David M. Hardesty and William O. Bearden

Consumer promotions are ubiquitous in today's marketplace. However, our knowledge of consumer preferences for various promotion types and price presentations and their relative effectiveness is limited. The current research extends our understanding by examining the interaction between promotion type (i.e., price discounts and bonus packs), price presentation (i.e., dollar and percentage) and promotional benefit level (low, moderate, high). Specifically, it is predicted that consumers will value price discounts higher than bonus packs for low and high promotional benefit levels, while valuing these promotions equally for moderate promotional benefit levels. Additionally, percentage price presentations are predicted to be valued more than dollar presentations when the promotional benefit level is high.

An inverted U explanation of consumer information processing, as well as previous retailing and sales promotion research, are used to motivate the predictions. At low and high promotional benefit levels, consumers are predicted to process information less than at moderate levels. Since price discounts and dollar price presentations are easier to process, they are expected to be preferred when processing is minimal (i.e., for very modest and for very good deals). When more elaborate processing takes place (i.e., at moderate promotional benefit levels), consumers are predicted to evaluate comparable bonus packs and price discounts, as well as dollar and percentage price presentations, equally.

Analysis of our experimental data, as well as open-ended thought data, indicate that consumers value price discounts and bonus packs similarly for low and moderate promotional benefit levels, while price discounts are preferred for high promotional benefit levels. Additionally, dollar and percentage price presentations are valued similarly for moderate promotional benefit levels, while percentage presentations are preferred for high promotional benefit levels. The current research extends previous research by showing that even small absolute dollar values can affect promotion evaluations.

Several implications for retailers and manufacturers can be made based on the current research. Specifically, for the consumer products investigated, bonus packs may be uniquely attractive alternatives when low and moderate promotional benefit levels are offered. In these situations, retailers as well as manufacturers might consider using bonus packs instead of price discounts since they do not alter price and thus do not alter expected future prices. That is, when a price discount is offered, the result is lower consumer price expectations for the product in the future. Alternatively, bonus packs do not impact consumer expectations of price in the future since there is no current price reduction. Thus, price discounts are more likely to dilute the brand than bonus packs. Additionally, bonus packs do not negatively impact consumer evaluations of brand quality and thus do not detract from brand equity. Finally, bonus pack promotions may be consumed faster than price discount promotions and thus lead to greater frequency of purchases. Clearly, an evaluation of the relative revenues and costs associated with these various promotion types would need to be considered before choosing a promotion type to employ. One additional recommendation for retailers and manufacturers is that when promotional benefit levels are high, price presentations might well include percentage information in order to maximize consumer value perceptions.