Do Feature and Discount Promotions for National Brands Primarily Drive (National) Brand Choice, Store Choice, or Both? An Exploratory Analysis

Abstract

Feature and discounts promotions are among the most frequently used marketing instruments in the consumer packaged goods (CPG) landscape. Using a flexible generalized extreme-value model, this study analyses the effect of national brand feature and discount promotions in a multi-retailer and multi-brand setting, in which households can use different decision routes to choose a (national or private label) brand and store. Across nine CPG categories, our results reveal that in each category a mixture of decision routes prevails: about 55 % of households exhibiting a brand focus (i.e. primarily select a brand, and then choose between stores offering that brand), the remaining 45 % showing evidence of a retailer focus (i.e. rather substituting brand offers within a visited store). These decision routes entail different patterns of competition between brands and stores, and come with differences in promotion response: feature ads triggering stronger (weaker) reactions among households with a brand (retailer) focus in almost all categories, and discount depth hardly affecting households with a retailer focus. As such, especially for less-frequently purchased categories, the brand-focus decision route leads to larger net promotion benefits for the retailer and, despite the stronger brand-cannibalization, even for the manufacturer. Managerial implications are discussed.