An empirically derived taxonomy of retailer pricing and promotion strategies

Most research categorizes grocery retailers as following either an Every Day Low pricing (EDLP) or a High Low (Hi-Lo) pricing strategy at a store or chain level, whereas this paper studies retailer pricing and promotions at a brand-store level. It empirically examines 1,364 brand-store combinations from 17 chains, 212 stores and six categories of consumer package goods in five U.S. markets. Retailer pricing and promotion strategies are found to be based on combinations of four underlying dimensions: relative price, price variation, deal intensity and deal support. At the brand-store level, retailers practice five pricing strategies, labeled Exclusive, Moderately Promotional, Hi-Lo, EDLP, and Aggressive pricing. Surprisingly, the most prevalent pricing strategy is not Hi-Lo pricing strategy as is widely believed. It is one characterized by average relative brand price, low price variation, medium deal intensity, and medium deal support. The findings provide some initial benchmarks and suggest that retailers should closely monitor their competitors’ price decisions at the brand level.     

The expected benefit as determinant of deal-prone consumers' response to sales promotions

This study proposes that the responses of more and less deal-prone consumers to price discounts and premiums depend on the promotional benefit level. At low and moderate benefit levels, low deal-prone consumers show a higher evaluation for price discounts than for premiums but if the benefit is high, deal proneness does not bias the higher evaluation of price discounts. An experimental study shows that low deal-prone consumers are concerned with obtaining price discounts. Taken together, these findings suggest that consumers more concerned with obtaining promotions do not always prefer price discounts.     

Everyday “low price” or everyday “value”? The interactive effects of framing and construal level on consumer purchase intentions

Academic literature uses the term “everyday low price” (EDLP) when referring to a pricing strategy that offers relatively stable, low prices across a wide assortment of product categories. However, in real-world situations, many brands and retailers opt to use a different term – “everyday value” (EDV). Do consumers differentially evaluate such framings of the same pricing strategy? The present research draws upon construal level theory and demonstrates – across two experimental studies – that EDV (vs. EDLP) framing is more effective among consumers with high (but not low) construal levels. This effect is mediated by perceived benefit such that consumers with high construal levels derive higher levels of perceived benefit when evaluating a product promoted with an EDV (vs. EDLP) framing. The findings of this research can be useful for marketers and retailers in promoting and framing the EDLP (or EDV) pricing strategies in their advertising and marketing communications.     

Deal‐prone consumers' response to promotion: The effects of relative and absolute promotion value

Increased use of promotions that target different market segments makes the study of consumer characteristics associated with the response to promotions more noteworthy. This article assesses the effect of a common segmentation criterion, consumer deal proneness, on consumers' responses to promotions of more and less relative and absolute value. The results of a pair of experiments indicate that deal‐prone consumers are sensitive to the value of a promotion relative to other available promotions only in a condition of high absolute dollar savings. The findings help integrate conflicting views of deal proneness into a framework in which deal proneness serves as a heuristic to limit or heighten processing of promotion‐related information depending on the promotion environment. © 2005 Wiley Periodicals, Inc.     

Consumer satisfaction in retail stores: theory and implications

The substitution of small retail stores by the large stores has been a topic of debate among academics, practitioners, retailers and general public, especially in the context of foreign firms entering emerging markets such as China and India. The purpose of this research is to find out the determinants of consumer satisfaction in small and large retail stores in an emerging market, with a sample from India. Data were collected using a 39‐item structured questionnaire developed by the authors. The sample consists of 225 consumers who shop at retail outlets (Convenience sample of 125 consumers from small and 100 consumers from large stores respectively). Exploratory factor analysis grouped the 39 variables into 14 factors. Further, regression analysis revealed that six of the factors (Social desirability, staff friendliness, shopping economy, shopping ambience, family shopping and deal proneness) were major predictors of consumer satisfaction as they were found to be significant at 5% level. The significance of factors such as social desirability and staff friendliness imply that many consumers prefer those typical features of small stores, which in turn results in the likely coexistence of small retail formats in spite of the entry and proliferation of large retail stores from different countries. We posit three theoretical propositions to stimulate further research in this area.     

Private label shoppers between fast fashion trends and status symbolism – A customer characteristics investigation

The question who the private label prone consumer is has received a lot of attention in research. While we so far have a good understanding of the private label shopper in the grocery industry, there is limited research in other industries. We assess private label shopper characteristics as a driver of private label choice using a unique data set of an online only fashion retailer covering 68,147 women shoes consumers in Germany. Fashion consumers are faced with a tradeoff between price and seasonality of fashion items as discounts are used to sell last season's stock. We find that private label choice is positively influenced by price orientation and less by discount proneness. Thus, private label shoppers are rather a fashion savvy segment focusing on buying more in season but at a lower price.     

Retailer Categorization: How Store-Format Price Image Influences Expected Prices and Consumer Choices

Prior research indicates that consumers may base their retail decisions (e.g., store choice, purchase quantity) on price image, which has been defined as consumer perceptions “of the aggregate price level of a retailer” (Hamilton and Chernev 2013, p. 2). The present research shows that consumers associate different price images not only with specific retailers, but more broadly with various store formats — such as grocery stores, convenience stores, and specialty stores. Six studies provide evidence that store-format price image exerts influence on consumer price expectations and store choice decisions, and that these retailer categorization effects are distinct from the effects of retailer price image.     

The long‐term effects of sales promotions on brand attitude across monetary and non‐monetary promotions

This study compares the influence of sales promotions on brand attitude across promotion types over time. An experiment is conducted with 154 subjects, who are exposed to test materials for 12 weeks. Evidence shows that the long‐term effects of sales promotions on brand attitude vary across deal types. Non‐monetary promotions seem to work better in eliciting consumers' favorable brand attitude than monetary promotions over time. However, such effects are moderated by consumers' deal proneness. Although monetary promotions may induce more negative effects than non‐monetary promotions, these effects are weaker for high deal‐prone consumers than for low deal‐prone consumers. © 2011 Wiley Periodicals, Inc.     

The Impact of Store-Price Signals on Consumer Search and Store Evaluation

Always low price (ALP) and low price guarantee (LPG) are store-price signals that retailers frequently use to induce favorable store-price image and discourage consumers from comparing prices across stores. Although both policies signal low prices, only LPG is an obligatory promise to beat rival stores’ prices. Results of two shopping simulations show that when consumer search costs are relatively low, ALP may effectively discourage consumer search whereas LPG may trigger more search. Paradoxically, consumers tend to evaluate ALP stores less favorably (as having lower integrity and higher self-serving intention) than LPG stores even when both signals appear to be credible. These findings suggest that LPG is a superior tactic for creating a favorable store image while ALP is more effective for discouraging consumer search. The results also indicate that consumers visit fewer stores when the LPG is not a credible signal of lowest market price than when it is credible. This is because consumers are inclined to either claim discounts or refunds at the non-credible LPG store or to purchase at the competing store with a lower price rather than continue searching.     

Price recall: Brand and store type differences

Price is among the most important choice criteria for customers, whose price knowledge is often surprisingly inaccurate. This study aims at providing new insights into differences in price recall across brands and store types, and their potential effect on marketing efficiency and customers’ store choice. Towards this aim, we analyze the price recall of consumers for 51 food items by a random-effects panel estimation employing a survey with 715 participants. Our results show that customers recall national brand prices better than private labels, almost irrespectively of the store type; consumers overestimate store brand prices in both store types; the effect, however, is much higher for the convenience store. These outcomes have consequences for the marketing strategy: despite a price-matching guarantee for the store brands in the convenience store, the price image is still in favor of the discounter. This result raises doubts on the effectiveness of the price-matching guarantee, at least in this context. The everyday low price strategy of the discounter seems to pay off in terms of the price image. Though both stores charge the exact same prices for their store brands, prices at the discounter are on average perceived to be significantly lower.     

Shopping orientations as antecedents to channel choice in the French grocery multichannel landscape

This paper investigates the influence of consumer shopping orientations on grocery channel attractiveness and choice. It extends the concept of shopping orientation (utilitarian and hedonic) to account for emerging motivations among French consumers: shopping in line with sustainable and ethical values. In doing so, it helps profile segments of consumers who choose to shop through new online channels (Drive through) and newly deployed store formats (city stores). A sample of 300 French customers, responsible for shopping in the household, was surveyed. Hypotheses were tested through Latent Class Analysis and Structural Equation Modeling with categorical outcomes. Our findings indicate that consumers shopping orientations influence the way consumers will combine the different channels and store formats for grocery purchase. In particular, our results highlight the importance of responsible retail practices and ethical assortments in consumers' choice of online formats whilst local product orientation influences the choice of city stores and market places.     

Wal-Mart Korea: Challenges of Entering a Foreign Market

Wal-Mart entered South Korea in late 1990s for its international expansion; however, IT had a major failure in this market and left Korea in 2005 as the American way of marketing did not translate well in Korea. Wal-Mart had critical shortfalls in enabling value exchange with the Korean consumers as the Korean consumers had significantly different taste and preferences compared to American consumers. Wal-Mart's Every Day Low Price (EDLP) strategy was not perceived to have the “value” in the minds of the Korean consumers, while its store locations were not strategically well positioned to create sufficient customer traffic. Wal-Mart's competitive advantage of low cost and low price was not suitable in the Korean competition and consumption context. Wal-Mart was not prepared to develop an effective localization strategy that might have stemmed from not having a clear projection of how much it was willing to invest and grow in this market. This Wal-Mart Korean case shows the importance of the compatibility of a corporate unique value proposition and strategic fit with the local market conditions.     

Examining the dimensionality of coupon proneness: a random coefficients approach

Many previous studies have sought to measure consumers’ coupon proneness but have tended to assume that this trait is unidimensional in nature, i.e., an individual's coupon proneness is the same for all types of coupons. It is argued in this study that because consumers differ in the products they shop for and in the types of coupons they are exposed to, their coupon proneness is likely to vary across different coupon types, i.e., is likely to be multidimensional. The authors test this proposition using the item response theoretic (IRT) model proposed by Bawa et al. (J. Marketing Res. 34 (1997) 517). In the Bawa et al. study a single coupon proneness parameter was estimated for each individual. The current study extends the IRT model via a random coefficients approach and estimates separate coupon proneness parameters for different coupon types. The results indicate the presence of distinct segments among consumers, with some consumers displaying a generalized coupon proneness tendency across coupon types and others displaying type-specific coupon proneness.     

A Conjoint Analysis of Quality Wine

Abstract

Weighted least squares approach for conjoint analysis is used to examine buyer preferences towards wines produced in different Spanish regions. Two producer regions are considered, Na-varra and Aragon, and three wine attributes: price, origin and grape vintage year (wine age). In both regions, differences between urban and rural consumers' preferences are tested. Results indicate that the origin of the grapes is the most important attribute for the wine consumer. Rural consumers prefer locally produced wines while Rioja wines are better considered by urban consumers. The price and the age of the wines are secondary attributes in consumer preferences. Finally, some market segments are formed based on individual consumer preferences and some of their sociodemographic characteristics in order to address differentiated marketing strategies to these segments.     

How Online Consumer Segments Differ in Long-term Marketing Effectiveness

Online commerce gives companies not only a growing global sales platform, but also powerful consumers enjoying 24/7 availability, choice proliferation and the power to opt in and out permission-based communication. Unfortunately, our knowledge is limited on long-term marketing effectiveness in this space and on how it differs across customer segments. Managers appear overwhelmed by the combination of rich online data on hundreds of thousands of customers and the typical aggregate-level data on offline marketing spending.This paper is the first to investigate the long-term impact of coupon promotions, TV, radio, print, and Internet advertising across customer segments for a major digital music provider with over 500,000 customers. We first segment customers and subsequently analyze how these segments respond in the long run to different marketing activities when purchasing music downloads. Our findings reveal that the effectiveness of marketing differs across segments, while standard segmentation approaches fail to identify the most valuable catches in a sea of consumers. In contrast to empirical generalizations on consumer packaged goods, heavy users of digital music products are least sensitive to price and most sensitive to TV advertising and to multiple touch points. Light users, the majority of consumers, are price sensitive and tend to opt out of targeted communication. Our research enables managers in the digital media space to target high-value customer segments with the most effective actions.     

“Seize the Deal,or Return It Losing Your Free Gift”: The Effect of a Gift‐With‐Purchase Promotion on Product Return Intention

The current article sheds light on an important issue in marketing: how marketers can prevent consumers from returning previously purchased goods. This research examines the relationship between a gift‐with‐purchase promotion and consumer product returns, hypothesizing that consumers who purchase products that come with a free gift will be less likely to return the products. Evidence shows that a gift‐with‐purchase promotion reduces consumer product returns and that this relationship is mediated by perceived loss in returning a product. Then, the results indicate that the choice of free gifts reduces product return intention and that this relationship is serially mediated by perceived ownership and perceived loss. The findings further suggest that when consumers with high product involvement can select free gifts among alternatives, they tend to perceive more ownership and loss and thereby are less likely to return the promoted product. Overall, the current research proposes that consumers prefer to seize the deal rather than to return it when they get a gift‐with‐purchase, have a chance to select a free gift, and are highly involved with the product.     

Money,mavens, time,and price search: Modelling the joint creation of utilitarian and hedonic value in grocery shopping

Abstract

This research deductively develops a model of both in-store price search and store deal proneness drawing on hedonic and utilitarian value creation. Based on a sample of 535 US grocery shoppers, the model reveals that in-store price search and store deal proneness share many of the same drivers, amongst these, the value of time being the most important. The opportunity cost of time engaged in price search is explained in terms of shoppers’ financial pressures and role construction as price mavens. Price mavenism influences store deal proneness directly due to its capacity to yield the price information required to build and maintain a role identity, and indirectly through its effect on the opportunity cost of time engaged in price search. The primary implication of the research is that the relationship between time, search, and price mavenism may be best explored by viewing price knowledge, the basis for identity maintenance, as a flow rather than a stock.     

Pick a card: Price ranges and gift card choice

Gift cards are wildly popular with consumers. Vast assortments of gift cards are available at many regional and national retail stores (e.g., grocery, convenience, home improvement). The present research examines consumer reactions to price range amounts displayed on gift cards (e.g., $20-$100; $25-$250). Commonly affixed to gift cards to convey possible purchase loads, price ranges appear to serve as contextual information for a desired purchase load as a gift that can affect beliefs about the recipient's views of the gift card i.e., metaperceptions. Specifically, these metaperceptions tend to be more negative for a gift card displaying a price range when the desired purchase load is the lower bound rather than the upper bound. These beliefs can, in turn, affect gift card choice, but only when social risk is applicable. Four studies provide support for the theory.     

Heterogeneity of deal proneness: Value-mining,price-mining,and encounters

This study uncovers the heterogeneity of deal proneness in relation to the cost of deal shopping (e.g., time and effort) and shopping capital (i.e., skills and expertise in shopping). The possession of shopping capital determines the cost of deal shopping and how consumers take advantage of deals. Findings of in-depth interviews include: (1) different types of deal shopping—value-mining, price-mining, and encounters, (2) strategies of deal-prone consumers with a high level of shopping capital—creating shortcuts, prospective thinking, and engineering deals, and (3) the sources of deal gratification that result from different goals of deal-prone behaviors.     

On consumer choice patterns and the net impact of feature promotions

Even in the digital age, feature promotions continue to receive significant investments from CPG manufacturers and retailers. Whether this is money well spent depends on consumers' (heterogeneous) tendency to switch brands or stores in response to features. This study proposes a ‘Mixed-pattern Random-effects Nested Logit’ (MRNL) model to analyse the effect of feature promotions in a multi-retailer multi-brand setting. Across 16 different CPG categories, our results reveal that in all cases a mixture of choice patterns prevails: about half of households exhibit a brand focus (i.e. rather substitute between stores offering that brand), the remaining half show evidence of a store focus (i.e. rather substitute brand offers within a visited store). We find that the size of the promotion lift and its underlying sources differ substantially between patterns. Brand-focused consumers are generally more responsive to feature ads than store-focused consumers – especially in low-concentration categories; while they imply much stronger cannibalization for the manufacturer, and much weaker cannibalization for the retailer. It follows that retailers reap much higher benefits in the brand-focused segment, while manufacturers may not prefer that segment in terms of net gains and must be wary of subsidizing those consumers. We identify household and category characteristics that underlie the choice patterns and offer opportunities for targeting.