Effect of product category on promotional choice: comparative study of discounts and freebies

Purpose Marketers have been using discounts and freebies for sales promotion strategy for a long time, yet a dilemma concerning better promotion remains. The paper tries to address this issue through empirical research by classifying sales promotion based on their utility and relatedness to the product to which they are bundled. Design/methodology/approach Two hypotheses were drawn: there is a distinctive preference of sales promotional offering, when it is bundled with a product, and the preference of promotion varies with the product category it is bundled with; discounts by retailers are preferred over advertised discounts, but they negatively affect the credibility of the product The hypotheses were tested by a double‐staged experimental protocol. The first stage standardized the perceived price of the freebies, and the second stage consisted of a 2 × 2 × 2 mixed model experiment. The first hypothesis was tested with Friedman's Test and Wilk's λ, and the second hypothesis was subjected to t‐test and factor analysis on a four‐item scale. Findings Promotion type influences the rate of increase in market demand and is product category dependent. Promotional offerings which can be readily converted into monetary terms are more preferred to freebies but in the long‐run, they can affect the overall value of the product. Retailer discount is preferred over advertised discount but has a negative perception. Hedonic freebies are least preferred; but have a higher perceived value. Research limitations/implications The study deals with the promotional choice of consumer durables and consumables. It is applicability to other product categories needs confirmation. Practical implications The findings can be useful for marketers in designing promotional strategies, especially in the consumer retail segment, new product marketing and brand extension situations. Originality/value The paper will help marketers design better and appropriate promotion vis‐à‐vis a product and its target consumers.