Abstract

For many products, brand managers use price promotions to address challenges such as diminishing growth or excess inventory. Luxury brands face the same challenges, but unlike other brands, they may face constraints in using price promotions given that luxury brands are generally associated with high price points. In particular, managers of new luxury brands may wish to use promotions as a means to acquire new customers; however, they are often concerned that reducing prices may affect consumers’ brand luxury perceptions. Is it possible for luxury brands to maintain luxury perceptions when discounting their products? While past research has shed light on the pros and cons of price promotions, little research has explored how different discount levels (low vs. high) may affect brand luxury perceptions and, more importantly, how brand messaging might buffer luxury brands against potential negative impacts of discounts. I hypothesize that brand messaging—i.e., an agentic (independent) vs. communal (interdependent) positioning—may affect consumers’ luxury perceptions at low and high discount levels, and that perceived strategic fit may drive effects. Across three experiments, participants were presented with display ads in which brand messaging and discount level were varied. While Study 1 yielded null effects, Study 2 revealed a marginally significant discount level x brand messaging interaction on luxury perceptions. Perceptions of strategic fit mediated these results. Finally, Study 3 attempted to replicate study 2 findings and explore the downstream effects of luxury perceptions on purchase intentions. In this study, luxury perceptions were primarily affected by discount level, while purchase intentions were primarily affected by brand messaging. My thesis discusses theoretical contributions, avenues for future research, and managerial implications related to price discounting for luxury brands.