Choices, choices.

March 21, 2009

I’m continuing to work my way through the Marketing and Psychology issue on assortment variety and choice. Today I’m reading Reutskaja and Hogarth*, who discuss the various costs and benefits that come into play in making a choice, and how the size of a choice set can affect how these costs and benefits are calculated.  Their experiment actually concerns something directly relevant to me (a rarity in this literature, I’m finding): shape and color.

They do an excellent job of presenting the fundamental issues. I’ve been going around in circles with “a big product assortment is good because….but on the other hand it’s bad because….AAGH!”. Lather, rinse, repeat.  Well, yes. In fact, it’s all true: these are the benefits and the costs. The benefits include economic benefits (finding the best value for the price), increased satisfaction, feeling positively about the situation/product/brand, feelings of control and autonomy.  Costs include cognitive effort, time spent, anxiety, and regret after purchase as you worry that you didn’t select the best choice.  The authors point out that, alas, the advantages and disadvantages of added assortment do not accrue evenly: at some point, the benefits plateu and the costs increase at a greater rate.  In the graphs, it’s an inverted U-shaped curve– as the product selection increases, the benefits go up, up, up…then suddenly down, down, down.

In the experiment, they had people choose a gift box they would use to give a gift to a friend. Participants were presented with a set of gift boxes of either 5, 10, 15, or 20 different boxes. (This is nice– usually experimenters just go with either a small or large assortment). These boxes varied either in color, shape, or both (e.g., a set of red boxes in 10 different shapes; a set of square boxes in 10 different colors, a set of 10 boxes of different colors and different shapes).  They then rated their levels of satisfaction with the process of making the choice, and with the outcome– how satisfied they were with the box they ended up choosing. Turns out, when it comes to shape vs color, there’s a big difference in how people respond to variety.  The responses to shape clearly showed that inverted-U curve– a rapid increase in satisfaction peaking at 10 options, followed by a  decrease once they hit 15 options.  For color, the satisfaction levels increased markedly between the 5 and 10 option levels, but didn’t decrease with15 or 20 options.  It just plateaued.  In other words, if you’re thinking about adding options to a product line, adding too many new shapes can really count against you, while adding more color options will help to a certain point and then above and beyond that, won’t do any good (or harm) with respect to satisfaction.

Of course, this doesn’t give us much insight into the too-much-choice problem, since in this study participants had to choose, and the measurement was of satisfaction; in the too-much-choice scenario, what’s measured is whether a choice is made at all.  And although the satisfaction levels drop off or plateu with added choice, what we don’t know is, for example, how brand perception is affected. Perhaps added color variety doesn’t continue to enhance satisfaction beyond a certain point, but it may continue to enhance brand perception (especially if the brand in question is an artist, as opposed to a toaster, but that’s another empirical question). 

 

*Reutskaja and Hogarth. 2009. “Satisfaction in choice as a function of the number of alternatives: when ‘goods satiate'”. Psychology and Marketing 26(3): 197-203.

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Too much choice? Nah.

March 17, 2009

The March issue of Psychology & Marketing was a theme issue on assortment variety and choice. Lots of good stuff therein– I hope to slog through it in short order.

First up is an article trying to identify boundary conditions on the too-much-choice effect– the much-ballyhooed (well, somewhat-ballyhooed) finding that too much variety will lead people to freeze up, say to hell with it, and leave without purchasing anything– a refusal to make a choice.  Researchers are still picking at this problem– when, why, how, for whom does an increase in the available choices cause decision overload?  Just how much choice is too much, anyway?  5 choices, 20 choices, 50 choices…? Where’s the line?

Gearing up for the art show season as I am, these questions have been on my mind as I try to figure how much to make in preparation, and how much to display when the time comes.

Good news (sort of) from the first article from the volume that I read*:  There are just no clear answers. They did three experiments in two countries, looked a a whole bunch of variables, and found that none of them correlated very reliably with a too-much-choice effect as lower reported satisfaction with the assortment.  Much of the time, the effect was not even in evidence, even when the choice set was rather large (79 items). Even if people reported that they found the decision difficult, it didn’t mean that they necessarily experienced choice overload.  Now, this is annoying if you really want to make sure you aren’t causing it in your own product display– but it’s also kinda nice to know that this effect isn’t all that robust, and in any case no one knows yet what causes it, much less how to prevent it.  One less thing to worry about for now.  In general, the benefits of offering a large variety (increased satisfaction with the variety; increased consumption of items from a large assortment) are more clear than any negative effects.

 

* Scheibehenne, Greifeneder, Todd. “What moderates too much choice?” Psychology & Marketing 26:3: 229-253.

Selling for a cause

February 12, 2009

I’ve been thinking a lot lately about what’s called cause-related marketing– businesses teaming up with charitable causes, as when a company donates a portion of an item’s price to a charity. I’ve been wanting to do this myself, because there are several causes that I care about and would like to find a way to support.  And if I’m going to do it, I want to do it right– in a way that really helps the charity and doesn’t hurt my business. There are a number of issues at play, and if done without careful reflection, the whole thing can backfire, which won’t do the business or the cause any good.

The factors are too numerous to address all in one blog post– so for starters, we’ll go with this study*, where the researcher has looked at the issue of how much to give per item, what type of items work best, and whether to frame the donation in terms of cents or percentage.

Now, in a way, a sale and an ’embedded premium’ like donation to a charity with purchase are very similar– the business is giving away a cut of the price to someone, either by letting the buyer keep it themselves (as in a sale) or by giving it to a charity. But psychologically, it seems to be very different. 

The researcher found that unlike in sale discount situations, it was more effective to frame a donation in terms of a flat dollar (or cents) amount rather than a percentage.  Presumably for the same reason– while in a sale you want to mask somewhat the actual price of the item to protect future expectations about price, in a donation context you want it to be crystal clear exactly how much will be given.  Having to calculate the amount will make the exact amount more ambiguous (especially with the remarkably inspecific “percentage of profit” framing– as if we the buyers have any way of knowing what the profit is).  If you’re donating, it’s good to be as clear as possible about the amount.

They also found that charity-donation promotions were more effective when the product was a ‘frivolous’ rather than practical item. If people are looking for an excuse to buy something they want but don’t really need, donating a portion of the price to charity will offset their guilt a bit and give them a little more incentive to buy. With practical items, that doesn’t come into play so much.  Plus, there’s an emotional element to giving that doesn’t get activated as much when people are buying practical items.

Now here’s the part that most surprised me– The donation campaign was more effective a) when the items in question were low-priced and b) when the amount of the donation was low. Donating a larger portion of higher-priced items (in the study, a printer or electronic dictionary) makes people more skeptical about the motivations of the company in offering the donation, and makes them wonder a bit about the quality of the item– is the price being inflated so they can give so much to charity? (If you really want to donate a percentage of a more expensive item, here’s where framing the donation as a percentage may be useful).  I guess that makes sense, but I would have thought that if giving a little was good, then giving more would be even more of a draw. Apparently not!

By far the most effective form of donation amount was when it was a small amount of an inexpensive (and frivolous) item.  That means more sales for the business and, more importantly, more money for the charity as a result of the campaign.

 

* Chang, C. 2008. To donate or not to donate? Product characteristics and framing effects of cause-related marketing on consumer purchase behavior. Psychology and Marketing 25:12, 1089-1110.

Ok, so you want to give a discount. After deciding how much you can afford to mark off, the next question may be whether to frame it in terms of a dollar amount off or a percentage off.  But which is better?  Is there any reason to think one is more effective than the other?

As it happens, yes, there are some differences. Some of the issues at play here include first of all, which is more effective at getting people to buy during the promotion; secondly, how does it affect whether people will buy after the promotion is over? Does the depth of the discount make any difference in all this? And how might the discount effect people’s expectations about the price once the promotion is over with? 

DelVecchio, Krishnan, and Smith (2007) ran a few studies to look at these questions, and found that, in a deep-discount situation, a percentage-off, being ever-so-slightly more demanding to calculate, leads people to expect higher prices when the discounted item isn’t on sale. This is good, because you don’t want people to find your regular prices too high, and you want to minimize any negative price-quality inferences they might make based on sale price.  And it seems that during the sale itself, people respond equally well to (meaning they’ll buy) both percentages off and cents-off.  So there are a couple reasons why percentages off are better, and no strikes against.

The same basically holds true for the period after the sale ends. There’s a bit of a difference between deep discounts (about 40% off in this study)and lower-depth discounts (15% off), in that the percentage-off deep discounts enjoyed greater sales than the cents-off deep discounts.  Not much difference was found between the two frames for lower-depth discounts.

Take-home message: if you’re going to offer deep discounts (and recall that that’s not necessarily a good long-term strategy), express them in terms of a percentage off, preferably not a super-easy-to-calculate percentage off. The reason behind the advantages of percentage-off sales seems to be the increased difficulty of making the calculation, so if you hand customers an easy problem like “50% off”, it kind of ruins the effect.

 

DelVecchio, D., H. Krishnan, and D. Smith. 2007.  Cents or Percent? The effects of promotion framing on price expectations and choice. Journal of Marketing 71: 158-170.

Ok, enough with the chicken feet already. Back to work.

I keep coming back to this product line variety question. It’s important to me because people’s opinion of how much variety I offer and of what sort can form very quickly, and whatever judgment they come to in that first crucial moment or two can color their perceptions from that moment on. If they decide I offer a good variety and am a master of my craft, they’re more likely to browse and then buy. If they decide my variety isn’t so good and that I don’t look focused enough, nothing will change their minds.  I make the art I make, sure, but if small details of presentation can make the difference in how people see my work, well, I want control over that. And as much as art is different than any other product, still, as an artist you can make what you make, but the moment you try to sell it, it’s a product and you’re working in an economic world. Best come prepared.

Anyway, yeah, variety. Earlier research I looked at indicated that a) being very focused in your product offerings leads people to believe that you are better at doing what you do, and therefore, your product is better, and therefore, they’ll be willing to pay more for it; and b) the variety has to be within-category, other wise you don’t look like an expert. This led me to wonder a bit about, in the arts, what counts as operating within one category.  And how much leeway do we have?

So now a little more on categorization.  Categories can be broad or very fine-grained, and a couple of things contribute to this.  One thing is expertise– if  a person is very familiar with the overall category, they’ll be able to chop the domain into smaller pieces.  So if you’re not into, say, fine tea, tea is tea is tea. But if you’re a tea expert, you break it down much more– you’ve got your black, green, yellow, white, oolong, pu-erh, pouchongs and souchongs…and then your growing regions, tea estates, and leaf size. 

Apparently* another way that finer-grained categorization can happen is just through preference– and not just because preference often leads eventually to expertise.  In this study, the researchers showed people unfamiliar symbols, and showed the symbols with either positive or negative photos.  Then they had them sort the symbols into categories (according to ‘meaning’). The symbols that had been shown with positive images ended up in more categories than symbols shown with negative images.  This suggests that just liking things allows you to find more distinctions among them.

I take this to mean that some things about presentation of art are going to be self-fulfilling– people who don’t know anything about your work, materials, or technique and who decide from the get-go that they don’t care for your style– you’re just not going to be able to win themover.  They won’t see the variety you actually have, and thus they’ll be less likely to see your craftsmanship, product quality, and be less impressed with your selection. Don’t worry about them.

On the other hand, those who take to your work immediately will stay and look, all the while thinking and seeing more and more detail and gettinghappier and happier.  For them, you don’t want to bee TOO focused–catch their eye with a nice variety of items with small differences so that the more they look, the more variety they’ll perceive, and that will cycle back into them liking the work more. 

And I’d guess that how widely you want to draw your categories to begin with depends on who your customer is. If they’re folks who already know a lot about art, you’ll want your offering to be more focused. But if they’re new to your work or only occasional consumers of your type of product, you can perhaps be a little freer to offer different types of things (within limits).  Think about a glass jewelry maker like Kevin O’Grady who sells mainly to collectors, and offers mainly bracelets, vs. a glassworker who sells to the public at art fairs and offers pendants, necklaces, bracelets, earrings, cufflinks, hair barettes, brooches, etc. etc. 

 

*Smallman, R. and N. Roese. 2008. Preference invites categorization. Psychological Science 19:12, 1228-1232.

Freebies

January 27, 2009

An earlier article I had read suggested that the value of coupons and premiums should stay below 20% of the product value, or you run the risk of negative brand perceptions.  Now I’ve had to revise that conclusion due to some new research* suggesting that promotions that include free stuff may actually be better than previously thought, because the value of free is way, way more than just zero.

The researchers did a series of experiments where they offered chocolates for sale– in one experiment, they offered Hershey’s kisses at a negligible price and Fererro Rocher at slightly higher price (2¢ and 27¢ in one condition, and in the second condition, 1¢ and 26¢).  They then reduced the price of each product in by 1¢, to 1¢ and 26¢ and to 0¢ and 25¢, respectively.  Here’s the cool part: even though the monetary value of the discount was the same across the board at 1¢, the demand for the chocolate offered for free went waaaayyy up (yes, that’s the technical term– ‘waaaayyyy up’).  Much, much more than the demand increase for the chocolate with the price reduced to 1¢. 

Why on earth would this be? It turns out that zero has a special status in a number of ways, especially when the zero in question is a monetary value.  For example, there are some interesting social norms that come into play when something comes for free– if you let people buy candy for 1¢ apiece, they’ll take an average of four pieces. If you offer it for free, more people will take it, but they tend to take only one each. And instituting a penalty for bad behavior (tardiness in picking up children at day care) can actually increase tardiness.  People doing things for free often put out more effort than those giving their services for some small amount. Free is different.

The researchers did another series of experiments trying to get at what drives the increase in demand they had found.  It doesn’t seem to be the social norms, but rather affect– this may not come as a surprise to you, but apparently free stuff makes people feel good. A lot better than its monetary value might indicate, in fact.  It’s a purely an emotional response– once you make people think a little about which product they actually like better (like they did in Experiment 6), it can make the zero-price effect nearly disappear.

The researchers suggest that if you’re willing to offer an item on discount, maybe it would be better to offer it (or a different, less costly item) completely free.  So maybe the value of a Buy One Get One Free offer is much more than 50% off, after all.  And free shipping! We already knew that was good because it doesn’t add cost onto a transaction, which can discourage new buyers– but apparently it may get you a lot of extra good feelings, too.   And, if you can manage it without sounding preposterous, perhaps it would be better to describe some items as coming ‘free with purchase’ rather than ‘included in price’.  I’m thinking about chains or cords for pendants, here.

Now, we should note that they didn’t do experiments to find out whether people make any assumptions about the quality of free goods (and about the brand in general).  They did ask the study participants some questions afterward, and none of them happened to mention anything about brand quality, but that’s suggestive at best.  Nor has there been any work done (that I’ve found yet, anyway) to see how well free items attract new customers and repeat business. Maybe you can get people to try your product, but will they come back?   Do the good feelings created by offering free stuff carry over as a positive attitude to the brand as a whole?   

 

*K. Shampanier, Mazar N., Ariely D. 2007. Zero as a special price: the true value of free products.  Marketing Science 26:6, 742-757.

In that last posting on assortment variety and quality inferences, we saw that product variety within one product category counted for a lot more in terms of perceptions of quality and expertise than product variety that spanned several types of items. That led me to wonder about what the relevant category distinctions in the arts really are–medium, style, function?

This article*, while not dealing with the arts specifically, shed some additional light on the subject for me.  They were looking at how different kinds of product organizations on a shelf or in an online store affected perceptions of variety.  Two main patterns fell out of this: there was a difference between shoppers who used the item on a frequent basis and those who seldom to never used the product. When the product layout matched the shopper’s internal organization– the existing schema that frequent product users already had in their minds– they judged there to be a better product variety than layouts with a bad mismatch between internal schema and product layout. There was no real effect for shoppers with no experience with the product, though.

Another type of organization is by shopping goal — people who aren’t very familiar with the product category tend to rely on this when searching for an item.  Now, the researchers found that when the product layout matched shopping goals, people were able to find what they wanted to buy more quickly, but also perceived less variety.  And, interestingly enough, if the shop filtered out (by a search function, for example) items not matching the shopping goal, the customers were much less satisfied with the product variety– even though they managed to find exactly what they wanted!

Ok, back to the issue of categories of art. The most useful information I got out of this was that there really is more than one way of categorizing  things– there may be an existing schema for some experienced shoppers like art show regulars, gallery buyers, collectors, other artists.  But for many, many casual browsers, the categorization may be directed by shopping goal.  They’re looking for a gift for their niece, a housewarming gift for a friend, whatever. They don’t necessarily have any concept of Fiberart, Paper arts, or whatever.   Mixing items of various functions even within one medium may seem to these folks more like a hodgepodge than a display of artistic prowess.

 I’m really just thinking as I type, here– even the most inexperienced arts buyer probably has some sort of internal schema for art, even if it’s just based on useful vs. for display only, or what is it made of?  I’m really no closer to understanding how the average person thinks about these things or whether artists have any more leeway than other types of businesses.  I guess I’m just trying to talk myself out of the conclusion that I should separate my 2D work from my jewelry!  What do you think– same body of work, or oddly incongruent?

 

 * Morales, Kahn, McAlister, and Broniarczyk. 2005. Perceptions of assortment variety: The effects of congruency between consumers’ internal and retailers’ external organization. Journal of Retailing 81: 2, 159-169.

More on product variety

January 23, 2009

Recently I wrote about a study suggesting that product specialization gives rise to quality inferences– the more narrow a set of products you offer, the higher quality the products are assumed to be.  Today I came across an experimental study* related to this idea that supported it pretty well and added some other interesting tidbits.

The researchers looked at it from the point of view of variety– variety is generally acknowledged to be a good thing, because people tend to more satisfied with their purchase when they feel like they’ve had a large variety to choose from. And having a large variety just increases the likelihood that they’ll see something they like in the first place. On the other hand, too much variety can stress people out and cause them to abandon the whole purchase.  Both of these effects are pretty well documented, and appear to contradict each other.  Hmmm.

Berger et al suggest (with the help of some nicely designed experiments) that if you have two brands, one of which has a large variety of their product and one a smaller variety, people will prefer to buy from the brand with the more variety, even when there’s an overlap in some of the product offerings.   For example, you’re ice cream shopping, and you’re choosing between one brand with 12 kinds of ice cream and another brand with 5– even if you just decide to go with vanilla (offered by both brands), you’re more likely to buy it from the brand offering the greater range of flavors.  They trace this back to a quality inference– people assume that the brand with more variety is of higher quality.   This in turn is connected to the association of depth of variety with category expertise– how many widgets of that kind you make is taken to indicate mastery of that category. This only works if the items you offer are compatible– if you do several different kinds of things (large product breadth), it looks like your skill in any particular domain is lacking.  So in their experiment, participants ranked for quality and expertise 3 hypothetical companes offering , respectively, 2 kinds of road bikes, the same 2 kinds of road bikes plus 5 other road bikes, and the same 2 road bikes plus 5 other bikes for other uses (mountain, beach cruiser, etc).  Both perrceptions of expertise and quality were greater only for the company with the high variety of items in the same category– the company offering 7 different types of road bikes.

*whew*

Ok, obviously this supports the argument that specialization is good– don’t mix up your categories, even if you are a multi-skilled creative genius.  Keep making to your heart’s content, but don’t put it all under one brand umbrella– open that second shop with a different name to focus on another medium if you feel you really want to sell more than one type of item.

But (suggest the researchers) if you have an item from your main category that is a little odd or costly, it may be worth it to you to go ahead and offer it anyway– even if no one ever actually buys it.  It can still do the work of increasing your variety and helping people understand that you are an expert at what you do.

I also see this as yet another reason for artists who wholesale to set minimum purchase requirements.  Or if you consign, to insist that they take a certain number to make a good selection available.  If a store takes only a small selection, what they’re doing may not necessarily hurt them, since it’s adding to the overall variety of their store, but your work is much less likely to move. If they only take 5 pairs of earrings to ‘try them out’, the artist the next display over with 20 pairs out is going to outsell you, even if yours are similar (or just plain better :).  People will  assume them to be the more skilled artisan.

All of this depends on what people take to be the relevant categories. And it’s not entirely clear for artists, I think– after all, if I saw a potter who made nothing but vases, would I think, wow, this person clearly is the Vasemeister? Best potter ever? Not necessarily.  There’s something about being able to do many (or at least a few) things in your medium to demonstrate skill.  This is just a guess, but I think function is the key, rather than medium. I find this surprisingly difficult to accept as an artist– there are so many things I can do in my medium! Isn’t that what counts? I’m guessing not so much to regular people–how do people search? In stores, it’s by function, rather than material or shape. You have kitchen stores, not Metal Things stores or stores where they sell Square Things.

 Still, I have a hunch that the arts are different somehow. After all, witness the career of Brother Mel, who does a new thing every year. I mean a totally new thing. One year it’s landscapes, the next year it’s Deco-style lawn furniture, then next time round, things made of recycled silverware.  And so on. His brand is category variation. No category overlap whatsoever, and collectors love it. Somehow the myth of The Artist gives us some latitude that regular businesses don’t have. But how much?

 

*Berger, Draganska, Simonson. 2007. The influence of product variety on brand perception and choice. Marketing Science 26:4, 460-472.

Shipping fees

January 21, 2009

Let’s talk about shipping fees. I admit they’re not as exciting as talking about Need For Uniqueness or price-quality inferences, but they can be an important overlooked factor for folks running online shops.

There are a few different ways you can do it:

  • The more stuff they buy, the more shipping fees they have to pay.
  • One shipping fee, no matter how much they buy.
  • Free shipping when they buy over a certain amount.

Personally, I’ve always taken the first approach– a low initial fee that increases a little for each item they buy. Makes sense, since I try to keep it close to my actual shipping costs, which of course increase with weight.  And in the Etsy store setup, it’s pretty easy to make it work (though the flat fee option is equally easy to set up).  The third option would involve having to send people a revised invoice or refund after the fact. A little bit of a pain for us moderately lazy types.

Notice that these provide different types of incentives– a gradually increasing fee structure penalizes people for making larger orders. Um, yeah, that’s probably not good!  And the free shipping over a certain amount encourages people to increase their order size in order to qualify, resulting in bigger orders!  With the intermediate option, a flat fee, the incentive increases as the order size increases, as the percentage of the total price spent on shipping becomes smaller and smaller.

Enter the research article*. This one looked at the relationship between shipping fee schedule, the occurance of orders, size of order, and the acquisition of new customers.  The fee schedules used in the study were the graduated shipping fees, promotional free shipping, and free shipping for large orders only. 

New customers, it turns out, pay more attention to the incentives or penalties built into the system– how steep the fee schdule is, for example.  In contrast, returning customers are more sensitive to the overall price level. 

They found that the graduated shipping fees structure generated the most orders, but attracted fewer new customers; free shipping attracted new customers but results in smaller orders (since online buyers are often reluctant to place large orders for items they’re unfamiliar with), while  free shipping on large orders brought the highest order sizes.

Oh, and high shipping fees resulted in fewer orders. Surprise!

I think I’m going to change to the flat fee schedule in my Etsy shop.  One low flat fee will bring in new customers and encourage them to make larger purchases (or at least not punish them for doing so), while a low base fee will keep the returning customers happy. If you want some fat, juicy orders, incentivize larger orders with free shipping (I do this on my wholesale site).  If you’re trying to get new customers though a free shipping promo, go for it, but if you have other, cheaper ways of attracting new customers, stick with those instead– free shipping isn’t the most cost effective approach, since it results in smaller orders.

 

* Lewis, M. 2006. The effect of shipping fees on customer acquisition, customer retention, and purchase quantites. Journal of Retailing 82: 1, 13-23.

I don’t tend to run promotions, specials, or give out coupons, but a lot of artists put a lot of time and effort into their promotional activities, so I’ve become curious about how well this really works– not just in the short term, but over the long term.  Do the new customers you get through promotions become repeat customers? Do constant sales undermine your ‘normal’ prices? What does it do to price-quality inferences?

I managed to scare up a meta-analysis* relevant to these questions. They looked at 51 past studies and did some formal comparisons and stats to get an idea of the bigger research picture of how promotions affect people’s brand preferences over the long term.  A caveat: much of the research reviewed concerned consumable goods (grocery store items); some info was relevant to durable goods, but who knows how applicable the findings would be to luxury goods (like art).  Anyway, given that, here are some highlights:

Promotions aren’t unambiguously good or bad. It depends on your product, and the kind of promotion you use. Dropping your prices without warning or explanation is about the worst thing you can do– people will wonder what happened, assume your quality has gone in the toilet, and will not come back unless they are related to you by blood (actually, I made that last bit up– there’s actually no research to indicate that you even your mother will buy your work again after an unannounced price cut.)(<– joke).

So, temporary sales are best.  Coupons or premiums (like a Buy One Get One) are the most effective types of promotions.  Coupons are especially good, since it seems that the very act of printing/clipping the coupon can make the consumer like the product more (at work here is a kind of after-the-fact rationalization that if they put some effort into obtaining the product, they must like it more than other products). But for coupons and premiums, keep the value of the discount under 20% of the product’s price– more than that, and it will start to affect your brand in a negative way. That means your BOGOs should be more in the range of Buy Two, Get One Half Price (16% off) rather than Buy One, Get One Half Off (25% discount) or Buy One Get One Free (50% off).

Moreover, the negative effect of promotions was worse when a) the brand was unfamiliar or new to the buyers, or b) the promotion was for a durable good or service. If I’m reading the stats right, the combined negative effects of promotions for unfamiliar, durable products are greater than the positive effects of using a coupon promotion.  That’s a red flag for most artists trying to attract new customers through promotion. Maybe save your 10% off coupons for folks already on your mailing list, who have already purchased your product and are familiar with its high quality. 

That’s not to say all sort of promotions can’t bring sales in the short term. But it looks like you need to consider your promotional choices very carefully if you care about the long-term health of your brand.

Questions for later: What about giveaways? How about sales donating a prtion of the price to charity? Good or bad in the long term? Stay tuned.

 

*DelVecchio, Henard, and Freling. 2006. The effect of sales promotion on post-promotion brand preference: A meta-analysis. Journal of Retailing 82: 3, 203-213.