The Effect of Choice Set Composition on Consumer Response To Sales Promotions

Recent research suggests that the response to sales promotion depends on the price-quality tier of the promoting brand, with high-tier brands tending to gain more share than lower-tier brands (e.g., Blattberg and Wisniewski 1989) We examine the effect of the choice set composition on this asymmetry in response to promotions and, more generally, on the likelihood of brand switching. Specifically, building on research indicating that a brand at an intermediate price-quality tier tends to take more share from a low-tier brand than from a high-tier brand, we propose that the asymmetric response to promotions will be eliminated when consumers consider three, rather than two, brands at different price-quality tiers. Furthermore, the addition of an “extreme” option (e.g., a high-tier national brand such as Bounty paper towel) to a two-option choice set is expected to increasew the absolute response to promotions on the lower-tier existing brand (e.g., a store brand) and decrease the response to promotions on the high-tier existing brand (e.g., a mid-tier national brand such as Brawny paper towel). The results of four studeis supported these hypotheses and also demonstrated that the same pattern of effects is observed for different model-tiers of a particular brand. The theoretical and practical implications of these findings are discussed.