In addition to multiple pricing there are other pricing approaches in which the marketer merely cuts the price of an item, offers a cents off special or provides some sort of rebate on the product as a way of stimulating sales. One consideration in all such approaches however, is the effectiveness of the price deal for accomplishing marketing objectives. For example it appears that price promotions can induce brand switching in favor of the promoted brand. For instance, one study of regular ground coffee found that more than 84 per cent of the sales increase due to price promotion came from brand switching while purchase acceleration in time accounted for less than 14 per cent and stockpiling for less than 2 per cent . A related factor of importance to retailers is that shoppers may substitute stores to make their purchases particularly as a result of price promotion. It is not clear however, that consumers remain with the brand once the deal is withdrawn (and hence, the price is raised). Thus, the marketer may not achieve lasting impact with price deals.
Can the deal prone consumer be identified and segmented? That is, do certain consumers react more favorably than others to deals? Although research results are inconsistent recent studies indicate that for certain frequently purchased goods, deal prone households can be identified and that the key variables are household resource variables (such as home and car ownership). Buyers with higher incomes and owners of cars and homes are more deal prone.
This is a form of price dealing in which a cent offs coupon is redeemed during purchase, thus reducing the product’s price. Coupon distribution has had a sharp, continuing growth over the past few years. In 1990, an estimated 280 billion coupons (over 3000 per household) were distributed by companies. The face value of these coupons averaged almost 50 cents, representing a potential consumer savings of $ 136.7 billion. However, redemption rates are quite low (7.1 billion coupons for a total savings of $3.5 billion). Although they have begun to rise coupons appear to have a significant impact on consumer purchase behavior, as indicated in Figure which compares four sales promotion devices.
Cent off coupons have been criticized on several bases: (1) they discriminate against low income and minority consumers and shoppers with high time costs, (2) they slow the checkout process, (3) they force food retailers to stock slow moving items, (4) they impose costs on the food system by generating demand surges, and (5) they distort consumer choices between advertised and private labels. In spite of these criticisms the practice of couponing continues to grow. It has been estimated that 97 per cent of all households use coupons in a given month. A consumer’s decision to redeem a coupon is based on coupon characteristics, characteristics of the purchase brand loyalty, the present promotional conditions and past coupon usage behavior. Consumers attempt to strike a balance between their needs for economizing and reducing shopping time and effort.
Although coupons are generally claimed to influence consumers to try new products or improve the position of older product, it is hoped they will result in long term loyalty once trial occurs. However, most coupons have been shown to result in short term sales gains only, although such gains may be impressive.
Who uses coupons? Coupon-responsive behavior appears to be a manifestation of two psychological constructs: coupon proneness (a propensity to respond to a purchase offer because the coupon form of the purchase offer positively affects purchase evaluations) and value consciousness (a concern for paying low prices subject to some quality constraint) .Coupon usage is greater among middle , and upper income groups, those with higher educational levels, and those who are urban, less brand loyal, and less store loyal. Such refunds also attract larger and older families. In addition, redemption varies by region, with a greater percentage of households in the northeast redeeming them than in south east. Market mavens are particularly heavy coupon users and are active in providing coupons to others.
Source: Consumer behavior