Government Adoption of Sales Promotions: An Initial Appraisal

Abstract

Governments have begun to adopt sales promotions to shape household consumption. Successful private-sector promotions hinge on choice of goals, design parameters, and implementation, particularly coordination between manufacturers and retailers. In the public setting, additional considerations—including equitable and nondiscriminatory treatment of citizens, the influence of the political process on goal setting and program design, the lack of experience in managing marketing programs, and a high level of public scrutiny—may constrain their application. The authors evaluate two recent incentive programs implemented by the U.S. government—the TV Converter Box Coupon program and the “cash-for-clunkers” stimulus in the automotive industry. Both programs encountered problems with goal clarity, forecasting of consumer demand, contractor performance, and logistical coordination with retailers, necessitating legislative extensions. Despite these difficulties, both promotions met their specified short-term objectives, though long-term outcomes are less clear. Government-run consumer promotions are worth considering when there is good reason to shape the timing or amount of household consumption in a specific product category.