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Unintended effects of price promotions: Forgoing competitors’ price promotions strengthens incumbent brand loyalty

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Abstract

A majority of consumers resist switching brands when exposed to competitor sales promotions. Yet, in an effort to entice consumers to switch brands, firms spend more on sales promotions, in the form of price promotions such as discounts and coupons, than any other advertising and marketing expense. Interestingly, marketing research devotes much attention to understanding how the small subset of consumers who switch are impacted by a firm’s promotional efforts, yet little attention is focused on how forgoing a competitive promotion alters a consumer’s loyalty to an incumbent brand. The present research focuses on the potential unintended consequences of price promotions and demonstrates when a competitor brand’s offer fails to motivate consumers to switch brands, a consumer’s resistance to the promotion subsequently increases loyalty to- and spending with- their incumbent brand. Across seven studies, this research demonstrates how a competing firm’s attempt to lure consumers away from a competitor’s brand can strengthen loyalty for the incumbent brand.

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Notes

  1. Given stayers could be matched with up to two counterparts who were not aware of competitor promotions, the sample size for “control” consumers exceeds the stayer consumers. This is typical in average treatment effect modeling.

  2. Post hoc, we re-ran the analyses while controlling for relative preference for Dunkin’ – Starbucks and the same results are achieved with respect to sign, significance, and magnitude, providing further evidence these results persist after controlling for potential self-selection issues related to relative differences in brand loyalty across the two conditions.

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Authors and Affiliations

  1. Mays Business School, Texas A&M University, 210 Olsen Blvd, College Station, TX, 77843, USA

    Alexander B. Pratt

  2. Culverhouse College of Business, University of Alabama, Box 870225, Tuscaloosa, AL, 35406, USA

    Stacey G. Robinson & Clay M. Voorhees

  3. Bentley University, 175 Forest St, Waltham, MA, 02542, USA

    Joyce (Feng) Wang

  4. Wilbur O. and Ann Powers College of Business, Clemson University, 225 Walter T. Cox Blvd, Clemson, SC, 29634, USA

    Michael D. Giebelhausen

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Correspondence to Stacey G. Robinson.

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Appendix

Appendix

Study 1 – Automotive Field Study.

All items were measured with 5-Point Likert-Type Scales where 1 = Strongly Disagree and 5 = Strongly Agree unless otherwise noted.

Consumer Loyalty (α = 0.81) – Adapted from Brocato et al. (2012) and Zeithaml et al. (1996).

  • I consider myself loyal to this brand.

  • I really love the brand.

  • I would really miss the brand if it went away.

Willingness to Recommend – Maxham and Netemeyer (2002).

1 = Definitely Not Recommend and 5 = Definitely Would Recommend.

  • How likely would you be to recommend this brand to others?

Willingness to Pay Price Premium – Zeithaml et al. (1996).

  • I would still buy this brand, even if it cost 5–10% more than a competitor’s product.

Consumer Engagement (α = 0.80) – Based on Conceptualization introduced by Pansari and Kumar (2017).

  • I am always interested in learning more about this brand.

  • I would be interested in merchandise with this brand’s name on it.

  • I like to visit this brand’s website, even when I am not shopping for a new vehicle.

Studies 2a-2c, 4–5.

All items were measured with 7-Point Likert-Type Scales where 1 = Strongly Disagree and 7 = Strongly Agree.

Consumer Loyalty – Adapted from Umashankar et al. (2017); Zeithaml et al. (1996).

  • I would say positive things about Brand X to other people.

  • I would continue buying from Brand X for the next few years.

  • I feel loyal to Brand X.

Resistance – Pritchard et al. (1999).

  • My preference to use Brand X would not willingly change.

  • It would be difficult to change my beliefs about Brand X.

  • Even if my close friends recommended another brand, I would not change my preference for Brand X.

  • To change my preferences from Brand X would require major rethinking.

Brand Strength Manipulation Check – Adapted from Yoo and Donthu (2001).

  • It makes sense to buy Brand X instead of another brand if they are the same.

  • Even if another brand has the same features as Brand X, I would prefer to buy Brand X.

  • If there is another brand as good as Brand X, I prefer to buy Brand X.

  • If another brand is not different than Brand X in any way, it seems smarter to purchase Brand X.

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Pratt, A.B., Robinson, S.G., Voorhees, C.M. et al. Unintended effects of price promotions: Forgoing competitors’ price promotions strengthens incumbent brand loyalty. J. of the Acad. Mark. Sci. 51, 1143–1164 (2023). https://doi.org/10.1007/s11747-022-00907-1

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