The Price (Promotion) Is Wrong

With consumer spending set to slow most brand managers will be dusting off their pricing strategy manual. One classic way to increase sales is to run a price promotion - "buy one get one free" or 'BOGOF' as they say in the trade.

But what if BOGOF (and every other variety of price promotion) doesn't work? A fascinating US study reaches the following conclusions:

Contrary to previous literature, the authors find that brand switching is not the dominant force for the increase in sales. They show that brand loyal consumers respond to a price promotion mainly by stockpiling for future consumption while brand switchers do not stockpile at all. The authors also find that heavy users stockpile more, while light users mainly increase consumption when there is a price promotion.

So the moral for Irish marketers may be to take a closer look at your customers and their likely responses to your promotion before you go to market with your 'special offer'. Certainly your customers will appreciate your promotion whatever the deal - but your finance director might just wonder about the longer term ROI. So should you.