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INTRODUCTION
Bonus packs is a popular form of sales promotion. It often involves offering buyers extra quantity of a product at no additional charge. Examples of such offers are "buy one get one free", "33% extra free", and "get 20 oz. more at the price of the original 48 oz. package." Although bonus pack (also referred to a "bonus quantity" in some countries) promotions have been well publicized in trade magazines and the popular press, this technique has received little scholarly attention. In one of the few scholarly studies of bonus packs, Ong, Ho and Tripp (1997) investigated consumers' perceptions of bonus packs such as whether aggressive offers (e.g., get 80% more free) lose their credibility. They found that consumers appeared not to give bonus pack offers too much credence in terms of the "no price increase" and extra quantity offered.
While we advocate more consumer behavioral studies on bonus packs, we choose to focus our attention in the present study on marketing managers of companies which have engaged in bonus pack promotions. In this paper, we will show that from a cost accounting standpoint, the contribution margin in a bonus pack offer is the same as that in an equivalent percentage in price discount. This knowledge may have important ramifications on future bonus pack promotion plans as current conventional wisdom suggests that it would be less costly to give away products a company manufactures than to discount the price of the product if the customer were to buy higher quantities. In this study, we would attempt to find out companies' costs assessment practices, decision-making processes, and perceptions relating to bonus pack promotions from a survey of marketing managers.
BACKGROUND
Numerous trade articles on sales promotion have reported on the success of bonus packs and price discounts. Each technique, however, has some major drawbacks. Price discounts may erode brand equity as consumers may doubt a brand's quality upon encountering periodic price discounts or an infrequent but large price discount. Another drawback could result from retailers not passing down the savings to the consumers. To ensure that consumers receive the savings, marketers may opt for a coupon or rebate program instead of a price discount. Coupons and rebates would increase promotional costs due to administration, printing,...