The effects of multiple-period promotions differing in frequency and depth on internal reference price

Abstract

ABSTRACT Many marketers use sales promotions but excessive discounting can lower consumers’ internal reference prices. Scant research examines the implications of discounts and premiums varying in frequency and depth across multiple buying periods on period-by-period reference prices. In three studies, we find discounts with deep depth generate lower internal reference prices than those with shallow depth at high frequency. Then, we find frequency moderates depth, identifying approximate threshold levels of reference-price change. Finally, we find that premiums with the same value as discounts preserve internal reference price even if they are implemented with high frequency and deep depth.