Effects of Retraction of Price Promotions on Brand Choice Behavior for Variety-Seeking and Last-Purchase-Loyal Consumers

Abstract

In the context of three laboratory experiments ranging from a computer simulation of purchases to actual product use by subjects, the authors investigate how in-store price promotions affect market share after the promotions have been retracted. They find that the effects of promotion are contingent on both the choice patterns of subjects—whether or not subjects switch among brands—and the ubiquity of promotions in a product category. If only one brand is being promoted and subjects are generally loyal to the last brand purchased, brand choice probability declines from prepromotion levels once the promotion is withdrawn. However, if subjects tend to switch among brands in the absence of promotions, or if several brands are being promoted, this decline is mitigated and/or does not occur.

Development of a conceptual framework for brand loyalty: A Euro-Mediterranean perspective

“…Some researchers have proposed and found empirically that if consumers have been satisfi ed with the promoted brand, their satisfaction is reinforcing and leads to an increase in the probability of choosing the brand again after the promotion is withdrawn, particularly for previous non-users of the brand ( Rothschild and Gaidis, 1981 ;Kahn and Louie, 1990 ). Generally speaking, loyalty implies satisfaction, but satisfaction does not necessarily lead to loyalty.…”

Why Switch? Product Category: Level Explanations for True Variety-Seeking Behavior

“…consumption histories that do not typically allow for insight into whether the observed switching behavior is intrinsically or extrinsically motivated. As a consequence, the use of such data threatens the validity of the variety-seeking parameters obtained, because the parameters combine two conceptually different phenomena (Kahn, Kalwani, and Morrison 1986). Rather than isolate true variety-seeking behavior effects, these parameters reflect the difference between repeat purchasing and general variation in behavior, irrespective of whether it is true variety-seeking behavior or derived varied behavior.…”

Effect of consumer characteristics on optimal reference price

“…As a result, this could lead to 'bad feelings' that may cause the development of negative attitudes toward their favourite brand (Dodson et al, 1978). In addition, consumers who have a higher tendency to switch between brands will be less sensitive to negative attitude formation following a promotion for a specific brand (Kahn and Louie, 1990). A supporting result of these arguments is proposed by Raju et al (1990), who claim that firms with loyal customers will have fewer price promotions than the other firms.…”