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

40 Pages Posted: 17 Jan 2006  

Sridhar Moorthy

University of Toronto - Rotman School of Management

Dilip Soman

University of Toronto - Department of Marketing

Date Written: December 1, 2005

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.

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

JEL Classification: M30, M31

Suggested Citation

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

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 )

Paper statistics

Downloads
472
Rank
46,621
Abstract Views
1,600