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Delay‐discounting rewards from consumer sales promotions

Kesha K. Coker (School of Business, Eastern Illinois University, Charleston, Illinois, USA)
Deepa Pillai (Woodbury School of Business, Utah Valley University, Orem, Utah, USA)
Siva K. Balasubramanian (Stuart School of Business, Illinois Institute of Technology, Chicago, Illinois, USA)

Journal of Product & Brand Management

ISSN: 1061-0421

Article publication date: 2 November 2010

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Abstract

Purpose

Rewards from sales promotions may be either immediate (e.g. instant savings, coupons, instant rebates) or delayed (e.g. rebates, refunds). The latter type is of interest in this study. The purpose of this paper is to present the hyperbolic discounting framework as an explanation for how consumers delay‐discount rewards, and test whether this holds for both high‐price and low‐price product categories.

Design/methodology/approach

Data were collected by administering two online surveys to respondents. One survey presented choice scenarios between sales promotion formats for a high‐priced product (a laptop, n=154) and the other for a low‐priced product (a cell phone, n=98). Hyperbolic and exponential functions were then fitted to the data.

Findings

The hyperbolic function had a better fit than the exponential function for the low‐priced product. However, this effect was not evident in the case of the high‐priced product; no significant difference was found between the functions. The rate of discounting was greater for the high‐priced product than for the low‐priced product. Thus, for low‐priced products, rather than discount a reward rationally, consumers tend to discount the value of the reward at a decreasing rate.

Originality/value

This study addresses delay discounting in the context of a typical consumer buying situation. It also addresses the possibility of consumers applying different forms of discounting to products at different price levels and tests for the same. The results are of considerable significance for marketers wishing to offer price discounts to consumers. For low‐priced products, marketers seem to have more flexibility in delaying the reward, since the rate of discounting decreases for longer delay periods. At the same time, the discount rate for high‐priced products is higher than that for low‐priced products, hence delay periods may have a more critical role as discounted values fall steeply with an increase in delay to reward.

Keywords

Citation

Coker, K.K., Pillai, D. and Balasubramanian, S.K. (2010), "Delay‐discounting rewards from consumer sales promotions", Journal of Product & Brand Management, Vol. 19 No. 7, pp. 487-495. https://doi.org/10.1108/10610421011086900

Publisher

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Emerald Group Publishing Limited

Copyright © 2010, Emerald Group Publishing Limited

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