When Do Price Promotions Affect Pretrial Brand Evaluations?

Abstract

The authors investigate the conditions in which price promotions affect pretrial brand evaluations. A price promotion is theorized to be informative about brand quality when it stands out because it deviates from either its own past behavior or industry norms. Product category experts, who have alternative sources of information to make quality judgments, are expected to make less use of price promotions as a quality cue than novices are. The authors describe three laboratory studies in the context of a price promotion that is designed to increase trial in a service industry. Results suggest that consistency with past promotional behavior, distinctiveness in terms of how common it is to promote in an industry, and consumer expertise are important variables that moderate when price promotions have an unfavorable effect on brand evaluations. The authors highlight implications for service providers that are offering promotions to attract new customers in industries in which promotions are uncommon and discuss the theoretical implications of the finding that expertise moderates the effects of distinctiveness and consistency on evaluations in the context of price promotions.