly Bought by Existing Brand Buyers
4 Pages Posted: 10 Jan 2013
Date Written: January 10, 2013
This study examines the extent to which temporary price cuts – called ‘price promotions’ in grocery markets – are bought by consumers who already buy the brand. The study extends research by Ehrenberg, Goodhardt and Hammond (1994) that found the majority of promotion buyers had bought the brand before. The study here uses data from 9 product categories and finds that on average, 58% of consumers who buy a brand on promotion have bought it in the past 26 weeks. The proportion of past buyers buying on promotion is somewhat lower for small brands – about 50% - and higher for larger brands – about 65% or more. Note that the overall result does not mean a promotion attracts (100% - 58%) 42% ‘new buyers’. Of those 42% who buy on promotion who have not bought the brand in the past 26 weeks – many simply have not bought the category recently. And if we go back further in time, to 52 weeks, many of those non-recent buyers in 26 weeks did buy the promoted brand in 52 weeks. The result helps explain why price promotions have only temporary effects and no longer-term favourable impact on brand purchasing. The result also suggests larger brands have even less to gain from price promotions than smaller ones.
Keywords: Price Promotions, Retailing, Brand Loyalty
JEL Classification: M31
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