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Incentives Are Not Always Best for Sales

free . / Credit: Free Image via Shutterstock

The long-held belief that giveaways will increase sales is being challenged by new research.

Research has found that product giveaways can actually make shoppers less likely to follow through on a purchase in some cases. The reaction to the giveaway all depends on what kind of product is being offered. 

Gifts offered with affective products more associated with emotions, such as makeup, can greatly improve sales. In fact, free gifts, even if they are unknown, can up to double the purchasing likelihood for a product.  On the other hand, when giveaways are given with products evoking more cognition, like a vacuum cleaner, sales can actually be hurt. In those cases, shoppers can be up to 50 percent less likely to buy a product even when they know what the free gift is.

"Past research has supported both the positive and negative effect of uncertainty in promotions," said Michael Tsiros, researcher and department chair and professor of marketing at the University of Miami School of Business Administration. "What we have lacked so far was a framework that can explain when uncertainty will harm and when it will benefit marketing promotions.  This work is novel in that it shows that the effectiveness of these promotions depends on whether the purchase decision is affective, meaning there is an emotional influence on the decision-making process, or cognitive, meaning there is more cognitive processing."

The research, which was published in the Journal of Marketing, also examined how coupons affect sales. Particularly, the researchers found that surprise coupons, or coupons whose value is determined at checkout, are more effective for magazines and other entertainment products that are affective than they are for cognitive products. 

"Marketers struggle to design effective and profitable promotional campaigns," said Juliano Laran, co-researcher and an assistant professor at the University of Miami. "This research has both theoretical implications for research on affect and uncertainty, and practical implications for marketing managers designing and implementing campaigns, big and small."

The research was based on the responses of more than 1,000 people in four studies.

Email David Mielach or follow him @D_M89. Follow us @bndarticlesFacebook or Google+.

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