Study of consumer perceptions towards discount offers Abstract This research study examined consumers’ perceptions of products they purchased under discount offers, and their effects on repurchase intentions of the same products after the end of the offers. The research began with an exploratory study of marketers’ observations of the effectiveness of consumer discount programs, and consumers’ opinions regarding the products. The findings of this exploratory research were used to develop hypotheses and survey instrument.
A consumer survey was carried out to empirically test the effectiveness of discount offers on three recapture dimensions biz. Quality, price and fun; and the Impact of these perceptions on repurchase intentions. The research revealed that consumers perceived that they receive quality and price benefits but not hedonistic benefits from the products purchased under product and prize based discount offers. The discount offers neither encouraged repurchase Intentions nor substantial short term brand switching.
Offering a gift attached to the product appeared to reward loyal consumers only. These findings have implications for marketers’ decisions to offer consumer discounts. Key Words Consumers’ perception, customers’ loyalty, non-price discount offers, repurchase intention 1. Introduction Growing competition has forced marketing practitioners to constantly evolve and reinvent their practices around the world. One of the popular marketing tactics has been the Increasing use of different types of raffles and free schemes aimed at brand building.
These practices are consumer discounts which consist of a collection of incentive tools, mostly short term, designed to stimulate the purchase of particular products or services by consumers. This study investigated whether the discount orgasm really contribute to brand building, purchase and repurchase intentions in India. Marketers have deferent views on the long term effectiveness of these consumer discount programs. Some marketers opine that the programs are effective in generating additional sales and in building brand; and others do not agree with this version.
Despite divergent views, most Indian consumer goods companies including multi-notational companies have employed Such discount approaches. There has been an explosion of “copycat” tactics In discount In almost all product categories. Such practices have created an environment of self-imposed margin pressures. The money spent on these promotions especially In case of Fast Moving Consumer Goods (FMC), is passed on to consumer. This study, which examines the is therefore potentially important for effective marketing decision making.
Research in other countries indicates that discounts induce trial purchases but they neither turn new customers into loyal users nor convince loyal customers to abandon their preferred brand. Consequently, such promotions do not result in a permanent market gain. Discounts with their incessant discounts, coupons, deals, and premix devalue the product in the buyers’ minds leading them to buy those products only hen they go on sale.
However, packaged goods companies feel compelled to make these offers and to blame the heavy use of discounts for decreasing brand loyalty, increasing consumer price sensitivity, and diluting brand quality image. There are no available studies on the contributions of discounts on trial purchases, quality perceptions, price sensitivity, brand image, brand loyalty and market gains in India. The current research explored whether discounts in India induced trial purchases or long term market gains, and identified the underlying reasons for consumers’ responses. Objectives of the Study
This research tried to answer the following questions: = What are the popular discount offers in India? = What are consumers’ perceptions of discount offers in India? = What are their effects on consumers’ repurchase intentions, brand loyalty, and brand switching? 2. Literature Review The study was carried out in four phases. The first two phases were exploratory in nature designed to understand the practices, opinions, and evaluation of sales promotion programs from the perspective of marketing managers and consumers. The findings were used to develop hypotheses.
Survey instrument was finalized in he third phase of study on 100 respondents. The hypotheses were empirically tested using a consumer survey in the last phase. 3. Exploratory Study 3. 1 Phase 1: Interaction with Marketers The first part of the exploratory study was aimed at understanding what marketers believe about the effects of consumer sales promotions on sales in general and on their brands in particular. Four purposively selected marketing managers of four different FMC companies who were involved in brand development through sales promotion programs were consulted.
In addition, 10 FMC wholesalers and retailers ere selected based on convenient sampling to share their observations about the effects of sales promotions. These marketing executives held a common view about the decreasing effectiveness of sales promotions during the last five years. They said that additional sales generated through sales promotions have been gradually ago. They opined that consumer sales promotions have been used merely to stabilize market share by retaining loyal consumers rather than for beating the competition.
Consumers have become used to continuous promotion campaigns from different competitors in different product categories. Consumers expect to find something extra in each packet of the products they purchase. Consequently, as research has also suggested, offering consumer sales promotions are seen as compulsory in many product categories As indicated by the interviewees, sales promotions in India, which claim to differentiate among brands with unique schemes, result in only short term gains and not in long term brand differentiation.
This observation is particularly valid in product categories where customers do not find real differences in taste, quality, function or image among competing brands. Retailers and wholesalers interviewed reported that households usually purchase food products in bulk and consumers prefer those brands which contain some form of cash prize, coupon, etc. This observation holds for toiletry products as well. For instance, consumers asked for Sunlit shampoo when an umbrella and a towel were attached.
Sales of Close-Up tooth paste increased due to the addition of sunglasses. Once the promotion is over, consumers switch back to their original brands. This supports research findings regarding consumers who buy those products only when there are sales promotion offers and switch back to their preferred brand leading to post promotion dips in sales (Brown, 1974). Further study of these phenomena will help marketers to select effective promotional offers for their products either for short term or long term market gains. 3. Phase 2: Survey on Sales Promotion Offers A survey was carried out on 40 consumers to find out the types of promotional offers available in the market across different brands of FMC product categories and to solicit their opinions about the products that they had purchased under promotional offers within the previous two months. The findings were used to generate statements for the survey instrument. This survey was carried out in February 2008. A semi structured open ended questionnaire was used to gather data. In-depth probes were used when participants’ initial responses were incomplete. MBA students collected information from 10 consumer’s each. The following four categories of non-price sales promotions were popular among the consumers during the study period: 1) Product-based promotion and 2) Prize based promotion. Product- based promotion included: a) Premium offers in which an additional product is attached as a gift (e. G. A towel with the purchase of a bottle of shampoo, a toothbrush with toothpaste, etc. ) and b) Extra product offers with additional quantities of products offered as a bonus, such as ‘buy 2 get one free’ when purchasing soap or an extra 25 grams of glucose powder in a packet.
Similarly prize-based promotion included: a) Lucky draw sweepstakes or cash coupons with or without scratch cards or coins or gold coins, or necklaces in one or several coupons with distinct symbols or alphabets randomly placed in packets of products such as tea and instant noodles, ND b) Contests with lucky draws held for the participants who submit slogans or statements such as guess the flavor of a fruit drink and win an pod each week such as reduced price, discounts and rebates, was not popular among the consumers during this survey.
In addition, the survey collected statements about participants’ interest in purchasing products that offered promotion schemes, the impression that promotional offers made on them, their satisfaction with products purchased under promotional offers, and their intentions to purchase the products once the promotional offers ended. The responses generated 25 common statements which were used to develop the instrument. 3. 3 Hypotheses Development The exploratory study provided base information regarding the popularity of non- price promotion offers, which included product- and prize-based promotions.
Several studies indicated that consumers developed different types of perceptions of products sold under price based promotions than of those sold under non-price promotions. Campbell and Diamond (1989) stated that non-price promotions are perceived as ‘gains’ whereas price-oriented promotions are seen as ‘reduced losses. Chanson, Wanting, and Laurent (2000) classified price promotions as provisions for utilitarian benefits to consumers, while many non-price promotions mainly offer hedonistic benefits (entertainment).
Price-based promotions have a negative influence on perceptions of quality as consumers perceive price reduction at the cost of quality of the product . These research findings revealed that consumers may develop three different types of perception about the promotion offers biz. Quality perception, price perception and fun perception. Therefore, the following three hypotheses measure Indian consumers’ perceptions developed by different types of non-price promotional offers.
HI: Consumers have different levels of quality perceptions of products purchased under different Non-price promotion offers. H2O: Consumers have different levels of price perceptions of products purchased under different Non-price promotion offers. HA: Consumers have different levels of fun perceptions of products purchased under different non price promotion offers. Research on the effects of the two types of sales promotion activities indicates raying degrees of effectiveness in brand building.
The research state that price promotions result in short-term increases in market share through brand switching by trial purchase. But, price promotions do not seem to contribute to brand loyalty Rather; they have a negative effect on brand equity. Furthermore, there is no relationship between price promotion and subsequent repeat purchase. Therefore, consumers who shift brands due to promotions change back once the promotion is over. In contrast, non-price promotions add excitement and value to brands and can even encourage brand.
They have the potential to encourage brand loyalty and strengthen the bond between consumers and their brand choices Therefore, it is reasonable to test the hypotheses that non-price sales promotion offers influence long term brand switching and encourage repurchase intentions among Indian consumers, and to determine the contribution of perceptions on HA: Consumers have different levels of repurchase intentions on products purchased under different non price promotion offers. HA: Repurchase intentions for products bought under non-price sales promotions offers will be determined by quality receptions, price perceptions and fun perceptions.
For example, non-price promotions increased the price sensitivity of non-loyal customers, but decreased that of loyal customers. The following hypothesis was developed to test whether loyal customers have different types of perceptions than the non-loyal customers. HA: Consumers’ loyalty on the product purchased under sales promotion is influenced by quality Perception, price perception, and fun perception. HA: The proportion of consumers who switch brands due to non-price sales promotion offers will be higher than those who do not switch.
