Analysis of Sales Promotion Effects on Household Purchase Behavior

But, in contrast, economic theory cannot explain why the retraction <strong>of</strong> substantial
incentives reduces the likelihood <strong>of</strong> behavioral persistence. A strict interpretation <strong>of</strong>
economic theory implies that retraction <strong>of</strong> an incentive will cause the utility <strong>of</strong> a brand to
fall in its pre-incentive level, not below it (or it is assumed that the utility function has
changed, but arguments for this change are not provided). This is also an illustration <strong>of</strong> the
shortcomings <strong>of</strong> economic theory in explaining the effects <strong>of</strong> sales promotions regarding
consumer behavior. Their data supported the external validity <strong>of</strong> self-perception theory in
marketing settings. Neslin and Shoemaker (1989) indicated that there is an alternative
explanation for the lower aggregate repeat rates observed (as found, for example, in
Dodson et al. 1978). Their explanation is based on statistical aggregation and they showed
that even when each consumer’s purchase probabilities drops to the same level as before
the promotion, not below, the average rate after a promotion purchase is lower. The
explanation is that the promotion temporarily attracts a disproportionate number <strong>of</strong>
households with low purchase probabilities. When the repeat rates <strong>of</strong> these households are
averaged with the repeat rates <strong>of</strong> those that would have bought the brand even without a
promotion, the average rate is lower. Davis et al. (1992) provided additional disconfirming
evidence. They reject the hypothesis that overall evaluations <strong>of</strong> promoted brands decrease.
Empirical research in this area therefore suggests that promotions can have either
positive or negative effects on brand attitudes, depending on the promotion itself, the
purchase environment, or the internal state <strong>of</strong> the consumer prior to using the promotion.
This line <strong>of</strong> research is very important for possible medium- and long-term effects <strong>of</strong>
promotions.
2.3.3.2 Theories <strong>of</strong> Price Perception
In order to determine the appropriate size and presentation <strong>of</strong> a price reduction, it is
important to gain insight into the consumers’ price perception processes. Three theories
have particular relevance: threshold theory (Weber’s law), adaptation-level theory, and
assimilation-contract theory.
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