Free Gift with Purchase: Promoting or Discounting the Brand?

Abstract

Two experiments examine the process by which free gift promotions serve as a source of infor-mation about the underlying value of the product offered as a free gift. The value-discounting hypothesis argues that by virtue of being offered as a free gift, products will be valued less as evinced by lower purchase intentions and a lower price that consumers are willing to pay for them. Conditions that inhibit the value-discounting effect include the (a) presence of alternate price information to make judgments about the value of the gift, and (b) contextual information about the value of the promoted brand. A rich literature in sales promotions has shown that short-term sales are positively affected by offering promo-tions (for a review, see Blattberg & Neslin, 1990). However, the economic model of consumer promotions does not ex-plicitly account for complementary routes through which promotions can affect consumer behavior. The notion that consumer promotions are informative and affect sales through more than offering a monetary incentive to purchase