Effect of Encumbrances on Response to Sales Promotions

Abstract

Sales promotions serve as important marketing tools to obtain immediate incremental sales. However, sales promotion campaigns are profitable only if the promotional offers (deals) can induce switch from competitor brands. However, redeeming deals may necessitate the purchase of less preferred brands and patronization of non-preferred stores, and incurring extra-expenses for subscribing to extra newspapers and magazines to obtain deals such as coupons and contests. Therefore, consumers may perceive brand, store and extra-expense encumbrances while responding to the deal offers. Thus, marketing strategists face an important question: whether these encumbrances have any impact on the consumers’ response to deals. This study addresses this question and finds significant positive effect of encumbrances on deal proneness. The study is carried out across multiple deal types and two product categories for generalization of the findings.