Effects of Retraction of Price Promotions on Brand Choice Behavior for Variety-Seeking and Last-Purchase-Loyal Consumers

Abstract

In the context of three laboratory experiments ranging from a computer simulation of purchases to actual product use by subjects, the authors investigate how in-store price promotions affect market share after the promotions have been retracted. They find that the effects of promotion are contingent on both the choice patterns of subjects—whether or not subjects switch among brands—and the ubiquity of promotions in a product category. If only one brand is being promoted and subjects are generally loyal to the last brand purchased, brand choice probability declines from prepromotion levels once the promotion is withdrawn. However, if subjects tend to switch among brands in the absence of promotions, or if several brands are being promoted, this decline is mitigated and/or does not occur.