Research Articles Impact Of Sales Promotion On Buyers Behaviour: An Empirical Study Of Indian Retail Customers Gopal Das Lecturer, NSHM Business School, Kolkata Dr. Rohit Vishal Kumar Reader, Xavier Institute of Social Service, Ranchi Abstract In the Global Context of open market economics of today, the consumer has become the king. He operates through his autonomous power. He enjoys a lot of freedom in his purchase decision. A consumer is in a position to influence the manufacturer or marketer regarding size, quality and contents of the product, price, and post-sale service, among other things.
As a result the markets no longer remained “sellers markets”, it obviously turned into “buyers markets”. With the Indian retail boom many players are entering with different retail formats. As a result, competition is becoming very tough. Keeping in mind that Indian consumers are price sensitive, each player is trying to attract more customers through different sales promotional activities. But the exact picture of the impact of sales promotion on consumer behaviour is yet unclear to the retailers.
This paper tries to find out the impact of retail sales promotion on consumer’s buying behaviour. GMJ,VOL 3,ISSUE 1,JANUARY – JUNE 2009 Keywords: Attract Customer, Buying Decision, Buyers Market, Retailing, Sales Promotion Introduction Considering the truth that the customer is the king, every organization wants to increase market share and profit. Day by day the different types of business formats are also coming to the Indian market. In today’s scenario, organized retail sector is the most important addition in Indian economy.
The Indian retail sector continues to be one of the largest sectors attracting fresh investments from private sector. Currently Indian retail distribution is completely fragmented with about 12 million players. The majority of these are very small players operating from small shops (below 50 square feet in size) and handcarts. These retail outlets are spread across the country in over 5,000 cities and 6,00,000 villages. India presents a huge opportunity to the world at large, to use as a business hub. A “Vibrant Economy”, India tops in the list of emerging markets for global retailers.
The second fastest 11 Gopal Das & Dr. Rohit Vishal Kumar growing economy in the world, the third largest economy in terms of GDP and the fourth largest economy in purchasing power parity(PPP) after USA, China and Japan; India is also rated among the top 10 FDI destinations. At present, the organized sector accounts for only 2 to 4 percent of the total market, although the Economist Intelligence Unit forecasts that on current trends, it will rise up to 20 to 25 percent of the total by 2010 (Ramanathan V and Hari K, 2008).
So there is a tremendous growth scope in organized retail sector. More and more players are coming in the market with new attractive retail formats like malls, supermarkets, departmental stores. India Retail Report (2007) reviewed that food and grocery comprises 62 per cent of the ($ 270 billion (Rs. 12,00,000 crore) Indian retail market. Only 0. 8 per cent of this segment is in organized sector, and it witnessed a year-on-year growth of 30. 8 per cent in 20052006 as against 2. per cent growth of the total food and grocery retail market (Refer to Exhibit 1 for the major players in India and their projected sales) (India Retail Report, 2007). Exhibit 1: Major Grocery Retailers in India Retailer Retail Sales (INR Crore) (2006-2007) Nilgiris 110 Spinach 90 Subhiksha 334 Taj 19 Fab Mall (Trinethra) 277. 99 Trumart Data Not Available Food Bazaar Data Not Available Spencer’s Data Not Available SPAR Data Not Available Nature’s Bazaar Data Not Available Namdhari’s Fresh Data Not Available Big Apple Data Not Available Reliance Fresh Data Not Available C3 14. Monday to Sunday Data Not Available Foodworld Data Not Available [email protected] Data Not Available (Heritage Foods) Arambagh Food 26 Mart Retail Space (Sq Ft) (2006-2007) 200 154 Data Not Available 29 526 168 480 181 27 Data Not Available 20 Data Not Available Data Not Available 22 13 71 4 13 No of outlets (2006-2007) 44 60 315 4 198 42 45 68 1 3 13 3 22 6 2 31 1 24 This indicates a scope of growth in organized retail sector, though 95% of the total sales are held through traditional retail stores in the country currently.
So, the question is that whether the organized retail sector will able to attract customers through different marketing activities, like sales promotion or not. The first part of the paper deals with a historical analysis of the Indian retailing structure followed by the review of literature and finally the last part deals with the result of empirical studies in an Indian metro. Organized Retail Development: Indian Context Goldman Sachs (2005) has estimated that the Indian economic growth could actually exceed that of China by 2015.
We all know that India has been a nation of dukandars (shop-keepers), having approximately 12 million retailers. The retailing is in our blood, either as shopkeepers or as a shopper. The Indian retail market is estimated to grow from the current US $ 330 billion to US $ 427 billion by 2010 and US $ 637 billion by 2015. Retail contributes to 10% of our GDP and is the largest source of employment after agriculture. Table 1 shows the share of retail in Indian employment that is one of the lowest of all the countries mentioned.
Table 1: Share of retailing in total employment Country India China Poland Brazil USA Korea UK Malaysia Share of Retail in Total Employment 6-7% 6% 12% 15% 11. 7% 18% 11% 7% The ratio of organized–unorganized retail was 3:97 in the year 2004 which is expected to be 9:91 by 2010, from the Table 2 below: Table 2: Share of organized and un-organized retail in India Year 2004 2010 Organized 3% 9% 100 Unorganized 97% 91% 100 (Source: Adapted from, R Rajmohan (2007), India Retail Report, 2007, Images Multimedia Pvt.
Ltd. ) 12 GMJ,VOL 3,ISSUE 1,JANUARY – JUNE 2009 Impact Of Sales Promotion On Buyers Behaviour: An Empirical Study Of Indian Retail Customers There is increased sophistication in the shopping pattern of customers, which has resulted in the emergence of big retail chains in most metros; mini metros and towns being the next target. Customer taste and preferences are changing, leading to radical transformation in lifestyle and spending patterns, which in turn is giving rise to new and developed business scopes.
Development of mega malls in India is adding new dimensions to the booming retail sector. There is a significant development in retail landscape not only in the metros, but also in the smaller cities. Retailers inspired by the wall-mart story of growth in America, are tempted to focus on smaller towns and villages in India. However an analysis of the town-wise population, population growth, migration trends of customer spending analysis reveals a very difficult picture of India.
Data of Table 3 by NCAER estimates, the share of the 35 towns with a present population greater than 1 million in India’s total population would grow much faster than their counterparts, from 10. 2% today to reach 14. 4% by 2025. Table 3: Urban-Rural usage pattern in middle Income group (per’ 000 Households) Consumer Durables Motorcycle Television Car Consumer Expendable Edible oil Shampoos Washing powder Urban Rural sectors are keeping almost all convenience goods under one roof. This convenience obviously attracts more customers.
So, the size of organized retail sector is increasing. Everybody wants to attract more customers through various marketing activities like, sales promotion. Almost every organized retail shop is offering some sales promotional schemes throughout the year to attract customers and to increase sales. But, the exact picture of the impact of sales promotion on consumer behaviour is yet unclear to the retailers. This paper tries to find out the impact of retail sales promotion on consumer’s buying behaviour.
Literature Review International Context An existing research stream considers how the costs and benefits of promotional activities are directed at customers, but empirical results are mixed according to Blattberg, Robert, Richard and Edward (1995). Kopalle, Praveen, Carl and Lawrence (1999) find that price promotions enhance consumer price sensitivity, but note that, under some conditions, such promotions can be profitable to both retailers and manufacturers.
An extensive body of academic research has established that temporary price reductions substantially increase short-term brand sales (Blattberg, Robert, Richard, and Edward 1995), which may explain their intensity of use by manufacturers and retailers alike. However short-term effects of price promotions tend to be much weaker. From the strategic point of view these findings imply that promotions generally do not generate long-term benefits to the promoting brand, it may generate the sales and margin on short term basis. Promotional actions should be accountable for the net positive results during the dust-settling period.
This accountability has two components. First, a promotion must not initiate a permanent price or margin drop. After the promotion period, prices must return to their normal levels lest they cause permanent erosion of profit margins without offsetting volume increases. Second, a promotion must generate a net surplus (incremental revenue and profit over baseline) for the promoter over the dust-settling period. There is only limited empirical evidence on the overall profitability of a given price promotion and its division across manufacturers and retailers.
Some argue that, while manufacturer profits from promotions have increased at a steady rate, retailers have been earning 2001-02 2009-10 2001-02 2009-10 134. 3 942. 8 31. 4 320. 7 1258. 9 52. 2 109. 0 616. 3 1. 6 250. 9 561. 3 3. 5 2001-02 2009-10 2001-02 2009-10 1000. 0 827. 8 904. 7 1000. 0 1000. 0 1000. 0 1000. 0 354. 5 775. 4 1000. 0 458. 4 946. 9 This urbanization will help to develop organized retail sector in India. Objectives of the study In the retail context, consumer goods enjoy predominant place in terms of volume and sales revenue.
In our daily life, we need convenience goods. The organized retail GMJ,VOL 3,ISSUE 1,JANUARY – JUNE 2009 13 Gopal Das & Dr. Rohit Vishal Kumar lower profits (Ailawadi, Farris, and Shames, 1999). Likewise, competition among stores may prevent retailers from translating trade allowances into profits (Kim and Staelin, 1999). By the same token, Srinivasan and Bass (2001) find that the intensity of price competition at the retail level exceeds what is optimal for the market, but this is not so for manufacturers.
In contrast, some believe that power in the channel has shifted toward retailers, so their share of promotion profits should be on the rise (see Kadiyali, Vrinda, Pradeep and Naufel, 2000 and Ailawadi, Kusum 2001, for an extensive review on this issue). Nijs (2001) argues that many leading manufacturers would like to reduce their excessive reliance on price promotions but are reluctant to do so, lest they lose the support of retailers who still appreciate the market expansive power of price promotions.
Interestingly, other sources (Urbany, Joel and Dickson) and recent research consistently find that short-term promotion effects die out in subsequent weeks or months — a period referred to as dust settling – leaving very few, if any, permanent gains to the promoting brand. This pattern has been shown to hold for the market shares of promoting brands (Srinivasan and Bass 2000), for category demand (Nijs, 2001), as well as for consumers’ purchase incidence, purchase quantity and brand choice (Pauwels, Hanssens, and Siddharth, 2001).
Kincade, Woodard, Ginger and Haesun (2002) studied buyer–seller relationships for promotional support in the apparel sector which was critical for success. The purpose of the study was to describe the promotional activities offered to apparel retailers by manufacturers. The study was trying to find out the retailer’s perceptions of the offering frequency and importance of the promotional support, and to investigate the relationship between offering frequency and perceptions of importance.
It was found that monetary support was regarded as the most important promotional support. In a study by Broadbridge and Calderwood (2002) emphasis was given to the fact that in an age of increasing competition from large-scale organized grocery retailers, local shops need to have the commitment and willingness to cater for the local community for survival which means focusing attention more closely on local residents’ wants and needs. Knox and Walker (2003) found the existence of weak but significant relationship between the involvement and brand loyalty in grocery markets.
Another study done by Moschis, Curasi and Bellenger (2004) was that older consumers are very price-conscious, (with an often exacting memory for the prices of frequently purchased items necessitating food stores to use frequent pricereduction promotions), and enjoy interactions and prefer to shop in a store where they can receive specialassistance services (such as valet parking, delivery assistance, carry-out assistance, liberal product return and refund policies).
Overall satisfaction with a store does not significantly influence customers’ loyalty to that store. And shoppers’ intention to remain loyal to their “primary store” was in fact influenced by several other reasons such as frequent buyer-reward schemes, travel distance, preference for an in-store delicatessen, size of the average grocery bill, store signage and the level of sale assistance (Miranda, Konya, and Havrila, 2005).
Spanish consumers’ perceptions of US apparel specialty retailers’ products and services, was studied by Hyllegard, Eckman, Descals, and Borja (2005). The study focused that specialty retailers’ success in international markets is contingent upon their knowledge of culturally-defined values, norms and behaviour that influence consumer decision making and impact acceptance of products and services.
It was found that customers’ perception differed regarding product quality, product assortment, quality of customer service etc. Indian Context The Indian consumers are known to be price-sensitive and retailers have to manage with razor thin margins in order to compete for the share of wallet of the grocery consumer. Consumer spending on food constitute around just under 50 per cent and margins on food retail is around 12- 15 per cent with a post-tax margin of 2 per cent (Vijayraghavan, 2007).
The entry huge grocery format of Reliance and proposed venture of Bharati-Wal-Mart is expected to further kick up competition in the business and put pressure on margins (Daftari, 2007) The 2000-crore Future Group (Pantaloon Retail) intends to increase its non-grocery business from the present 40 percent to 50-70 percent in view of the increased competition in the grocery business in coming years wherein the group’s grocery model might not be competitive enough (Vijayraghavan, 2007). On the other 14
GMJ,VOL 3,ISSUE 1,JANUARY – JUNE 2009 Impact Of Sales Promotion On Buyers Behaviour: An Empirical Study Of Indian Retail Customers hand, understanding consumer insight is crucial to get to the shelf right and Wal-Mart went wrong in Germany as they did not even understand that the pillow size of Germans is bigger than that of Americans (Karwal as quoted by Tarun and Chopra, 2007). Again, Indian retailers understand the culture, taste and preferences of Indian consumers better (Biyani of Pantaloons as quoted by Tarun and Chopra, 2007).
Some experts also feel that the kirana stores do not have any overheads and are extremely presentable; if Indian big retailers can compete with them, they may compete with anybody and should not be worried about competition from international players (Sanjiv Goenka of RPG Enterprises as quoted by Tarun and Chopra, 2007). Indian consumer is also known to be extremely value-conscious with 80 per cent of his wallet consisting of essential and need-based purchase which he can get from the store next-door; the big question is whether he would travel all the way to the big store (Karwal as quoted by Tarun and Chopra, 2007).
In fact there might be emergence of several India-specific retail business models and formats in view of the unique peculiarities of the behavior of Indian consumers (Arvind Singhal, Chairman, Technopak Advisors as quoted by Tarun and Chopra, 2007) like the proposed Argos retail format of Shopper’s Stop-HyperCITY Retail-Home Retail venture, which involves catalogue stores along with home shopping and on-line retail (Bureau, 2007).
Sinha, Mathew, and Kansal (2005) carried out a study on format choice of food and grocery retailer for one product and one customer segment with a sample of 26 respondents on five existing store formats namely kirana, upgraded kirana, supermarkets, hypermarkets and wholesalers. They suggested that the type of product influence the purchasing patterns of customers and commented that it would be interesting to capture the utilities of each store format, given that shopping has been found to be influenced by local culture, and suggested that it would be a good study to determine the format choice behavior of many customers.
In a study by Vyas (2005), it was found that 72% of the respondents are deal prone in all income categories; more than 60% of the sample was found to be deal prone; in fact in higher income category, 75% were found to be deal prone. Respondents were asked about their preference for price cut or value added promotions for the FMCG category. 60% of the sample preferred price cut nature of promotions and the best preference value added promotions.
From another study (Goswami and Mishra, 2007) in food and grocery retail sector in India it was found that customer loyalty in grocery stores was found to be positively related to location, cleanliness, offers quality; helpful, trustworthy salespeople, home shopping, and negatively related to travel convenience. Kiranas do well on location, but poorly on cleanliness, offers, quality and helpful and trustworthy salespeople. Converse is true for organized retailers.
In another study (Vyas, 2007), in Indian apparel retail sector, it is found that seasonality affects apparel sector and hence it becomes critical for a retailer to clear off the stocks at the end of season otherwise he may have to incur substantial inventory carrying costs, allocate scarce shelf space and out of fashion apparels may be worthless and remain unsold forever! Thus stock clearance seems to be a very important objective for apparel retailers in using end of season sale twice in a year wherein discount given is up to 50% of the MRP (Maximum Retail Price).
Vyas (2007) also pointed out in the study that in terms of consumer sales promotions, almost everyone used discount coupons and few used lucky draws, contests, gifts, “buy one get one free” type of promotions. From the above review of literature we see that in the Indian context, not much research work has been done in the area of sales promotion of convenience goods. Keeping this in mind the present research is trying to find out the impact of retail sales promotion on consumer’s buying behaviour. Research Methodology After formulating the research problem, the researcher is interested to find out a suitable way to solve the problem.
Research methodology is the way to systematically solve that problem. A research methodology consists of various steps. A researcher should have detailed knowledge before implementing all the steps of research methodology. The researcher must deign the steps of research methodology focusing on the research objectives and the logic behind it. Thus when we talk of research methodology we not only talk on research methods but also consider the logic behind the methods. Keeping the concept in mind the study designs the following research methodology. GMJ,VOL 3,ISSUE 1,JANUARY – JUNE 2009 5 Gopal Das & Dr. Rohit Vishal Kumar Research Design “When designing research, one is faced with a continual series of tradeoffs. Since there are tropically numerous design alternatives that will work, the goal is to find the design that enhances the value of the information obtained, while reducing cost of obtaining it” (Malhotra, 2005). Keeping this above concept in mind this chapter covers the details of the research design. The research design of the study is descriptive in nature. Descriptive studies are made in product research, promotions research etc.
This study often involves the description of the extent of the association between two or more variables. The present study basically deals with the promotions and consumer behaviour. The present study will try to find out the association between the promotions with the various aspects of consumer behaviour. Sampling Unit Socio Economic Criteria (SEC) is a household classification system and the SEC of an individual is determined by taking into consideration the highest level of education and occupation of the Chief Wage Earner (CWE). The NRS-V defines the CWE to be that person in a given time period.
Our study considered the given time period of one month for determining the CWE. As per the Socio Economic Criteria (SEC) classification, a household can be divided into 8 groups based on the occupation level of the Chief Wage Earner –roughly corresponding to income distribution nomenclature. The groups are A1, A2, B1, B2, C, D, E1, and E2. The study was limited to the respondents into SEC A1 and A2 only. This is because SEC A1 and A2 roughly correspond to the middle to lower upper income group and thereby it is assumed that the groups would be more indicative of Big Bazaar customers.
The other criteria of selecting the respondents were the age group. The study has taken the age group of 15-55 years, both male and female. So the target respondents were coming under SEC A1 and A2 and in the age group of 15-55 years both male and female. And the survey was held only on convenience goods for two Big Bazaar retail outlets namely Highland Park and VIP Road in West Bengal. Sample Size Sample size refers to the numbers of elements to be included in the study. Determining the sample size is complex and involves several qualitative and quantitative 16 considerations.
In general, for more important decisions, more information is necessary and the information should be obtained more precisely. The nature of research also has an impact on the sample size. The study has taken 100 samples under the assumption that the characteristics of interest is present in 50% of the population in the choice of sample size of 100 samples would give us a +/- 10% margin of error at 5% level of significance and +/- 13% margin of error at 1% level of significance. The study collected data from two Big Bazaar retail stores at two different locations in West Bengal through structured questionnaire and face-to-face interview.
From each retail store we took data from 50 respondents. The details of the sample size are listed in Table 4. Table 4: Details of the sample size. Types of buyers Highland park VIP Road Total First Time Buyers 25 25 50 Repeat Buyers 25 25 50 Total 50 50 100 With the context of sample size, the study defines the two types of buyers as follows: Repeat Buyer would be identified as those females and males who have purchased the identified convenience goods at least once in the last 45days. First Time Buyer would be identified as those females and males who have purchased the identified convenience goods beyond the specified days.
Sampling procedure The study took the help of random sampling. Among the various types of random sampling the study specifically took the systematic sampling. The data have been collected through structured questionnaire which has been pre tested among the researchers and faculties before posting the final one. The questionnaire has been divided into two parts, eligibility and main part. The data collected by the researchers themselves at the checkout point of the selected retail stores with the sampling interval of five that is every fifth mall leaving customer will be intercepted and eligibility questionnaire will be administered.
If the respondents meet the eligibility criteria then the main questionnaire will be administered. GMJ,VOL 3,ISSUE 1,JANUARY – JUNE 2009 Impact Of Sales Promotion On Buyers Behaviour: An Empirical Study Of Indian Retail Customers Questionnaire Design Data collection is one of the most important methods for any research. Without data collection the study does not do data analysis. If a researcher is unable to do data analysis then the outcome may not be possible, so data collection is important. Data are of two types viz, primary and secondary data. There are various sources of collecting primary and secondary data.
Questionnaire is one of the methods of collecting primary data which the study adopted. After doing literature review related to promotions and consumer’s behavior in international and national context the questionnaire has been made. Structure of the Questionnaire The research was carried out using maximum closed ended questions designed to collect the requisite information from the respondents. The questionnaire was designed in view that it would be administered by the interviewer in a face-to-face discussion and as such the questions and the answers need to be clear and unambiguous and less time taken.
With the purpose of less time it was decided to break the questionnaire into two sections. Section A: Eligibility Section-In this section, the objective was to ensure that the respondent met the requisite criteria for going to the next part. This section established the sex, age (in complete years), status (CWE or others), income group and list of convenience goods. The elimination criteria were used –age had to be 15-55 years; SEC had to be A1 and A2 and, income group and the convenience goods purchase match with the list.
In case of any one of the criteria was not fulfilled, the respondents were eliminated from the survey. Section B: Retailing Promotion and Consumer Behaviour-In this section data were collected with regard of various aspects of retailing promotions and consumer behaviour. Apart from these questions it has been asked to give the suggestion for the improvement of the retail store. In this portion some question was only asked to the repeat buyer or first time buyer. Questions have been asked for getting the opinions of the respondents on different aspect of promotions.
Based on this part the analysis was done for getting the desired objectives. Analysis, Findings and Implications for Managers Analysis can be viewed as ordering, the breaking down into constituent parts, and the manipulating of data to obtain answers to the research question or questions underlying the research project. The complete analysis of research-obtained data requires a blending of art and science, of intuition and informal insight, of judgment and statistical treatment, combined with a thorough knowledge of the context of the problem being investigated.
Overall process of analyzing sample data and making inferences from them can be viewed as involving a number of separate and sequential steps, which are Tabulation, Formulating additional hypotheses and Making inferences. (Green, Tull and Albaum, 2007). Keeping the above concept and the research question in mind we have done the analysis part in the following ways: Reasons of purchasing the products The study aims at knowing from the customers about the reason for purchasing a product. The analysis of the data from the two centers is as stated in Table 5.
Table 5: Reasons for purchasing the products (Multiple Responses: Figures are Percentages of Total Responses) Reasons Highland Park VIP Bazaar Average Sale Promotion Product Satisfaction Good Packaging Non Availability of Other Brands Recommendation to purchase No particular reason 57. 10 67. 30 46. 00 68. 00 51. 50 67. 70 44. 90 32. 00 38. 40 8. 20 6. 00 7. 10 10. 20 24. 00 17. 20 42. 90 36. 00 39. 40 GMJ,VOL 3,ISSUE 1,JANUARY – JUNE 2009 17 Gopal Das & Dr. Rohit Vishal Kumar The Figure 1 of pie chart shows the above tabulated result more clearly. Reasons Highland Park VIP Bazaar Average 8. 20 6. 00 7. 0 Just picked it off the shelf Liked what I read about the product on the package Liked the advertisement of the product 18. 40 30. 00 24. 20 8. 20 20. 00 14. 10 From the result of the above table we can conclude that keeping product satisfaction constant, sales promotion is the main reason for purchasing goods. So, the retailers may take a lesson that after product satisfaction, sales promotion is the main reason for purchase of convenience goods. Decision on amount of purchase owing to sales promotion Customers were asked which sentence best described the amount of their purchase decision during the promotional period of a product.
The analysis is stated in Table 6. Table 6: Best purchase decision due to promotions Purchase Decision Purchase Much More Purchase Somewhat more Purchase the same amount Purchase somewhat less Purchase Much Less Total Highland Park Nos. 02 27 VIP Total Road Nos. Nos. Percentage 04 6 6. 00 29 56 56. 00 Figure 1: Best Purchase Decision due to Promotions From the analysis, we can see that 38 per cent of customers said that they purchase the same amount during promotional period while 56 per cent said somewhat more they purchase.
So, we can conclude that almost 20 per cent of the customers purchase somewhat more of their regular purchase due to promotion. Purchase decision of the same product at a different store under the same promotional scheme: The customers of the two centers were asked, if they get the same promotional scheme for a product at another shop, whether they will go there to purchase it or not. The result of the analysis is described in Table 7. Table 7: Purchase decision of the same product at different store under same promotional schemes Opinions Highland Park No. 05 10 VIP Total Road No. s No. s Percentage 09 14 14 05 15 15 20 0 0 50 18 0 0 50 38 0 0 100 38. 00 0. 00 0. 00 100. 00 Definitely not Probably not 18 GMJ,VOL 3,ISSUE 1,JANUARY – JUNE 2009 Impact Of Sales Promotion On Buyers Behaviour: An Empirical Study Of Indian Retail Customers Opinions Neither yes nor no Probably yes Highland Park Nos. 05 VIP Total Road Nos. Nos. Percentage 02 07 07 Table 8: Opinions regarding promotion Opinions Definitely not Probably not Neither yes nor no Probably yes Definitely yes Total Total no of respondents 7 56 16 16 5 100 2 12 22 50 24 40 100 24 40 100 Definitely yes 18 Total 50 The figure 3 of pie chart shows the details of the above tabulated result. The figure 2 of bar chart shows the clear result of the above tabulated value. Figure2: Purchase decision of the same product at difference store under same promotional scheme Form the result of above bar chart, it is clear that 40 per cent of the respondents say if they get the promotion in any other shop apart from the two selected they will definitely go there to purchase, where as only 24 per cent said probably yes.
So, from this result we can conclude that stores location/loyalty do not play a major role in purchase decision making of convenience goods when promotion is concerned. So, the study can suggest that promotion may have an influence in consumer behaviour in spite of locational advantages. Whether the customers will wait for promotion to purchase the goods The respondents were asked whether they would wait for a promotional scheme to purchase a product or not. The result of the analysis of collected data is stated in Table 8. Figure 3: Opinions regarding promotion From the above result, we see that 7 per cent respondents said hey would definitely not wait for sales promotional scheme to purchase the product, while 56 per cent would probably not, 16 per cent remained undecided, 16% would probably wait and 5 per cent would definitely wait. From the result we can conclude that consumer may not wait for getting promotional benefit to purchase convenience goods. GMJ,VOL 3,ISSUE 1,JANUARY – JUNE 2009 19 Gopal Das & Dr. Rohit Vishal Kumar Does promotion influence repeat visit to the store? A very interesting question was asked to the respondents on whether they would again visit the retail store if it offered the same promotional scheme in future.
The analysis result on 5 point Likert scale reveals – 15 per cent respondents opted for strongly likely, 56 per cent for somewhat likely, 22 per cent neither likely nor unlikely and 7 per cent somewhat likely. So from the result one thing is clear that if the customers get the same promotional benefit in near future for the same product they might come to purchase. So, we can conclude that sales promotional schemes play a limited role in ensuring repeat visit to the store. Ranking of different promotional schemes: There are various types of promotional schemes, like direct price discount; buy one, get one free and bonus pack.
The study wanted to find out the first three popular promotional schemes based on the collected data. The following Table 9 shows the result: Table 9: Overall ranking of the promotional schemes Promotional Schemes 1. Direct price discount 2. Buy one, get one free 3. Buy one get another product free Rank 1 2 3 Sources Highland Park VIP Bazaar Average of Information From newspaper advertisement From television advertisement From radio/ FM channels advertisement Came to know when I visited the store My friends/ neighbors who have already purchased From advertising material displayed outside store Others (please specify) 47. 44. 0 45. 9 47. 9 54. 0 51. 0 10. 4 10. 0 10. 2 54. 2 60. 0 57. 1 16. 7 2. 0 9. 2 From the above mean results we can see that direct price discount ranked no. 1, Buy one, get one free ranked no. 2 and buy one get another product free is number 3. So we can conclude that the retailer can give the three promotional benefits as per the ranking to attract more customers. Media habits of the consumers: Customers were asked how they came to know about the different promotional schemes or sources of information of sales promotion. The analysis of the data is stated in Table 10.
Table 10: Sources of information of promotions (Multiple Responses: Figures are Percentages of Total Responses) 6. 3 6. 0 6. 1 .0 .0 .0 The result shows that in-store publicity ranks the highest. From this we can also conclude that in-store publicity 20 GMJ,VOL 3,ISSUE 1,JANUARY – JUNE 2009 Impact Of Sales Promotion On Buyers Behaviour: An Empirical Study Of Indian Retail Customers plays a major role in providing information to the customers, followed by television and newspaper. So, for sales promotion the retailers need not spend much more money for outdoor advertisement if they properly maintain in-store publicity.
Impact of sales promotion on purchase basket To find out the impact of sales promotion, the study has developed a hypothesis which is as follow: H0: There is no impact of sales promotion on consumer purchase basket To test the above hypothesis, we decided to test the impact on various aspects like center, sex of the respondent, status of the respondents, and the respondent code on Qn. 8 — in which we asked the respondent how much more he has purchased. The results are summarized in the Table 11 below (Questionnaire attached at Exhibit 2): Table 11: Impact of manifest variables on purchase basket QB4 versus F Calculated 0. 1 Center 0. 49 Sex Status (CWE) 0. 01 1. 10 SEC 0. 51 Respondent Type From the above table we see that the impact of the various manifest variables is not significant on the purchase basket. As such we decided to search for latent (hidden) variable which could reveal whether promotions have an impact on retail purchase or not. To this extent, we found Qn. 8. most suitable for our purpose. In Qn. 8. we had asked the respondent to identify all the factors which prompted him to purchase the particular product. Ten (10) different reasons were provided viz.
Promotions, product satisfaction, good packaging, non-availability of other brands, recommendation to purchase, no particular reason, just picked it off-the-shelf, liked what I read about the product on the package and liked the advertisement of the product. P Value 0. 477 0. 486 0. 943 0. 297 0. 477 Result Not Significant Not Significant Not Significant Not Significant Not Significant The question was a multiple response question and five variables numbered Qn. 8_1 to QB8_5 were used to record the multiple responses. Analyzing individual variables we found that promotions were recorded only in Qn. _1. As such, we recoded Qn. 8_1 into a new variable (PROMO) as follows: If QB8_1 = 1 New Value = 1 Else If QB8_1 = 2 to 10 New Value = 2 The new variable PROMO reflected the hidden motive of purchase. If the value of PROMO was 1, it meant that promotion was an influence in purchase of the product and if it had a value of 2, it meant that sales promotion was not an influence on purchase. Now we ran a test of ANOVA with PROMO as the factor and purchase basket as the response. The results are presented below: Source PROMO Error Total DF 1 98 99 SS 547. 8 6402. 2 6950. 0 MS 547. 8 65. 3 F 8. 38 P 0. 05 %% Others %% Promotions Figure 4: Box-Plots of Average Purchase GMJ,VOL 3,ISSUE 1,JANUARY – JUNE 2009 21 Gopal Das & Dr. Rohit Vishal Kumar consumers sales promotion works,” Marketing Science, 14(3/2), G112-G132. Broadbridge, A and Calderwood, E (2002) “Rural grocery shoppers: do their attitudes reflect their actions? ” International Journal of Retail & Distribution Management, 30 (8), 394-406. Bureau (2007). “Shopper’s Stop, Hyper-CITY ink MoU for Argos,” The Economic Times, February 26. Blattberg, R, Briesch, R and Fox, E (1995). “How promotions work,” Marketing Science, 14 (3), G122132. Daftari, I (2007). Reliance Fresh may add groceries to product mix,” The Economic Times, May 3. Goswami, P and Mishra, M (2007). “Would Indian Consumers move from Kirana Stores to Organized Retailers When Shopping for Groceries? ” papers. ssrn. com/sol3/papers. cfm? abstract_id=983303. Goldman, Sachs (2005). “India’s Economic growth May Beat China by 2015”, Asia Pulse, February 7. Green, Tull and Albaum (2007), Research For Marketing Decisions, PHI, fifth edition. Hyllegard, K, Eckman, M, Descals, A M, Borja, M A G (2005). “Spanish consumers’ perceptions of US apparel specialty retailers’ products and services, Journal of Consumer Behaviour, 4(5), 345-362.
India Retail Report (2007). “Food and Grocery Retail,” India Retail Forum and Images Multimedia, pp 74-77. Kopalle, P K, Carl, F M, and Marsh, L (1999). “The Dynamic Effects of Discounting on Sales: Empirical Analysis and Normative Pricing Implications,” Marketing Science, 18 (3), 317-332. Kadiyali, V, Chintagunta P, and Vilcassim, N (2000). “Manufacturer-retailer channel interactions and implications for channel power: An empirical investigation of pricing in a local market,” Marketing Science, 19(2), 127-148. Knox, S and Walker, D (2003). Empirical developments in the measurement of involvement, brand loyalty and their relationship in grocery markets,” Journal of Strategic Marketing, 11, 271– 286. Kim, S Y and Staelin, R (1999). “Manufacturer allowances and retailer pass-through rates in a competitive Figure 4: Residual Plots of Average Purchase The results show that the p-value is significant at 5 per cent level of significance. Thus there is evidence for us to believe that promotions may play a significant part in determining the size of the purchase basket. However, the finding of importance is that promotion was found to be a latent variable.
This raises an interesting question regarding how purchasers see promotions. It could be that, in the case of convenience goods, use of promotions may not reflect well on the status of the consumers. Conclusion The study shows that retail sales promotion plays a limited role on consumer buying behavior. Only a small percentage of the customers are attracted to such sales promotion and wait for it. Store loyalty may not play a role in sales promotion. Retail sales promotion has to depend on others factors to positively impact buying behavior. Hope retailers will consider this study while planning their strategy.
This would also open new insights for academicians. References Ailawadi, K L, Farris, P and Shames, E (1999). “Trade promotion: Essential to selling through resellers,” Sloan Management Review, 41 (1), 83-92. Ailawadi, K (2001). “The retail power-performance conundrum: What have we learned? ” Journal of Retailing, forthcoming. Blattberg, R C, Briesch, R A and Fox, E C (1995). “How 22 GMJ,VOL 3,ISSUE 1,JANUARY – JUNE 2009 Impact Of Sales Promotion On Buyers Behaviour: An Empirical Study Of Indian Retail Customers environment,” Marketing Science, 18 (1), 59-76.
Kincade, D H, Woodard, G A, Park, H (2002). “Buyer– seller relationships for promotional support in the apparel sector” International Journal of Consumer Studies, 26 (4), 294-302. Malhotra, N K (2005). Marketing Research an Applied Orientation, PHI, fourth edition. Moschis G, Curasi C, Bellenger, D (2004). “Patronage motives of mature consumers in the selection of food and grocery stores,” Journal of Consumer Marketing, 21(2), 123- 133. Miranda, MJ, Konya L, Havrila, I (2005). “Shoppers’ satisfaction levels are not the only key to store loyalty,” Marketing Intelligence & Planning, 23 (2), 220-232.
Nijs, V R, Dekimpe, M G, Steenkamp, J B E M, and Hanssens, D M (2001). “The category demand effects of price promotions,” Marketing Science, 20 (1), 1-22. Pauwels, K, Hanssens, D and Siddharth, S (2001). “The long-term effects of price promotions on category incidence, brand choice and purchase quantity,” Working paper, Anderson Graduate School of Management, UCLA. Ramanathan, V and Hari, K (2008), “Structural Changes in Indian Retail Market: From Unorganized to Organized,” Indian Journal of Marketing, XXXVIII (12) ,34-38. Srinivasan, S and Bass, F M (2001). Diagnosing competitive responsiveness: Disentangling retailerinduced and manufacturer-induced reactions,” paper presented at the MSI conference at Cambridge, MA. Srinivasan, S and Bass, F M (2000). “Co integration analysis of brand sales and category sales: Stationary and long-run equilibrium in market shares,” Applied Stochastic Models in Business and Industry, 16, 159177. Sinha, P K, Mathew E, Kansal A (2005). “Format Choice of Food and Grocery Retailer,” Working Paper No. 200507-04, IIM Ahmedabad. Tarun, K S, and Chopra, S L (2007). “Beyond the Retail Hype,” Indian Management, pp 12-27.
Urbany, J E, Dickson, P, and Sawyer, A (2000). “Insight into cross-and within –store price search: Retailer estimates vs. consumer self-reports,” Journal of Retailing, 76 (2), 243-258. GMJ,VOL 3,ISSUE 1,JANUARY – JUNE 2009 Vijayraghavan K, and Ramsurya M V (2007). “Mom & pop happy letting a rich tenant take over,” The Economics Times, February 5. Vijayraghavan, K (2007). “Future Group to focus on lifestyle & non-grocery biz for higher margins,” The Economic Times, February 9. Vyas, P H (2005). “Measuring Consumer Preferences for Sales Promotion Schemes through Conjoint Design in FMCG Sector,” W.
P NO. 2005 -09-08, IIMA, India. Vyas, P H (2007). “Sales Promotions practices in Apparel retail Sector and Challenges Ahead,” W. P NO. 2007 -1102, IIMA, India. Exhibit 2: Questionnaire: Qn. 1. SHOW CARD 1. Ask the respondents, Can you tell me the reason for purchasing the product. MULTIPLE CODE POSSIBLE Promotions Product Satisfaction Good Packaging Non Availability of Other Brands Recommendation to purchase No particular reason Just picked it off the shelf Liked what I read about the product on the package Liked the advertisement of the product 01 02 03 04 05 06 08 09 10 Qn. 2.
Considering your consumption of the product and the purchase of the product due to promotional scheme, which sentence best, describes your purchase decision: SINGLE CODE I have purchased much more than what I need I have purchased somewhat more than what I need I have purchased the same amount what I need I have purchased somewhat less than what I need I have purchased much less what I need 01 02 03 04 05 23 Gopal Das & Dr. Rohit Vishal Kumar Qn. 3. Would you have purchased the same product, if it was being sold with the same promotion scheme at any other shop? SINGLE CODE 5 Definitely Yes Yes 3 nor No 2 Probably Not 1 Definitely not Qn. 7. Considering the product that you have purchased, can you tell me how do you come to know about the promotional scheme. MULTICODE POSSIBLE From newspaper advertisement From television advertisement From radio/ FM channels advertisement Come to know when I visited the store My friends/ neighbors who have already purchased From advertising material displayed outside store Others (please specify) 01 02 03 04 05 06 07 Probably Neither Yes Qn. 4. Do you wait for promotional schemes for purchasing products and services for your household?
SINGLE CODE 5 Definitely Yes 4 Yes 3 nor No 2 Probably Not 1 Definitely no Probably Neither Yes Qn. 5. How likely are you to come to the retail store again, if it launches the same / similar kind of promotion scheme again in the near future? SINGLE CODE 1 Strongly Likely 2 Somewhat Likely 3 Neither Likely nor Unlikely 4 Somewhat Unlikely 5 Strongly Unlikely Qn. 8. SHOW CARD 8. ASK IF REPEAT PURCHASER Can you tell me the reason for purchasing the product of the same brand again? ASK IF FIRST TIME PURCHASER Can you tell me the reasons for purchasing the product of this brand?
MULTIPLE CODE POSSIBLE Promotions Product Satisfaction Good Packaging Non Availability of Other Brands Recommendation to purchase No particular reason Just picked it off the shelf Liked what I read about the product on the package Liked the advertisement of the product 01 02 03 04 05 06 08 09 10 Qn. 6. SHOW CARD . 6 Given below is some common types of promotions that are used by marketers to sell their products. Considering everything, can you please rank these in the order of your preference? Give a rank of 1 to the most preferred, 2 to the next most preferred and so on Different promotional chemes Direct price discount Buy one get one free Buy one get another product free Redeemable discount coupons Contests and sweepstakes Exchange offers Product warranties Bonus pack Samples Rank 24 GMJ,VOL 3,ISSUE 1,JANUARY – JUNE 2009 Copyright of Globsyn Management Journal is the property of Globsyn Business School and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder’s express written permission. However, users may print, download, or email articles for individual use.
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