Price Promotions – the Problematic Child of Marketing

Have you ever wondered how short-term discounts influence long-term brand loyalty and customer purchase behavior?

Understanding the subtle differences behind consumer response often proves crucial for marketers aiming to design effective promotional campaigns. 

We’ve recently come across an interesting case study conducted by Elena Kostadinova, where the complexities of price promotion decisions in the consumer packaged goods (CPG) sector are meticulously examined. This research, motivated by the prevalent use of promotions despite their often questionable long-term benefits, analyzes the promotion strategies of a major food manufacturer in Bulgaria. The study specifically looks at nine product categories ranging from basic food items to impulse purchases, providing a broad spectrum of data.

The study revealed some compelling statistics: during promotional periods, sales spikes were significant, often achieving immediate volume targets. However, post-promotion periods saw a sharp decline in sales, with products experiencing a sales drop of up to 83% once the promotions ended. Notably, products that were simultaneously supported by robust advertising campaigns didn't just perform better during the promotion but maintained stronger sales afterward compared to those without complementary advertising.

Actionable strategies for marketing managers

Strategically Pair Promotions with Advertising

The sustained post-promotion performance of products with strong advertising underscores the importance of a dual approach. Marketers should craft email campaigns that not only announce promotions but also emphasize the product's value, leaning on psychological principles that associate product quality with brand reliability.

Use Data to Time Promotions Effectively

Leveraging sales data to optimize the timing of promotions can mitigate the typical post-promotion sales drop. The study's data points to the effectiveness of this approach, particularly when promotions are aligned with anticipated periods of high consumer engagement.

Focus on Customer Retention

Given the study's findings that promotions tend to attract existing customers rather than new ones, email marketers should focus campaigns on customer segments known for brand loyalty, encouraging repeat purchases through personalized offers.

We’re keen to hear your thoughts on how price promotions impact your engagement!