Structuring Big-Event Price Promotions for Success

SAGE is proud to feature a fascinating summary by authors Wiebke I.Y. Keller, Barbara Deleersnyder, and Karen Gedenk. They recently published their paper, titled “Price Promotions and Popular Events,” in the January 2019 issue of Journal of Marketing

[Reblogged from the American Marketing Association Scholarly Insights: Structuring Big-Event Price Promotions for Success]

Companies spend significant sums to increase brand awareness at popular events such as the Superbowl, the Olympics, or the FIFA World Cup. In addition to advertising, firms occasionally run price promotions at local retailers. But is this actually a good idea?

A new study in the Journal of Marketing examines consumers’ responses to price promotions during popular events, comparing them to non-event times. Our research team examined 242 consumer packaged goods (CPG) brands and their price promotions during five popular events held in the Netherlands between 2007 and 2011. Since sales promotions constitute a large portion of CPG manufacturers’ total marketing budgets – up to 55% in the U.S. – getting higher-spend event promotions right is core to a brand’s success.

Our team built a multiplicative sales response model that we extended into a hierarchical linear model structure to analyze relative promotion response across brands and events. This research is quite innovative. Past price-promotion research has focused instead on timing of promotions relative to competitors or price and sales patterns related to seasonal and holiday demand cycles.

Key findings include:

– Price promotions offered around popular events often generate a stronger response than the same promotion at non-event times. The price-promotion elasticity is 9.3% larger, on average, during events. 

– In our study, consumer response varied with events. Sales lift ranged from 2.68 for Summer Olympics promotions to 5.44 for Winter Olympics promotions compared to an average sales lift of 3.45 at non-event times.

– Only two out of every four price promotions around events is on target, with promotion activity increasing with a stronger consumer response during events. For one in four, promotion activity is more intense during events, while sales response is tepid, leading to overspending. For the final one in four, promotion activity is less intense even as sales surge, leading to missed sales opportunities.

– Managers should integrate event promotions into their broader marketing campaigns, using advertising and other sponsorship activities to drive event price promotion awareness. This is especially true for event sponsors. In our study, only 8.71% of price promotions during events were supported by advertising.

– Premium-priced brands benefit more from shifting their promotions towards events than brands with a lower price premium. Thus, managers should select brands for event promotions based on brand equity (reflected in relative price) rather than brand popularity.

– While managers often choose to run price promotions in conjunction with high-fit events, competitors do likewise. As a consequence, stores are often cluttered with displays and shelf-tags, potentially reducing promotion impact by lowering consumer brand recognition and recall and product sales.

– Low-fit events can also work if brands exploit the element of surprise and provide an event link.

– Brands should avoid being “stuck in the middle,” where event promotions may be seen as part of the event itself, leading to consumer confusion and lower sales.

– To enhance promotion response, managers should carefully choose the right brand-event combinations. They should reallocate promotions towards an event only if brands have a stronger promotion response during that time. The study provides guidelines for which brands, events, and contexts it is beneficial to use price promotions during big events.

Brand managers can use our research to determine whether to run price promotions in conjunction with a specific popular event, which brands are best suited for these promotions, and how to structure these promotions. They also can use insights to decide how to embed events in larger marketing strategies and how much to allocate to these campaigns.

Finally, retailers can use this research to determine which brands to select for price promotions to drive customer response and deliver an exceptional experience.

Read the latest research from the Journal of Marketing, the Journal of Marketing Research, the Journal of Public Policy and Marketing, and the Journal of International Marketing today!

This entry was posted in American Marketing Association and tagged by Cynthia Nalevanko, Senior Editor, SAGE Publishing. Bookmark the permalink.

About Cynthia Nalevanko, Senior Editor, SAGE Publishing

Founded in 1965, SAGE is the world’s leading independent academic and professional publisher. Known for our commitment to quality and innovation, SAGE has helped inform and educate a global community of scholars, practitioners, researchers, and students across a broad range of subject areas. With over 1500 employees globally from principal offices in Los Angeles, London, New Delhi, Singapore, Washington DC, and Melburne, our publishing program includes more than 1000 journals and over 900 books, reference works and databases a year in business, humanities, social sciences, science, technology and medicine. Believing passionately that engaged scholarship lies at the heart of any healthy society and that education is intrinsically valuable, SAGE aims to be the world’s leading independent academic and professional publisher. This means playing a creative role in society by disseminating teaching and research on a global scale, the cornerstones of which are good, long-term relationships, a focus on our markets, and an ability to combine quality and innovation. Leading authors, editors and societies should feel that SAGE is their natural home: we believe in meeting the range of their needs, and in publishing the best of their work. We are a growing company, and our financial success comes from thinking creatively about our markets and actively responding to the needs of our customers.

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