Do Price Promotions Help or Hurt Premium-Product Brands? The Impact of Different Price-Promotion Types on Sales and Brand Perception
The September 2015 issue of the Journal of Advertising Research presents a study which examined various types of price promotions. The authors, Felix Zoellner, BMW Group, and Tobias Schaefers, TU Dortmund University, combined the sales data of German premium automobile brands with a consumer-behavior analysis. The goal was to analyze the impact of different types of promotions on sales and on the perception of a premium-product brand. The research distinguished between direct versus indirect-price reductions and marketers’ use of a “precondition,” for example, promotions offering free gifts, trade-in incentives, or loyalty-program benefits.
The authors demonstrated that:
-Different price-promotion types have different influences on sales and brand perception in the premium automotive market.
-Direct-price reduction has the strongest positive impact on sales numbers.
-Price-promotion types with which the customer is not familiar may be harmful for the brand.
-Promotion types that are well-known among customers should be preferred to minimize a premium brand’s image and prestige deterioration.
-Combining the sales and brand-perception impact, “direct-price reduction without a precondition” appeared to be the ideal price-promotion type for premium products, as it had the strongest positive influence on sales and no negative impact on brand image and prestige.
-Management should focus on price-promotions with direct-price reductions that are also familiar to the customer.
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