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Pricing strategy However, past research has shown that promotions often have negative Beware the perils effects: consumers learn to expect Promotions of discounting Do delays and may resist future price increases negative efects Regular discounting exposes promotions from frequent discounters often have from the seller. And, as Lee’s research shows, the timing of consumption undermine after a purchase can also infuence the lack of a compelling value proposition for a consumer’s experience, often with brands, warns top South unintended results. African advertising industry the value is that both emotional and cognitive – discount or no discount – ate a truffe executive, Mike Abel. the reason for this, Lee explains, Half of each category of participant forces are at work when a consumer Writing in a 2012 article for Strategic as soon as it was paid for, while the others received a truffe a week later takes advantage of a discount. When Marketing, Abel noted: “Once this of discounts? the product is consumed immediately (although all were actually purchased truth has been revealed to consumers, after payment, emotional forces tend to the brand can never re-establish what just one day before consumption to were false perceptions in the frst control for freshness and taste.) dominate the experience. “the positive mood that you’re in after enjoying a the researchers found that when the place. This leaves only the horrible discount can play a very large role when truffes were eaten immediately, the option of not using a discounted price Price promotions can you consume a product right away – promotion enhanced the consumption to delight, reward or to increased be a double-edged whether that is watching a video on experience. However, when payment basket size – but as the only tool your and consumption are decoupled by a brand has to defend, rather than grow, demand or buying a fast-food meal,” sword, new research Lee says. time delay, the effect was reversed. market share.” from Columbia “marketers want consumers to buy He continued: “So, before you Business School in Declining with time their products, and promotions can put your stuff on sale, cut your be a way to loosen purse strings,” but over time, these positive emotions margin, or hand everything over to New York shows. tend to decline. cognitive forces have a Lee says. “but if you consider the the ‘couponeers’, decide on your greater infuence if consumers have the consumer relationship from a long- pricing strategy. Remember that pricing is a key component of your dVd shipped, or take home that term standpoint, in terms of customer A fast-food special. in these cases, timing satisfaction and brand loyalty, you might marketing strategy and cannot be customer decides to buy A ad hoc or nebulous”. want to pay more attention to whether is relative; for example, a 20-minute bestselling book from an online store. As she browses, she sees would have a similar effect to a three- consumption experience.” a banner advertisement announcing A delay in the drive home before consuming the meal the customers are truly enjoying the that all bestsellers are currently 20% consumption of day wait for a dVd to arrive in the mail, When a discounted product is a product – such off. Will receiving this discount increase as the time taken as opposed to watching it instantly. consumed after a delay and the her enjoyment of her purchase? And between order in these circumstances, if a consumer experience is therefore less enjoyable, does this depend on whether she and delivery – purchased a product at a reduced price, a customer may become less likely to downloads the book and begins reading can negate the she might feel less motivated to recover buy the product again or to recommend positive effects it immediately, or receives the book of a discount the ‘investment’ of its cost. the brand to friends, he cautions. For several days later in the mail? Lee and his research partner consumers, this research shows that New research shows that a delay in claire i. tsai of the university of toronto For consumers, these offers have explored the relationship between getting a great discount doesn’t always consumption can negate the positive in canada. “the conventional wisdom tangible benefts: fnancial savings, an consumption and enjoyment in four increase happiness. shoppers who plan effects of a discount and even render the is that if you like discounts, you’re going increased willingness to try new products, experiments involving products such on consuming a product later might be consumption experience less enjoyable. to enjoy the product even more with a and the emotional rewards of taking as chocolates and music downloads. better off resisting that promotion and “People are quick to take advantage promotion. in fact, that tends to happen advantage of a good deal. For marketers, in one such experiment, participants holding onto their money. of promotions – whether for economic only when the product is consumed promotions are an easy way to increase were given us$1 and asked to buy reasons or to justify the purchase of immediately after it is paid for.” demand from both existing and new one of two types of truffes – both of Leonard Lee is associate professor something that they want to buy but don’t discounts and promotions, an customers – at least in the short term PHOTOS: istocK, suPPLied which were in fact the same. All of the of marketing at Columbia Business really need,” says Professor Leonard Lee enormously popular marketing strategy, – and can help ward off competition by participants were told that the truffes School in New York City. Reprinted from of columbia business school in New crowd email inboxes and are on making it harder for smaller companies had a retail price of us$1, but half Columbia Ideas at Work by permission. york city, who worked in the study with prominent display in retail stores. to enter the marketplace. received a 50% discount. Copyright 2014. Columbia University. 46 strategicmarketing August–September 2014 strategicmarketing August–September 2014 August–September strategicmarketing 47 46