Consumption Experience and Sales Promotion Expenditure
AbstractAn economic theory of habit formation through consumption learning is developed to explain order differences in relative sales promotion expenditures among brands. The theory applies to consumer brands in equilibrium markets, where consumer information from sources other than advertising, sales promotion, and previous consumption experience is negligible. Three propositions are derived from the theory: brands with more consumption experience (1) spend proportionately less on sales promotion as well as (2) on advertising and promotion combined, and (3) place proportionately more emphasis on advertising relative to sales promotion. These propositions are formulated as hypotheses and tested against empirical data from the PIMS project. It is found that the data are generally consistent with the propositions. In order to examine the robustness of the results, the hypotheses are subjected to three different empirical tests, each with different assumptions. The findings are shown to be reasonably robust with respect to these changes in assumptions.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by INFORMS in its journal Management Science.
Volume (Year): 31 (1985)
Issue (Month): 9 (September)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Covin, Jeffrey G. & Slevin, Dennis P. & Heeley, Michael B., 2000. "Pioneers and followers: Competitive tactics, environment, and firm growth," Journal of Business Venturing, Elsevier, vol. 15(2), pages 175-210, March.
- Sergi Jiménez-Martín & Antonio Ladrón de Guevara-Martínez, 2009. "A state-dependent model of hybrid behavior with rational consumers in the attribute space," Investigaciones Economicas, Fundación SEPI, vol. 33(3), pages 347-383, September.
- Esposito Vinzi, Vincenzo & Ringle, Christian M. & Squillacciotti, Silvia & Trinchera, Laura, 2007. "Capturing and Treating Unobserved Heterogeneity by Response Based Segmentation in PLS Path Modeling. A Comparison of Alternative Methods by Computational Experiments," ESSEC Working Papers DR 07019, ESSEC Research Center, ESSEC Business School.
- Raju, Jagmohan S., 1995. "Theoretical models of sales promotions: Contributions, limitations, and a future research agenda," European Journal of Operational Research, Elsevier, vol. 85(1), pages 1-17, August.
- Ringle, Christian M., 2006. "Segmentation for path models and unobserved heterogeneity: The finite mixture partial least squares approach," MPRA Paper 10734, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc).
If references are entirely missing, you can add them using this form.