Dr Eamon Fulcher, CEO & Co-founder, Split Second Research.

Everyone, so it seems, loves a bargain. But all bargains may not be equal. A price discount on a single item may be perceived differently from a unit offer, such as buy one get one free, and differently from a free gift with every purchase kind of offer. Just which kind of offer is best for a particular brand or market category is the subject of ongoing research from Split Second Research. Although offers can clearly push sales, the fear is that they will adversely affect perception of the brand, as the consumer comes to question aspects such as its quality, reliability, trustworthiness, premiumness, and other attributes.

One way to avoid this is to give a well-accepted motivation for the offer, such as the end of the season, a few days after a festive period, when signing up for a store card, giving  discount for purchasing online, and so on. One interesting question is whether promotional offers on luxury goods has any negative impact on the brands. The idea of say, a price discount seems incompatible with the notion of premium or luxury. So for example, the common promotional mechanisms of ‘half price’ and ‘buy-one-get-one-free’ would seem unsuited to brands such as Rolex, Calvin Klein, and so on. It would make common sense that widening the availability of luxury goods through such offers could devalue its brand equity.

However, hard research on this issue is difficult to find, and the little research that has addressed this issue has used traditional survey methods, such as asking consumers whether they would buy certain products under specific promotions. Inviting respondents to offer their own verbalised opinions may not provide us with the full picture because of the several biases inherent in the subjective approach in traditional methods. This may therefore not help us fully understand how they behave in-store. Market research is moving in the direction of using objective methods as an addition to the traditional methods in measuring emotional and non-conscious responses to brand propositions to increase the odds of predicting purchasing intention and behaviour.

Split Second Research recently carried out a study to examine the relationship between a price promotion and premiumness. The focus of interest was in whether the impact of a promotion on brand perception is the same for a premium product as it is for a basic or standard product; also, whether such promotions affect loyal consumers differently to considerers of the brand (those who have not bought but would consider buying) and lapsed customers of the brand (those who have bought but would no longer intend to buy).

Luxury is…

Luxury signals at least one of these: (1) social status – a luxury product is one to be seen with, (2) high quality – a product made with expensive materials or designed by a renowned expert, (3) rarity – a product is made exclusively or is naturally in short supply, (4) emotional engagement – the product gives pleasure and satisfies some aspect of hedonism, (5) aspiration – by acquiring something premium we get a taste for luxury and social status, and aspire to getting more, and of course (6) price – luxury items can be several multiples of the price of a basic or standard item in the category.

Putting a luxury item on offer may affect some or all of these, such as reducing its desirability, raising concerns about its quality (a ‘bad batch’), and reducing its sense of exclusivity. For example, research by Zoellner and Schaefers (2015) shows that luxury goods can be negatively impacted by a price promotion (though they can be resilient to promotional mechanisms involving free gifts and loyalty program benefits).

Some brand categories are exclusively premium but many brands offer their products in both premium and basic forms. In this study we chose toilet tissue as it is one such product category. We also chose it because the luxury range is within the reach of most consumers and therefore allows us to draw comparisons between the two. A quick search for “Toilet tissue” on Tesco online makes one realise what a fiercely competitive category it is.

A search on 9^th June 2019 returned six brands (Cushelle, Andrex, Sofcell, Renova, Tesco Spring Force, and Tesco Luxury Soft), seven colours (white, cream, pink, peach, light green, and even red or blue), six sizes (4, 6, 9, 12, 16, or 24 rolls in a pack), rolls of different sizes (160, 180, or 200 sheets per roll, different sheets sizes (120mm x 103mm versus 124mm x 103mm versus 118mm x 104.5mm, etc), and with different formulations (2 ply tissue, quilted, special cleaning extracts, such as, aloe vera, chamomile, and shea butter). Some were even 100% recycled (Husted, Russo & Meza, 2014 found that shoppers may buy more for environmentally friendly products, including toilet tissue). Out-of-pocket ranged from £1.00 to £9.45 and cost per 100 sheets ranged from 12p to 43p.

All in all, the consumer is offered a complex mix of options. Add a number of promotional mechanisms to this mix and the range of choices becomes even more diverse. Of course, the larger quantities are implicit promotions – Tesco Luxury Soft White in 4 rolls is 20p per 100 sheets or 47.5p per roll (for a spend of £1.90), and in 24 rolls is 15p per sheet or 33.3p per roll (for a spend of £8.00). So, if the consumer can cover the out-of-pocket of the larger quantity then the saving is 14.2p per roll or £3.41.

Clearly in-store or online, shoppers do not spend the time making such calculations and will use general rules-of-thumb (mental algorithms) and biases. Example rules-of-thumb are:

• The more quantity one buys the lower the unit price (though not always)
• The lower the price the lower the quality (though not always) The use of the registered trademark symbol implies greater quality and higher cost
• Quilted is more expensive than standard 2 ply
• Tesco home brand will be cheaper than the market leader, and so on.

Given the complex problem the consumer has in determining the best buy for their needs, they may come to rely heavily on rules-of-thumb, intuitive responses, as well as buying habit.

The study

The Split Second Research team recruited 500 respondents through CINT an online consumer survey panel in the UK. Respondents were put through stringent screening tests before qualifying for the main study. As the main study used implicit response priming, the qualifying test included testing their reaction times to a specific criterion that ensured responses would be reliable in the main test. Of the 500 who entered the survey, 390 qualified for the survey proper.

In the first phase of the main study, the brand logos of Tesco Luxury Soft, Tesco Basic, Andrex (premium), and Sofcell (basic) toilet tissue were presented in a rapid implicit reaction time test with five attributes. This enabled us to obtain brand profiles on the attributes, trusted, value for money, favourite, popular, and reliable. These attributes were used as these were the purchase drivers in this category discovered from previous research carried out by Split Second Research. A traditional survey questions was applied to determine respondent purchasing behaviour. This has also enabled us to classify respondents as either Tesco customers/loyals (n = 250), Tesco considerers (n = 50), Tesco lapsed (n = 30), or Tesco rejecters (n = 160).

Results

Profiles of each product and for each of the four consumer groups are shown in Figure 1.