Companies spend significant sums to increase brand awareness at popular events such as the Superbowl, the Olympics, or the FIFA World Cup. In addition to advertising, firms occasionally run price promotions at local retailers. But is this actually a good idea?
A new study in the Journal of Marketing examines consumers’ responses to price promotions during popular events, comparing them to non-event times. Our research team examined 242 consumer packaged goods (CPG) brands and their price promotions during five popular events held in the Netherlands between 2007 and 2011. Since sales promotions constitute a large portion of CPG manufacturers’ total marketing budgets – up to 55% in the U.S. – getting higher-spend event promotions right is core to a brand’s success.
Our team built a multiplicative sales response model that we extended into a hierarchical linear model structure to analyze relative promotion response across brands and events. This research is quite innovative. Past price-promotion research has focused instead on timing of promotions relative to competitors or price and sales patterns related to seasonal and holiday demand cycles.
Key findings include:
- Price promotions offered around popular events often generate a stronger response than the same promotion at non-event times. The price-promotion elasticity is 9.3% larger, on average, during events.
- In our study, consumer response varied with events. Sales lift ranged from 2.68 for Summer Olympics promotions to 5.44 for Winter Olympics promotions compared to an average sales lift of 3.45 at non-event times.
- Only two out of every four price promotions around events is on target, with promotion activity increasing with a stronger consumer response during events. For one in four, promotion activity is more intense during events, while sales response is tepid, leading to overspending. For the final one in four, promotion activity is less intense even as sales surge, leading to missed sales opportunities.
- Managers should integrate event promotions into their broader marketing campaigns, using advertising and other sponsorship activities to drive event price promotion awareness. This is especially true for event sponsors. In our study, only 8.71% of price promotions during events were supported by advertising.
- Premium-priced brands benefit more from shifting their promotions towards events than brands with a lower price premium. Thus, managers should select brands for event promotions based on brand equity (reflected in relative price) rather than brand popularity.
- While managers often choose to run price promotions in conjunction with high-fit events, competitors do likewise. As a consequence, stores are often cluttered with displays and shelf-tags, potentially reducing promotion impact by lowering consumer brand recognition and recall and product sales.
- Low-fit events can also work if brands exploit the element of surprise and provide an event link.
- Brands should avoid being “stuck in the middle,” where event promotions may be seen as part of the event itself, leading to consumer confusion and lower sales.
- To enhance promotion response, managers should carefully choose the right brand-event combinations. They should reallocate promotions towards an event only if brands have a stronger promotion response during that time. The study provides guidelines for which brands, events, and contexts it is beneficial to use price promotions during big events.
Brand managers can use our research to determine whether to run price promotions in conjunction with a specific popular event, which brands are best suited for these promotions, and how to structure these promotions. They also can use insights to decide how to embed events in larger marketing strategies and how much to allocate to these campaigns.
Finally, retailers can use this research to determine which brands to select for price promotions to drive customer response and deliver an exceptional experience.
Read the authors’ slides for sharing this material in your classroom.
From: Wiebke I. Y. Keller, Barbara Deleersnyder, and Karen Gedenk, “Price Promotions and Popular Events,” Journal of Marketing, 83 (January).
Wiebke I.Y. Keller is Assistant Professor of Marketing, Eberhard Karls University of Tuebingen, Germany.
Barbara Deleersnyder is Associate Professor of Marketing, Tilburg University, The Netherlands.
Karen Gedenk is Professor of Marketing, University of Hamburg, Germany.