Choosing high-equity cosmetic brands in bad macroeconomic conditions: evidence from panel data

Abstract

Purpose This study investigates how price, promotion and consumer characteristics affect consumer choice of high over medium- and low-equity cosmetic brand under different macroeconomic conditions. Design/methodology/approach The study uses purchase records from MarketingScan's Behaviour Scan panels (a GFK – Mediametrie Company) covering the period from 2008 to 2009. The panel analysed represents a sample of 2,149 households representative of the national population. Findings Results indicate that regular price and relative brand price increase high-equity cosmetic brand choice over both low- and medium-equity brands, while reference price decreases it. Brand feature promotion activity and joint promotion positively affect high-equity cosmetic brand choice, whereas display promotion decreases it. In comparison to medium-equity cosmetic brands, gender and education slightly increase high-equity cosmetic brand choice, while age decreases it. Surprisingly, household income does not affect high-equity cosmetic brand choice. The effect of regular price decreases over worsening macroeconomic conditions. However, the effect of relative brand price decreases between low and moderate contraction periods, but increases between moderate and high contraction times. Feature promotion is effective only when the contraction is moderate, while the negative effect of display promotion is stable over time. Originality/value The paper underlines the moderating role of macroeconomic conditions on the relationship between pricing decisions as well as promotion activity and consumer choice of high-equity cosmetic brands.