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Consumer Identity and Promotion Preference

Smeal’s Karen Winterich examines consumers’ social identities and how they relate to companies’ promotional strategies. Independents tend to prefer discount promotions, while interdependents usually prefer donation promotions. Factors such as culture, gender and product type impact preference, so managers need to be aware of these circumstances when forming their promotional strategies and budgets.

Mar 29, 2011

kpw2_bio.jpgIn light of the recent natural disasters in Japan, many corporations have donated to the relief efforts through promotions and other marketing campaigns. However, they need to be mindful of the way they go about it. Consumers may see these efforts as ploys to turn a tragedy into a profit, so marketers need to understand which promotions are most effective in driving sales, while remaining sensitive to the crisis.

Research from the Penn State Smeal College of Business looks at two types of promotions, discount-based and donation-based. Discount-based promotions give the consumer a few dollars or cents off the price of the product. Donation-based promotions are similar to discount-based promotions, except that the money goes to a charity, not back in the consumer’s pocket.

Karen Winterich, assistant professor of marketing at Smeal, and coauthor Michael Barone, professor of marketing at the University of Louisville, find that consumer preferences for donation versus discount promotions depend on the consumer’s identity.

Interdependent, or collectivistic, consumers are more concerned with helping others whereas independent, or individualistic, consumers are more concerned with the self.

Keeping this in mind, the researchers find that interdependent consumers tend to prefer the donation promotion, since the savings is given to a charity. However, this isn’t always the case. Interdependents prefer the discount promotion when the charity isn’t relevant to one of their social identities and when the charity uses their funds inefficiently.

“Promotion managers need to be cautious when aligning their company with a charity, since the success of the campaign may be dependent on the charity’s fit with customers’ preferences,” write the researchers.

Independents normally prefer the discount promotion, so the researchers examine under what circumstances they would prefer the donation promotion. They find that independents prefer donation promotions when the discount is matched with an indulgent product, like a candy bar.

In one study, Barone and Winterich use a candy bar and a cereal bar to determine which consumer prefers which discount and when. With the candy bar, they find that both independents and interdependents prefer the donation promotion. With the cereal bar, only interdependents prefer the donation promotion. They believe that the charitable donation offsets the guilt the consumer experiences from purchasing the candy bar, causing the independents to favor the donation promotion.

Winterich turned to prior research on gender and cultural factors to make further assumptions. For example, females, on average, tend to be more interdependent than males.

“If you have a product that mostly females are buying, go with a donation promotion,” says Winterich. “If you’re in a collectivistic country like China, go with the donation promotion, as long as the donation benefits a local charity.”

These answers have important implications for marketing managers in forming their promotional strategies and budgets.

Managers must ask themselves two important questions to determine which promotion to use — “What am I selling?” and “Who is my consumer?” Knowing their products and their customer base will help them choose the most effective promotion.

Marketing managers of national or international companies may want to align their company with one charity as a means of simplifying their promotional strategies, but this research suggests that sales may benefit from aligning with local charities with which customers may better identify.

For example, Target’s REDcard program allows customers to choose which charity or school their purchases support. This strategy enhances consumer identification and is likely to boost the response rates associated with the donation promotion.

“People like the idea of money staying within their community,” says Winterich. “It makes consumers more motivated to give when they are helping a cause they can identify with.”

Their study, “Warm Glow or Cold, Hard Cash? Social Identity Effects on Consumer Choice for Donation versus Discount Promotions,” is forthcoming in the Journal of Marketing Research.

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"At a Glance"

Smeal’s Karen Winterich and coauthor Michael Barone look at how social identities impact consumer preference for either donation promotions or discount promotions. Key findings include:

  • Interdependent consumers, who are usually more concerned with others, tend to prefer the donation promotion, since the savings is given to a charity.
  • However, interdependents prefer the discount promotion when the charity isn’t relevant to one of their social identities and when the charity uses their funds inefficiently.
  •  Independents normally prefer the discount promotion, but they prefer the donation promotion when the discount is paired with an indulgent product, like a candy bar.
  • Managers must ask themselves two important questions to determine which promotion to use — “What am I selling?” and “Who is my consumer?” Knowing their products and their customer base will help them choose the most effective promotion.