Non Monetary Promotion Analysis of Consumer Response to Gift Promotions Essay Sample
A limited time offer!
Get a custom sample essay written according to your requirements urgent 3h delivery guaranteedOrder Now
Non Monetary Promotion Analysis of Consumer Response to Gift Promotions Essay Sample
Growth of consumerism has emerged as a worldwide observable fact. Business firms too have risen and realized that nothing sells if there is no demand by the consumers. Consumer sovereignty exist that states “Consumer is the King”. This research paper is an analysis of non monetary promotion and its types, consumer response to non monetary promotion and consumer expectations towards non monetary promotions. “One of the purposes of a consumer promotion is to elicit a direct impact on the purchase behaviour of the firm’s customers” (Kotler, 1998; Blattberg and Neslin, 1990). “Successful promotions reflect brand image and objectives” (Kendrick, 1998). Gift offers and promotion can result in better brand image but only if they relate to the brand. Gift promotions are used to influence attitudes and purchase intentions of potential consumers either to maintain or increase purchase intentions.
“Offering a gift that fits with the product and using high equity brands is a wise strategy to positively influence purchase intentions” (Montaner; de Chernatony; Buil, 2011). It is an effective way to increase sales by encouraging new consumers to buy different brands or by motivating loyal consumers to buy more. But it is not necessary that gift promotions always achieve their objectives of increasing sales. “Free gift with purchase” offers appear to be overwhelming the market place. Whether they are in the cosmetic industry, in duty-free catalogs or in everyday supermarket shelves, marketers convince consumers to buy their product through the offer of a free gift with purchase.
“Non-Monetary promotions are defined as promotions such as giveaways (freebees) or contests in which value is temporarily added to the product at full price” (Cooke, 1983). They are used to create brand equity because of their positive effect on brand knowledge structure. “ Non- Monetary promotion may help to reinforce brand equity” (Palazon and Delgado, 2005; Montaner and Pina, 2008). “With Non-Monetary promotions the incentive is not directly experienced through a lower purchase price making it more difficult that these types of promotion influence consumers’ internal reference prices (Campbell and Diamond, 1990). “Non-Monetary promotion can differentiate brand and help communicate distinctive brand attributes, contributing to the improved brand equity” (Papatla and Krishnamurthi, 1996; Mela et al. , 1998; Chu and Keh, 2006). Thus, Non-Monetary promotions like- free gifts, free samples, sweepstakes etc. are gaining popularity giving negative effects of frequent discounts.
TYPES OF NON-MONETARY PROMOTIONS
• Gift Offers
“A gift or premium is a product or service offered free, or at a relatively low price, in return for the purchase of one or many products or services” (d’Astous and Landreville, 2003).
“A free gift is one for which the giver is not trying to get something in return or one that does not cost the giver. It offers the consumer an incentive to purchase in the form of free product or service” (Jha-Dang; Koshy, 2004). Example- On purchasing a car, the consumer is offered a complementary product like music system or accessories. The consumer may also be offered a free service such as extended 3 year warranty or free insurance. Sometime, it happens that “the product offered as a free gift constitutes an upgrade to the original purchase” (Jha-Dang; Koshy, 2004). Example- In case of laptop purchase, the consumer is offered a free Internet device or 16 GB pen drive. Here the free products appear to be ‘use complements’ to the original product. At other times “the free product can be a related product or product used in similar context” (Jha-Dang; Koshy, 2004). Example- For kitchen product, the free product is items used in kitchen such as plastic containers, metal spoon, serving bowl, OTG and non stick pan.
It can also happen that “the free product may be totally unrelated to the original purchase” (Jha-Dang; Koshy, 2004). Example- The consumer may be offered free batteries as a free product on the purchase of detergent. But, the products through unrelated are targeted to the same segment of consumers. This sort of promotion is basically targeted at children products. Example- On the purchase of pencil box the free products offered are generally comics, sticker, toy and tattoo. It is also possible that “the free gift offered along with the purchase can also be a variant accessible by the company” (Jha-Dang; Koshy, 2004). Example- In case of spices, the consumer is offered with Kashmiri mirch as a free product on the purchase of regular spices. Several free gift offers have an assurance of size or value of purchase from the consumer. “It happens that there are smaller gifts associated with purchase of smaller pack sizes and larger gifts associated with purchase of larger pack sizes of a product. In most cases, the price of the free gift is not mentioned” (Jha-Dang; Koshy, 2004).
• Sweepstake Offers: It is a type of Non-Monetary promotion that serves both the purpose of generating enthusiasm and providing incentives among the customers by enticing consumers to submit free entries into drawings of chance that are tied to product or service, in which the featured prizes are given by sponsored company. The prize can be in the form of cash, car, homes, electronics etc. Sweepstake offer is generally won by luck. It usually involves a lucky draw or a scratch card based on which the winners are decided. Gold has major appeal as a prize on the sweepstake promotion. • Contest Offers: It is mostly seen in products targeted at children. This promotion requires the consumer to fill up a coupon and get a chance to meet Katrina Kaif. The prizes offered on this promotion are similar to sweepstake promotion. • Extra Product Offers: “An extra product offered serve as an additional consumption units for the consumer” (Jha-Dang; Koshy, 2004). The specific products on which extra product promotion are introduced include Talcum powder, Fruit Juices, Soaps and Hair Oil. In some cases, the consumer is offered 20% extra in the same pack. In case of Internet service provider, some extra hours of usage is provided.
Extra Product Offers an increased quantity of the product without an increase in normal retail price.
Premium Offers a free gift in addition to to the main purchase.
Contest Provides a chance to win a large prize through skill.
Sweepstake Provides a chance to win a large prize based on chance.
Fig 1.1 (Blattberg and Neslin, 1990)
WHAT ARE GIFT PROMOTIONS AND ITS VALUE?
Gift promotion is a technique of convincing consumer to buy product by offering a free product. It is basically done to increase the sales volume. But, it also has other objectives. That includes- • Uplifting the brand by using attractive and branded gifts. • Reminding the consumer about the brand existence by giving gifts. • Promoting consumer loyalty and commitment.
Gift Promotion can be of two types- ‘strings attached’ and ‘no strings attached’.‘Strings attached’ gifts are the premiums and rebates that the consumer gets after purchasing the product. “Even gifts with no explicit ‘strings attached’ are often given with an expectation of reciprocity of some kind” (Mauss 1954, Gouldner 1960, Homans 1965, Levi-Strauss 1965, Schwartz 1967, Titmuss 1971, Sherry 1983, Cronk 1989). “In fact this expectation may be the primary motive behind giving gifts” (Cronk 1989). ‘No string attached’ gifts are the free samples or an extra product. ‘No strings attached’ gift would result in increased sales.
“The fact that a manufacturer is providing a free gift along with purchase of their product, could either imply that the product itself was overpriced, or that the free gift was of low value. Free gift promotion could lead to inferences about the cost and margin structure of the promoted product or the free gift or both” (Raghubir, Priya). The gift promotion offered by the business is basically to increase their sales but it will also cut their profit margin in doing promotion. So, the business should provide such an offer that after doing promotion they are still in a profitable situation. The hypothesis is that the free product offered by the business is either of very low cost or the product has high margin that covers the cost of free product. Thus, the free gift product offered by the business to the consumer should be valuable to the consumer. It should satisfy the need of the consumer and also should relate to the original product.
CONSUMER RESPONSE TO GIFT PROMOTIONS
“Stronger relationship between the consumer and the business and an implicit request for reciprocation positively after consumer responses to gift” (Bodur and Grohmann, 2005). Consumer response to gift promotion is basically dependent on four factors. They are as follows:- • Nature of the promoted product: Utilitarian vs Hedonist. • Relationship between the product and the gift.
• Brand of the original product.
• Consumer’s buying behavior and deal offered by the brand.
NATURE OF THE PROMOTED PRODUCT: Utilitarian vs Hedonist
Utilitarian are in terms of monetary savings, product quality and shopping convenience while hedonic are in terms of value, expression entertainment and exploration. “Non-Monetary promotions can also be useful with utilitarian products because they provide consumers with experiential benefits that are not generated from the product itself. In this sense gift promotions could offer consumers experiences such as fun, amusement and diversion, and provide a symbolic meaning that supplements the characteristics of the utilitarian products” (Palazon and Delgado, 2005). The free product offered by the brand should consider both the aspects of the consumer their tangible and intangible needs.
RELATIONSHIP BETWEEN THE PRODUCT AND THE GIFT
“When the relationship is high (e.g. between brands and extensions, brands and endorsers, brand and causes) consumers experience cognitive consistency and respond favourably to the offer” (Aaker and Keller, 1990; Boush and Loken, 1991; Becker-Olsen and Hill, 2006; Volckner and Sattler, 2006; Bigne-Alcaniz et al. , 2009; Samu and Wymer, 2009). However, when there is a low relationship, “customers experience cognitive inconsistency and report negative reactions” (Montaner; de Chernatony; Buil, 2011). A promoted product could have a good relationship with a gift if both have the same nature (i.e. utilitarian or hedonic) or share similar associations, features and benefits. When a high relationship between the promoted product and the gift exists, in this situation, consumers should regard the promotion as credible and consistent with the brand, leading to more favourable attitudes toward the promotion. By contrast, “if the product-gift relationship is low, the promotional offer is likely to be perceived as inconsistent and even opportunistic”. (d’Astous and Landreville, 2003).
BRAND OF THE ORIGINAL PRODUCT
The evaluation of gift promotions is likely to depend on the type of brand used (e.g. whether high or medium brand equity). Those who buy lower quality brands are more price sensitive than the consumers of higher quality brands. Thus, promotions for lower quality brands only attract customers of similar or lower price brands. By contrast, promoting strong brands causes consumers to switch from a competing brand in greater numbers. “Brands with higher awareness are expected to generate a more positive consumer response. Furthermore, consumers are usually more attentive to the marketing actions developed by high quality, well-known brands” (Keller, 1993, 2007; Hoeffler and Keller, 2003).
CONSUMER’S BUYING BEHAVIOR AND DEAL OFFERED BUY THE BRAND
Deal proneness varies from consumer to consumer. Some consumers are not influenced by the gift promotion offered by the brand while some are so responsive to promotions. If a brand offers a good deal than automatically it creates an interest in the consumer’s mind. The consumer wants to grab the opportunity because it knows it may not last for long. Example- On purchase of Loreal shampoo, the consumer is offered Loreal conditioner as a free gift. This type of deal will mechanically catch consumer’s attention and through word of mouth the brand will also get promoted. Deal proneness has been defined as “ a general proneness to respond to promotions because they are in deal form” ( Lichtenstein et al. , 1990). “Deal proneness is not the actual purchase of goods and services on promotion but the psychological propensity to buy” ( Del Vecchio, 2005).
Consumer response on missing the gift promotion is reluctantly disappointing because the consumer realizes that the product he has purchased is relatively costly than the others. The consumer tries to figure out the difference between the price they paid and the promotion price. They try to investigate the cause of missing promotion. The consumers consider missing the gift promotion as a loss and they feel regret.
CONSUMER EXPECTATION TOWARDS GIFT PROMOTIONS
“Customer satisfaction is the ultimate objective of every business” (Hanan and Karp, 1989). “Customer satisfaction is important because there are significant short-term and long-term costs associated with poor customer services. Short-term dissatisfaction could result in a walkout, whereas long-term dissatisfaction response might lead to customer defection” (Gagliano and Hathcote, 1994). This study was conducted through a process of Focus Group discussion that took place among five students including me. The main questions discussed in the focus group discussion are as follows:- • What does a consumer expects when he/she gets a free gift? • What does a consumer expect as a free gift?
• Is consumer concern with the value of free gift (Monetary and Non-Monetary)? • Is consumer satisfied with free product offered?
Consumer expectation is a vast subject to study because it varies from person to person. Understanding consumer expectation is what required by the brands? They need to comprehend what exactly a consumer demand and what will satisfy it needs? Consumer expectation towards gift promotions depend on the following things:- • Utility of the free product.
• Free product should be offered according to need of the customer. • Free product/gift should be related to the basic purchase. • Value and price of the free product.
• Variety of free products offered by the brand/business.
UTILITY OF THE FREE PRODUCT: The free product offered by the brand should have some utility and functional value. Example- On the purchase of wrist watch the free product offered is a showpiece than in this case, the product is not serving any utility or function. But, if a college student purchases a wrist watch and is offered a set of colour pens as a free gift than the free gift has utility and effectiveness.
FREE PRODUCT SHOULD BE OFFERED ACCORDING TO THE NEED OF THE CONSUMER: The free product offered by the brand should be a customized product according to the consumer need. The free product offered by the brand should consider consumer’s taste and preferences. Example- On purchase of hair shampoo a consumer is offered soap as a free product. Many a time it happens that the consumer does not feel the need of soap or may be the consumer does not use that soap. In that case the free gift offered will be of no use. It will be a waste to the consumer. It often happens that if the free product offered by the brand is not according to the consumer, the consumer may not buy the original product because the consumer will think that the free product offered is of no use and will be a wastage so it’s better not to take the product. The brand should keep option for free gifts so that the consumer gets a chance to choose. Thus, if a free product offered by the brand is according to the consumer demand than the free product will also be considered as a utility product.
FREE PRODUCT/GIFT SHOULD BE RELATED TO BASIC PURCHASE: The free product offered by the brand should be in relation to the basic purchase so that the consumer’s need of buying two products can be satisfied by buying only one product. Maggi is the best example to this context. On purchase of Maggi Ketchup the free product offered is generally a Maggi soup or Maggi (noodles) itself. Sometimes, it happens that the brand offer some product that is not at all related to the basic purchase. Example- On purchase of Juice the free product offered is Fast Relief. The free product offered is not at all related to the basic purchase and thus, does not serve any purchase. In spite, it can change the purchasing intention of the consumer. Resulting, in decrease of sales volume of the basic purchase.
VALUE AND PRICE OF THE FREE PRODUCT: The free product should have some value in terms of utilitarian as well as hedonist. It should provide some usefulness to the consumer. Example- On purchase of Hair Oil the free product offered is comb. Here comb is considering functional value and is also related to the basic purchase. The free gift should also have some monetary value that is price. The price of free product should be in relation to the price of the basic purchase. Example- If the price of the basic purchase is low than the price of the gift offered should be low and if the price of the basic purchase is high than the price of the gift offered should also be high.
VARIETY OF FREE PRODUCTS OFFERED BY THE BRAND/BUSINESS: The brand should provide the consumer with varieties of free product so that the consumer can choose anything it desired. This will help in uplifting the sales volume of the basic purchase. Example- On purchase of microwave the free product offered to the consumer is cooker, juicer, grinder, microwave utensils, idli stand etc. In this case the consumer can pick anything it desire. But, if the consumer was offered cooker only as a free gift and the consumer does not need it, may be it can change its buying intention. If the consumer is satisfied with the availability of free product of his choice it will surely endorse the brand through word of mouth. Thus, the consumer will be helping the brand in its promotion and sales. But, if the consumer is not satisfied and faces disappointment it tends to complain and spread negative word of mouth which will be a huge drawback for the brand.
“With today’s focus on customer retention and loyalty, the use of gifts fits in better with brand image and repeat purchase objectives” (Kendrick, 1998). Thus, creating effective gift promotions isn’t simple. In retailing context when shoppers are given a gift upon entry, the consumers instinct reaction is they increase their spending on the promotional product. The study demonstrates that even a nominal gift upon entry is effective in inducing customers to spend more money than originally planned. It creates an interest in consumer’s mind which ultimately convince the customer to buy the promotional product. It is not necessary to use relatively expensive gifts such as toasters, radios or umbrellas. It appears that even an inexpensive gift will activate the obligation on the customer’s part. “It is found that giving inexpensive gifts such as pens or small monetary amount will result in higher rate of response than not giving any gifts or monetary incentives” (Armstrong 1975, Hansen 1980, Boyd; Westfall and Stasch 1989, Tull and Hawkins 1987).
It is not necessary that the gift be an advertising speciality. A gift that carries the retailer’s name, logo, slogan or some sales message is use to motivate the consumers to buy. Thus, free gifts offered without any advertising messages will do. “The uninscribed gifts are more likely to be perceived by the consumer as true gifts and are thus more likely to be effective than advertising specialities” (Friedman and Herskovitz). “The efficiency of free gifts is, however, in doubt, with detractors claiming that giveaways take away from future sales and defenders arguing that they increase them” (Sexton, 1987).“Once you start giving free gifts you can’t ever stop” (Kendrick, 1998). Thus, Gift promotions are considered to be desperate measures used by marketers just to increase their sales. It is not considered as a key component of a marketing strategy for a brand.
“The promotional offers that highlight the free gift are less effective than those that highlight the product to be purchased. Increasing the visual size of the free gift leads to perceptions of poorer product quality and has unfavorable consequences for purchase intentions of the offer. The larger the size of the gift in a promotional adds, the higher the perceived component of gift value in total promotional offer, and accordingly the lower the value of the product. Visually larger gifts lead to lower deal evaluations and purchase intentions than visually smaller gifts. Example- The free gift offered by Ralf Lauren is a large backpack comprises the full-page ad and with headline that it is a free gift with purchase of a Ralf Lauren fragrance. The hypothesis is that the free gift offer is the primary draw for consumers to consider purchasing a Ralf Lauren fragrance” (Raghubir, Priya).
Future research should be done on different types of products offered as free gifts from the brands on the purchase of original product. Retailers considering the use of gift promotion should do a cost benefit analysis and take into account the cost of the gift and the estimate sales it produces. In future the research should be done as to how to relate the free gift with the original product that the brand is offering to the consumer. The free product should be according to the need of the consumer and the free product offered should have some value and utility. The brand should come with an offer of trial product; in spite of offering an extra product to the consumer, the brand should come with a free gift as a trial inducing device. By offering trial product the brand will be able to promote its product and the consumer will automatically use it out of curiosity in order to know the product. It will later on help in increasing future sales of the product.
• Mark D. Uncles, Grahame R. Dowling, Kathy Hammond, (2003), “Customer loyalty and customer loyalty programs”, Journal of Consumer Marketing, Vol. 20 Iss: 4pp. 294-316. • Patterson, P. G. (1993). Expectations and Product Performance as Determinants Of Satisfaction for a High-Involvement Purchase. Pschology and Marketing , Vol. 10(5), pp. 449-465.
• Aaker, D.A. and Keller, K.L. (1990), “Consumer evaluations of brand extensions”, Journal of Marketing, Vol. 54, January, pp. 27-41.
• Armstrong J. 1975. Monetary incentives in mail surveys. Public Opinion
• Becker-Olsen, K.L. and Hill, R.P. (2006), “The impact of sponsorship on brand equity: the case of non profit service providers”, Journal of Service Research, Vol. 9 No. 1, pp. 73-83.
• Bigne-Alcaniz, E., Curras-Perez, R. and Sanchez-Garcia, I. (2009), “Brand credibility in cause-related marketing: the moderating role of consumer values”, Journal of Product & Brand Management, Vol. 18 No. 6, pp. 437-47.
• Blattberg R. and Scott A. Neslin (1990), Sales Promotion: Concepts, Methods, and Strategies. Englewood Cliffs, NJ: Prentice Hall.
• Bodur, H.O. and Grohmann, B. (2005), “Consumer responses to gift receipt in business-to-business consumer contexts”, Psychology and Marketing, Vol. 22 No. 5, pp. 441-56.
• Boush, D.M. and Loken, B. (1991), “A process-tracing study of brand extension evaluation”, Journal of Marketing Research, Vol. 28, February, pp. 16-28.
• Boyd, H., R. Westfall, and S. Stasch. 1989. Marketing Research. Homewood, IL: Irwin
• Campbell, L. and Diamond, W. (1990), “Framing and sales promotions: the characteristics of a ‘good deal'”, Journal of Consumer Marketing, Vol. 7 No. 4, pp. 25-31.
• Cronk, L. 1989. Strings attached. The Sciences (May-Jun.): 2-4.
• Chu, S. and Keh, H.T. (2006), “Brand value creation: analysis of the Inter brand-Business Week brand value rankings”, Marketing Letters, Vol. 17, pp. 323-31.
• d’Astous, A. and Landreville, V. (2003), “An experimental investigation
of factors affecting consumers’ perceptions of sales promotions”, European Journal of Marketing, Vol. 37 Nos 11/12, pp. 1746-61.
• DelVecchio, D. (2005), “Deal-prone consumers’ response to promotion: the effects of relative and absolute promotion value”, Psychology and Marketing, Vol. 22 No. 5, pp. 373-91.
• Dr. James Manalel, J. M. (2007). Sales Promotion- Good or Bad? International Marketing Conference on Marketing and Society , 325-329.
• Gouldner, A. 1960. The norm of reciprocity: A preliminary statement. American Sociological Review 25:176-177.
• Hanan, M. and Karp, P. (1989). Customer satisfaction, how to maximize, measure and market your company’s ultimate product. New York: AMACOM.
• Hansen, R. 1980. A self-perception interpretation of the effect of monetary and nonmonetary incentives. Journal of Marketing Research 17:77-83.
• Hathcote, G. a. (1994). Customer expectations and perceptions of service quality. The Journal of Services Marketing , 60.
• Herskovitz, H. H. (n.d.). The Effect of a Gift-Upon-Entry on Sales. MAJB.
• Hoeffler, S. and Keller, K.L. (2003), “The marketing advantages of strong brands”, Journal of Brand Management, Vol. 10 No. 6, pp. 421-45.
• Homans, G. 1965. Social behaviour as exchange. In Coser, L. and L. Rosenburg, eds., Sociological Theory. New York: Macmillan.
• Keller, K.L. (1993), “Conceptualizing, measuring and managing customer based brand equity”, Journal of Marketing, Vol. 57, pp. 1-22.
• Kendrick, A. (1998). Promotional products vs price promotion in fostering customer loyalty: a report of two controlled field experiments. The Journal
of Services Marketing , 312-326.
• Koshy, P. J.-D. (n.d.). An Empirical View of the Different Types of Consumer Promotions in India.
• Levi-Strauss, C. 1965. The Principle of reciprocity. In Coser, L. and L. Rosenburg, eds., Sociological Theory. New York: Macmillan.
• Lichtenstein, D.R., Netemeyer, R.G. and Burton, S. (1990), “Distinguishing coupon proneness from value consciousness: an acquisition-transaction utility theory perspective”, Journal of Marketing, Vol. 54, July, pp. 54-67.
• Mauss, M. 1954. The Gift: Forms and Functions of Exchange in Archaic Societies. English translation by F. Cunnison: Glenco, IL: Free Press.
• Mela, C.F., Gupta, S. and Jedidi, K. (1998), “Assessing long-term promotional influences on market structure”, International Journal of Research in Marketing, Vol. 15, pp. 89-107.
• Montaner, T. and Pina, J.M. (2008), “The effect of promotion type and benefit congruency on brand image”, Journal of Applied Business Research, Vol. 24 No. 3, pp. 15-28.
• Palazon, M. and Delgado, E. (2005), “Sales promotions effects on consumer-based brand equity”, International Journal of Market Research, Vol. 47 No. 2, pp. 179-204.
• Papatla, P. and Krishnamurthi, L. (1996), “Measuring the dynamic effects of promotions on brand choice”, Journal of Marketing Research, Vol. 33, February, pp. 20-35.
• Patterson, P. G. (1993). Expectations and Product Performance as Determinants Of Satisfaction for a High-Involvement Purchase. Pschology and Marketing , 449-465.
• Raghubir, P. (2004). Free Gift wit Purchase: Promoting or Discounting the Brand? Journal of Consumer Psychology , 181-185.
• Raghubir, P. (n.d.). Promoting Promotions: Why does Increasing the Visual Size of the Free Gift Backfire?
• Samu, S. and Wymer, W. (2009), “The effect of fit and dominance in cause marketing communications”, Journal of Business Research, Vol. 62 No. 4, pp. 432-40.
• Schwartz, B. 1967. The social psychology of the gift. American Journal of Sociology 73(1):1-11.
• Sherry, J. Jr. 1983. Gift giving in anthropological perspective. Journal of Consumer Research 10:157-168.
• Teresa Montaner, L. d. (2011). Consumer Response to Gift Promotions. The Journal of Product and Brand Management , 101-110.
• Titmuss, R. 1971. The Gift Relationship. New York: Pantheon.
• Tull, D. and D. Hawkins. 1987. Marketing Research: Measurement and Method. New York: Macmillan.
• Volckner, F. and Sattler, H. (2006), “Drivers of brand extension success”, Journal of Marketing, Vol. 70, April, pp. 18-34.
• (Wei Wei Chen, 2010)Cooke, Ernest F., “What is Sales Promotion?” paper presented at Sales Promotion Workshop, Babson College, May 23, 1983.