Copyright © 2004, Lawrence Erlbaum Associates, Incorporation.



Free Surprise with Purchase: Promoting

or perhaps Discounting the manufacturer?

Priya Raghubir

Haas School of Business

University of California, Berkeley

Two tests examine the task by which cost-free gift offers serve as a source of information about the underlying worth of the product offered being a free present. The value-discounting hypothesis states that due to being offered like a free gift, products will probably be valued fewer as evinced by reduced purchase motives and a reduced price that consumers are offering for them. Circumstances that hinder the value-discounting effect are the (a) presence of various price details to make judgments about the significance of the present, and (b) contextual information about the value in the promoted brand.

A wealthy literature in sales promotions has shown that

short-term sales are efficiently affected by giving promotions (for a review, observe Blattberg & Neslin, 1990). However , the economic model of consumer marketing promotions does not explicitly account for complementary routes whereby promotions may affect consumer behavior. The notion that

consumer offers are educational and impact sales

through more than providing a budgetary incentive to acquire

is not really new (Inman, McAlister, & Hoyer, 1990; Inman, Peter,

& Raghubir, 1997; Raghubir, 1998), nonetheless it has never been used on the context of free present promotions. This information explores the info content of totally free gift offers, focusing on inferences drawn about the totally free gift, as opposed to the promoted item.

" Totally free gift with purchase” presents appear to be inundating the marketplace. Whether they are in the cosmetics industry, in duty-free catalogs, or perhaps in your everyday supermarket

shelves, marketers is very much enticing buyers to buy

all their product through the offer of your free gift with buy. The presents vary: Some explicitly talk about the value of the offer, although others usually do not. Although research in price offers is useful to know how these kinds of offers affect current and future product sales of the promoted brand supplying the free of charge gift, an unanswered query is that they affect upcoming sales of the trademark being offered as being a free gift.

In this article, we examine the way in which customers' process free gift with purchase provides. Although the cosRequests for reprints should be sent to Priya Raghubir, Haas Institution of Business, University of California, Berkeley, CA 94720–1900. E-mail: [email protected] berkeley. edu

metics industry is by far the biggest user of direct present with order offers, with over 60% of department store makeup

and treatment sales and 40% of reputation fragrance sales associated with provides such as these (Sexton, 1987), this kind of offers happen to be gaining surface in other sectors as well. The efficacy of totally free gifts is definitely, however , uncertain, with detractors claiming that giveaways take away from upcoming sales, and defenders arguing that they boost them (Sexton, 1987). Corporations also differ markedly in their beliefs about the effectiveness of this kind of promotions: whereas over fifty percent of product sales at Esteè Lauder are associated with cost-free gift with purchase marketing promotions (Trager, 1984), Chanel does not offer any kind of (Matthews 1995), and

Aramis is shifting from products to testing, with on the quarter of its marketing budget devoted to free types of newly launched products (Nayyar, 1993). We argue that even though a free product enhances the

transactional value of the purchase, it brings with it a mixed carrier of inferences that customers may draw on the basis of

the offer. These kinds of inferences can be both regarding the product

offered as a gift and about the brand offering the freebie. Though a free give may enhance sales in the promoted item by increasing the value of the transaction, this information examines how it may influence stand-alone product sales of the merchandise offered being a...

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