Friends and Family: How In-Group-Focused Promotions Can Increase Purchase

Abstract

Firms use large majorities of their budgets on sales promotions such as coupons and sales events. Many of these sales promotions are framed as "friends and family" or "pre-ferred customer." Which of these frames is more effective, when, and why? We answer these questions building on existing research on deal exclusivity. We show that the success of promotions framed as in-group vs. self-focused depends on whether they are targeted toward interdependent or independent customers. We find that interdependent customers are more receptive to in-group-focused promotions because they perceive such promotions as being higher-value deals. We also show that consistency with brand personality matters: the benefit of in-group-focused promotions for interdependent consumers is higher for brands with a group-oriented personality. Overall, these results show how sales promotions can be more effective without having to increase the magnitude of the promotion. Promotions such as deals and coupons can consume 25 to 50 % of a company's marketing budget [6, 31]. While increasing the deal magnitude of a promotion (e.g., price cut and coupon value) increases purchase intentions [19, 32], the magnitude of impact that a unit increase in deal magnitude of the promotion (i.e., 15 to 20 %) has on purchase intentions may be context dependent. For instance, Inman et al. [16] find that purchase intentions are increased for products on display even without a price cut. Raghubir [29] finds that when price information is present, a 39 % increase in coupon value (from $23 to $32) increased deal evaluations only by 11 %. More recently, Raghubir [30] demonstrated that doubling the coupon value from $2 to $4 had no effect on deal evaluation. Thus, while increasing the promotion's deal magnitude is very costly from a budgetary perspective, its efficacy in terms of enhancing consumer's deal evaluation and subsequent purchase is limited. What may be another, more effective and less costly way to enhance the efficacy of such promotions? There is research showing that simply framing the discount value or the re-demption window can differentially influence promotion effectiveness [11, 20, 22]. More recently, Barone and Roy [8] demonstrated the effect of deal exclusivity, promotions provided to one person vs. many, on promotion response. These results suggest that framing promotions based on noneconom-ic dimensions, in a context-specific manner, can make them more effective. Adding to this research, we specify in-group (vs. self-focused) promotions as a type of promotion framing that can differentially increase the effectiveness of promotions of the same monetary value. When a promotion is in-group focused, it calls attention to the customer being included as part of a larger group (e.g., friends and family); by contrast, when a promotion is self-focused it calls attention to a customer being an individual who is different from others (exclusively for you). We demonstrate benefits from in-group-focused