Short- and Long-Term Consumer Reactions to Promotions: An Abstract
Previous research on effects of promotions provides the notion that consumers’ purchase intentions are often higher during the promotion period (Ailawadi & Neslin, 1998; Grewal et al., 1998), but that promotions can have negative long-term effects on sales (Cheng & Monroe, 2013; DelVecchio et al., 2007). Thus, when evaluating the overall effectiveness of promotions, it is important to examine both short- and long-term consumer reactions (Mela et al., 1998). Literature on effects of promotions has often focused on effects on changes (reductions) of consumers’ price beliefs (Bambauer-Sachse & Massera, 2015; Chandrashekaran & Grewal, 2006) without examining how these reductions influence both short- and long-term consumer reactions in terms of purchase intentions. The objectives of this study are to examine consumer reactions to promotions in terms of purchase intentions during the promotion and when the promotion is over and to explore whether reference price reductions and reductions of consumers’ willingness to pay mediate these effects. This study contributes to research on consumer reactions to promotions by examining purchase intentions during the promotion and when the promotion is over and by providing insights into direct and indirect effects of possible drivers (reference price reductions and reductions of willingness to pay) in this context.
We varied the promotion type (percentage off, gift), the test product (low price, socks; high price, winter jacket), and the discount level (low, 10%; high, 50%) to generate variance in the reduction of the reference price. The sample consisted of 468 respondents who filled in an online questionnaire. Before seeing the promotion, the respondents saw an ad of the test product without price information and had to indicate their reference price and willingness to pay. Afterwards, they were shown the test ad with the respective promotion (percentage off, test ads with regular price, reduced price, and saving; gift, test ads with regular price and value of the gift) and had to provide their reference price and willingness to pay again. Next, purchase intentions during the promotion were measured. Finally, the respondents were shown an ad displaying the test product at the regular price without any promotion, and they had to indicate their purchase intentions with regard to this situation.
The results confirm the basic assumptions that consumers’ reference price and willingness to pay are reduced after contact with the promotion and that purchase intentions are lower when the promotion is over than purchase intentions during the promotion. Furthermore, the SmartPLS results show that reference price reductions do not directly affect purchase intentions during the promotion and purchase intentions when the promotion is over, but the reduction of consumers’ willingness to pay is driven by reference price reductions and has in turn such direct effects. Thus, marketers should develop strategies to re-establish high levels of willingness to pay and maintain high purchase intentions when the promotion is over because the reduction of consumers’ willingness to pay after exposure to a promotion has both positive effects during the promotion period and negative effects when the promotion is over.