Embedded Premium Promotion: Why It Works and How to Make It More Effective

Arora, Neeraj; Henderson, Ty
July 2007
Marketing Science;Jul/Aug2007, Vol. 26 Issue 4, p514
Academic Journal
In this paper we define an embedded premium (EP) as an enhancement that involves a social cause added on to a product or service. We characterize EP as a sales promotion strategy and juxtapose it with traditional approaches, such as discounts and rebates. Across three experiments, using a nationwide lnternet panel and employing stated measures and model-based inference, we find that at low denominations EP is more effective than an equivalent price discount. We describe how an EP's social association may influence consumer choice quite differently than price promotions and, contrary to the asymmetric price promotion effect documented in the promotions literature, we find that EP benefits an unknown brand more than a known brand. Our hierarchical Bayes approach uncovers heterogeneity in EP effectiveness that can be explained by affinity toward the focal charity, personal motivations, and demographic markers. An identifiable segment of individuals prefer the "other" over "self," suggesting possible EP optimization and segmentation strategies. Two such strategies, customization and coverage, are empirically tested, and the former is shown to be very effective. Our findings have broad implications for brand managers with regard to resource allocation and EP program return on investment (ROI), as well as important social welfare implications.


Related Articles

  • An Investigation into the Debate Between the Strategic Choice and Resource Dependence Models: Resource Allocation Changes in Declining and Growing Organizations. Flynn, E. James; Weiss, Andrew R. // Academy of Management Best Papers Proceedings;1987, p160 

    The strategic choice and resource dependence models were tested to determine if either influenced resource allocation changes in growing or declining organizations. Independent variables represented strategic mix and resource exchange characteristics. Strategic choice variables and resource...

  • TOOLS OF THE TRADE. Wilson, Carol // Training Journal;Aug2009, p60 

    The article focuses on the Johari Window model designed to raise awareness of oneself and others in a work situation. It includes an open, blind, hidden and unknown areas. It concludes that the key to working with the model is to take a look that the value lies in the new self-awareness gained...

  • MAPPING THE FUTURE IN UNCERTAIN TIMES. Canada, Alonzo // Rotman Management;Winter2010, p40 

    The article discusses the relevance of opportunity map in making decision for business development. It mentions that the said map will aid business leaders in conceptualizing better ideas for the betterment of business. In addition, this map will visualize business landscape. Furthermore, the...

  • Keep your board members focused and productive. Levine, Stuart // Long Island Business News (7/1993 to 5/2009);8/1/2008, Vol. 55 Issue 38, p29A 

    The article offers advice on keeping board members focused and productive. The author emphasizes to be clear on what information board members need to make better decisions. He added to create a dashboard to measure performance. Lastly, he recommends to have a strategy and a plan because in that...

  • Is Your Business Case Compelling? Walker, James W. // Human Resource Planning;2002, Vol. 25 Issue 1, p12 

    The article discusses the strategy for obtaining the support of managers for a human resource initiative by identifying and explaining a clear business need. HR leaders have to define the issues which create a sense of urgency for executives to take action. These issues may be gaps between...

  • An Empirical Test of the Performance Implications of Environment-Strategy Coalignment. Venkatraman, N.; Prescott, John E. // Academy of Management Best Papers Proceedings;1988, p47 

    The positive performance impact of a coalignment between a business's environment and its strategy is an Important theoretical proposition in strategic management. The proposition was tested specifying coalignment as profile deviation and supported across eight distinct environments in two...

  • THE RESOURCE-BASED CHALLENGE TO THE INDUSTRY-STRUCTURE PERSPECTIVE. Conner, Kathleen R. // Academy of Management Best Papers Proceedings;1994, p17 

    There is a persistent sense in the strategy field that there are important differences between the Industry-structure (IS) approach, and the emerging Resource-based (RB) perspective. This paper analyzes the challenge presented.

  • Strategy Execution and Value-Based Management. Frigo, Mark L. // Strategic Finance;Oct2002, Vol. 84 Issue 4, p6 

    The article reports on value-based management (VBM), a strategic performance measure that focuses on managing organizational activities toward optimal value creation. Examples are given that show how VBM and value-based metrics can be used in planning incentive compensation and resource...

  • Chinese Cultural Implications for ERP Implementation. Srivastava, Mukesh; Gips, Betsy J. // Journal of Technology Management & Innovation;2009, Vol. 4 Issue 1, p105 

    Implementation of an enterprise resource planning (ERP) system in a global environment can be fragmented due to the internal enterprise culture, which is representative of societal culture. In China, this is especially true due to the nationalistic culture of business. The way ERP systems are...


Read the Article


Sign out of this library

Other Topics