The impact of sales promotions on brand loyalty and brand switching

Introduction

The use of weekly scanner data is often used to monitor the impact of sales promotions and has frequently proven that this marketing tool is able to boost sales, and as a result has continued to be heavily invested in by marketers (East, Wright and Vanhuele, 2013, p. 206). The purpose of this article is to provide a critical overview of academic research on sales promotions and its impact on brand loyalty and brand switching.

Brand loyalty and brand switching

The Promotion Marketing Association of America (PMAA) carried out research on consumers to find out if sales promotions supported brand loyalty (Eisman, 1990, p. 40). They found that sales promotions had a major impact on the products bought by consumers and often encouraged them to trial new brands (Eisman, 1990, p. 40). This was supported by their research, in which 75% of 500 consumers agreed that money off coupons spurred them to use a different brand (Eisman, 1990, p. 40). However, it has been found that with the lifting of a promotional offer the purchase behaviour of consumers returns back to normal (Dubey, 2014, p. 61). Nonetheless, academic research supports that companies agreed that the use of sales promotions helped increase loyalty, in particular loyalty programmes as these increased the purchase frequency of consumers and retained customers through valuable rewards, often increasing a brand’s market share (Eisman, 1990, p. 42).

However, it has been critiqued by academic researchers, that sales promotions could also potentially decrease a brand’s customer base (Pandey, Pandey and Henry, 2013, p. 3). As one of the aim’s of sales promotions is to encourage brand switching, which could often involve low loyal customers of a brand choosing an alternative brand based on a offer (Pandey, Pandey and Henry, 2013, p. 3). Furthermore, with low involvement products, sales promotions could also decrease the differentiation between brands, preventing brand loyalty (Pandey, Pandey and Henry, 2013, p. 3). Although, it has been critiqued that brand switching may occur when a preferred brand is not available and as a result an alternative brand is chosen (Dubey, 2014, p. 49). Additionally, brand switching could occur when a customer has divided brand loyalty within a specific product category and prefers a variety of brands (Dubey, 2014, p. 59).

Furthermore, in regards to the carryover effect, switching could enable brands to sustain increased sales after a promotional period (East, Wright and Vanhuele, 2013, p. 210). This could be achieved through encouraging trial, for example a case study on the Dove brand stated how a campaign was designed in order to build awareness of their new product range and increase trial from women who were non-buyers of the brand (WARC, 2004). Through the use of sales promotions supported with other media, the brand achieved a significant increase in turnover and market share in all of their European markets (See appendix C) (WARC, 2004). Whereas, its competitor’s market share decreased in the same period (2002-2003) (WARC, 2004). Furthermore, it was found by the use of demographic buyer data from Germany, France and the UK, that the campaign had successfully reached non-buyers of their target audience and purchases within their silk product range had increased, with France achieving the greatest increase of 64% (WARC, 2004). This case study supports research conducted by practitioners and consulting agencies that the most effective promotional campaigns are designed with synergies between promotional offers, advertising and display (East, Wright and Vanhuele, 2013, p. 208).

Conclusion

Sales promotions have become an evidently popular marketing tool to be used by many organisations within different industries, although particularly within retail. The use of sales promotions can be positively utilised in order to encourage brand loyalty and brand switching by companies.

However, academic research suggests that consumers can become loyal to sales promotions rather than a brand and therefore in turn also cause brand switching amongst consumers who seek to purchase products only when on offer. Therefore, it is important that companies thoroughly plan and personalise their sales promotions strategy according to the product category in which their brand is a part of  in order to remain competitive within their market.

Zhorna Sylvia Ali

References

Dubey, J. (2014) ‘Personal care products: Sales promotion and brand loyalty’, The Journal of Contemporary Management Research, 8(1), pp. 52-71.

East, R., Wright, M. and Vanhuele, M. (2013) Consumer behaviour: Applications in marketing, London: SAGE Publications Ltd.

Eisman, R. (1990) ‘Building brand loyalty’, Incentive Marketing, 164(9), pp. 39-44.

Pandey, B., Pandey, S. and Henry, A. (2013) ‘Sales promotion and its effectiveness: A study on selected small car companies and dealers in Bilaspur, Chhattisgarh’, International Journal of Marketing and Technology, 3(4), pp. 1-7.

WARC (2004) Dove – Origins of Silk. Available at: http://www.warc.com.ezproxy.kingston.ac.uk/Content/Documents/A79853_Dove_Dove__Origins_of_Silk.content?PUB=EURO-EFFIES&CID=A79853
(Accessed: 30 December 2014).

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