Neuropricing and the Effect of In-store Offers on Brand Values
It is now well established that shoppers pay attention to only a small fraction of the items in a store and that consequently, the factors that affect their purchasing decisions operate subconsciously and habitually. Ways of increasing consumers’ attention to a brand and hence influence their purchasing decisions is to offer sales promotions, such as price reductions, volume discounts, special displays, contests, and coupons, to name a few. Some recent research has suggested that such promotions can negatively affect a brand’s values, such as its image and its perceived quality, authenticity, popularity, and so on. This is important, since the initial gains made from a promotion may adversely affect future sales.
Brand values may be represented in memory by a rich collection of associations between the brand and the desires, motivations, and perceptions of the consumer. They also relate to the message that a brand attempts to convey in its marketing. Most of these associations operate subconsciously. It is appropriate therefore to measure the effects of a sales promotion on a brand using indirect methods, such as neuropricing, a growing area of research that employs neuro-cognitive techniques to understand
the influence of pricing and in-store offers on the perception of a brand, as well as how much consumers are willing to pay.
The question of how an offer can affect a brand’s image was addressed by obtaining consumer evaluations of different price offers in a range of products using implicit reaction time technology.
This enabled us to tap subconscious perceptions of a range of offers using an indirect method instead of relying on explicit, verbal responses, which can often be prone to cognitive biases.
Sample was recruited on the basis that (1) they were the primary shopper for groceries in their household or that they accompany the primary shopper and (2) they regularly purchase at least one of the products in the study. We obtained 443 respondents, 74% female, all between the ages of 21 to 70, with 72% carrying out the study on a desktop or laptop computer and 28% completing the study on a mobile device (smartphone or tablet).
The test consisted of an array of brand attributes that were hypothesized to be affected by a sales promotion, such as quality, authentic, popular, superior, love, amazing, safe, reliable, favorite, and first choice. The products studied were: Activia yoghurt, Philadelphia cheese, Heinz baked beans, Tropicana orange juice, TRESemmé shampoo, and Fairy laundry liquid. Each was paired with six offers: price changes, such as Save X, strikethrough, Any 2 for X, Save 1/3 and volume offers such as Any 3 for 2 and Buy 1 Get 1 Free. A trial consisted of a mock shelf of a product and a sales promotion, which were presented as a prime. An attribute appeared as the target (an attribute or its antonym) and the task was to simplify identify whether the target was a positive or a negative word as quickly and as accurately as possible within a specific, short timeframe. The cognitive principle at work here is that if the prime initiates a positive feeling, then it will be easier for the respondent to detect a positive target and slower to detect a negative target and this difference is observed in the reaction times.
Explicitly, respondents said that their most preferred type of offer is Buy 1 get 1 free, and while this may bring the biggest savings, our results show that it can negatively affect the brand’s image implicitly just as strongly as the offers they said they liked least. In fact, there was no overall pattern in the implicit results to suggest an overall strategy for all or most brands, but rather a brand needs to favor specific types of promotions and to rule out others. They should do this depending upon the type of product offered in conjunction with the brand values they wish to preserve.
Our results show that brands with short shelf-life (Activia and Philadelphia) were the most negatively affected by sales promotions. Food brands with longer shelf life (Heinz and Tropicana) had mixed results with Save X and Buy 1 get 1 free being their best strategies, respectively; while their worst strategy was Any 2 for X.
Remarkably, and in stark contrast to the other brands tested, TRESemmé actually benefits overall from most types of sales promotions. The brand’s worst strategy would be to offer Save 1/3 and its best strategy would be to offer any of the following:
Save X, Any 3 for 2, Any 2 for X. There may be several reasons why this brand benefits from a sales promotion. Firstly, it has a long shelf life and hence consumers may not suspect any decrease in its quality or reliability. Secondly, it is clearly seen as a quality product (based on the attributes that were the strongest overall) and so loyal customers may view a sales promotion very positively, rather like a ”thank you” from the brand.
Our results clearly show that consumers do make strong discriminations at the subconscious level when perceiving a range of price promotions. Our findings suggest that some pricing offers work well in some retail contexts but less well in others. While some brands can be strongly negatively impacted by a sales promotion, other brands can benefit considerably, raising their existing brand values (especially, in the case of TRESemmé). More research is needed to broaden our understanding of sales promotions and their impact on the brand to guide marketing strategies.
Figure 1: Unlike the other brands tested, the price promotions had a positive impact on TRESemmé's brand values.
Neuropricing is shown to be an effective and more objective approach for understanding subconscious ways of perceiving brands and sales promotions. To view shoppers as rational consumers who actively compare and contrast the pros and cons of different brands of the same product type may be inaccurate. Instead, shoppers appear to develop short-cuts and intuitive ways of selecting products. This view extends to the impact that price promotions can have on them, which are often subconscious and not always positive.