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Effects of Price Promotions on Variety-Seeking and Reinforcement Behavior

Author

Listed:
  • Barbara E. Kahn

    (University of Pennsylvania)

  • Jagmohan S. Raju

    (University of California, Los Angeles)

Abstract

A stochastic model is proposed to examine how changes in frequency of price discounts affect brand choice decisions of consumers who exhibit variety-seeking and reinforcement behavior. It is shown that the effect on choice depends on whether the brand offering discounts is a major or minor brand in the product category. This model extends the existing literature on stochastic models of variety-seeking behavior by explicitly incorporating switching due to promotions along with intrinsic switching due to variety-seeking. The model yields testable hypotheses which are supported in a laboratory experiment and on analyses of the IRI cracker data.

Suggested Citation

  • Barbara E. Kahn & Jagmohan S. Raju, 1991. "Effects of Price Promotions on Variety-Seeking and Reinforcement Behavior," Marketing Science, INFORMS, vol. 10(4), pages 316-337.
    • Handle: RePEc:inm:ormksc:v:10:y:1991:i:4:p:316-337
    DOI: 10.1287/mksc.10.4.316
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    Citations

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    Cited by:

    1. Nanarpuzha, Rajesh, 2013. "Modeling Situational Factors in Variety Seeking Behaviour: An Extension of the Lightning Bolt Model," IIMA Working Papers WP2013-12-04, Indian Institute of Management Ahmedabad, Research and Publication Department.
    2. Szymanowski, M.G., 2009. "Consumption-based learning about brand quality : Essays on how private labels share and borrow reputation," Other publications TiSEM b12825d8-5e21-4437-adda-b, Tilburg University, School of Economics and Management.
    3. Kurata, Hisashi & Liu, John J., 2007. "Optimal promotion planning--depth and frequency--for a two-stage supply chain under Markov switching demand," European Journal of Operational Research, Elsevier, vol. 177(2), pages 1026-1043, March.
    4. Marshall Freimer & Dan Horsky, 2008. "Try It, You Will Like It—Does Consumer Learning Lead to Competitive Price Promotions?," Marketing Science, INFORMS, vol. 27(5), pages 796-810, 09-10.
    5. S. Sajeesh & Jagmohan S. Raju, 2010. "Positioning and Pricing in a Variety Seeking Market," Management Science, INFORMS, vol. 56(6), pages 949-961, June.
    6. Bandyopadhyay, Nirmalya & Sivakumaran, Bharadhwaj & Patro, Sanjay & Kumar, Ravi Shekhar, 2021. "Immediate or delayed! Whether various types of consumer sales promotions drive impulse buying?: An empirical investigation," Journal of Retailing and Consumer Services, Elsevier, vol. 61(C).
    7. Kuntner, Tobias & Teichert, Thorsten, 2017. "Price Promotions: Enablers or Obstacles for Brand-Led Innovation Adoption – A Double-Hurdle Approach," EconStor Preprints 157297, ZBW - Leibniz Information Centre for Economics.
    8. Szymanowski, Maciej & Gijsbrechts, Els, 2013. "Patterns in consumption-based learning about brand quality for consumer packaged goods," International Journal of Research in Marketing, Elsevier, vol. 30(3), pages 219-235.
    9. C. Goukens & S. Dewitte & I. Anthoons, 2003. "When New Feels Good. Enhancing Variety Seeking by Using Subtle Priming," Review of Business and Economic Literature, KU Leuven, Faculty of Economics and Business (FEB), Review of Business and Economic Literature, vol. 0(3), pages 469-488.
    10. Harlam, Bari A. & Krishna, Aradhna & Lehmann, Donald R. & Mela, Carl, 1995. "Impact of bundle type, price framing and familiarity on purchase intention for the bundle," Journal of Business Research, Elsevier, vol. 33(1), pages 57-66, May.
    11. Vakeel, Khadija Ali & Fudurić, Morana & Malthouse, Edward C., 2021. "Extending variety seeking to multi-sided platforms: Impact of new retailer listing," Journal of Retailing and Consumer Services, Elsevier, vol. 59(C).
    12. Aradhna Krishna & Fred M. Feinberg & Z. John Zhang, 2007. "Should Price Increases Be Targeted?--Pricing Power and Selective vs. Across-the-Board Price Increases," Management Science, INFORMS, vol. 53(9), pages 1407-1422, September.
    13. Alam Kazmi, Syed Hasnain, 2015. "Brand the Pricing: Critical Critique," MPRA Paper 64984, University Library of Munich, Germany.
    14. 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.
    15. H-Y Tsao & L Pitt & C Campbell, 2010. "Analysing consumer segments to budget for loyalty and promotion programmes and maximize market share," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 61(10), pages 1523-1529, October.
    16. Ivanova Marusya, 2012. "A Benefit-Based Approach for Increasing the Effectiveness of Promotions," Scientific Annals of Economics and Business, Sciendo, vol. 59(2), pages 67-82, December.
    17. Alam Kazmi, Syed Hasnain, 2015. "Developments in Promotion Strategies Review on Psychological Streams of Consumers," MPRA Paper 65424, University Library of Munich, Germany, revised 05 May 2015.
    18. Z. John Zhang & Aradhna Krishna & Sanjay K. Dhar, 2000. "The Optimal Choice of Promotional Vehicles: Front-Loaded or Rear-Loaded Incentives?," Management Science, INFORMS, vol. 46(3), pages 348-362, March.
    19. Foubert, Bram & Gijsbrechts, Els, 2010. "Please or Squeeze? Brand performance implications of constrained and unconstrained multi-item promotions," European Journal of Operational Research, Elsevier, vol. 202(3), pages 880-892, May.
    20. Kwon, Ohjin & Singh, Tanya & Kim, SunAh, 2023. "The competing roles of variety seeking in new brand adoption," Journal of Retailing and Consumer Services, Elsevier, vol. 72(C).
    21. Liu, Huan & Lobschat, Lara & Verhoef, Peter C. & Zhao, Hong, 2021. "The effect of permanent product discounts and order coupons on purchase incidence, purchase quantity, and spending," Journal of Retailing, Elsevier, vol. 97(3), pages 377-393.
    22. Sanjay K. Dhar & Jagmohan S. Raju, 1998. "The Effects of Cross-Ruff Coupons on Sales and Profits," Management Science, INFORMS, vol. 44(11-Part-1), pages 1501-1516, November.
    23. Desai, Kalpesh Kaushik & Trivedi, Minakshi, 2014. "Do consumer perceptions matter in measuring choice variety and variety seeking?," Journal of Business Research, Elsevier, vol. 67(1), pages 2786-2792.

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