Sales Promotion Effect on Customer Buying Decision

Sales Promotion Effect on Customer Buying Decision at Supermarket: Example on several countries.

Literature Review

Sales Promotion

According to Boddewyn & Leardi (1989) the nature of sales promotion can be defined as:” Techniques and devices commonly used on a temporary basis, to make goods and services more attractive to distributors or final customers by providing them with some additional benefit or inducement (incentive) or the expectations of such a benefit, whether in cash, in kind (nature) and/or services, whether immediately or at a later time, whether freely or conditionally.”. There are three main contents in the sales promotion field: Customer promotion, Trade promotions and sales forces promotion (Smith, 1998). Specified in sales promotion, there are some sales promotional categories are: Rebate, Samples, Coupons, Bonus Pack. All of these tool being used as ways to promote profitability by stimulating the consumers to buy their products (Boddewyn and Leardi, 1989). Desire to buy the product or give at least a try on the product that the sellers want to present to the customer are the action of sales promotion. Effective sales promoting can build up an good image of the brand and accomplish several purposes like increasing sales, building a customer databases, generating appearance on publicity (Smith, 1998). Accredited from John and William (1986) Sales promotion and Modern Merchandising,  the activities of sales promotion seem to be more effective than other types of advertising and personal selling. In addition, Joncos (1990) stated that sales promotion is more effective in any rival than any others marketing operation. According to Chandon, Wansink and Laurent (2000) the sales promotion satisfies the customer need of money saving, provide instant reward and can be considered a practical advantage for the consumers.

Types of sales promotion

Samples

Samples are some test taster of the product, some are free and some are charged with a little amount to requite the loss of the company (Kotler et al., 2003). According to Clow and Baack (2007) free samples are a way of introducing a new product out on the market. Samples also are a very clever method to deliver the product to the customers so the product can be tested by the direct customers and affect their decision on buying the product in the future (Kardes, 1999). According to O’Guinn, Allen and Semenik (2012) most of the company on consumer market using this method in some kinds, invest roughly $2.2 billion a year on this promoting routine.

Lammers (1991) stated that there is a significant effect of sampling method on customer buying behavior and have good connection on fast selling practice. In addition, Shimp (2003) also indicate that sampling have a good effect on customer buying decision.

Coupons

Coupons is one of the most used practice by many marketers with the action of giving the customers a vouchers or certificate that reduce their spending on certain products utilitarian them financially later on and whenever in the future they want to purchase, like 25% discount from the actual price or a fixed amount like $5 per piece (Harmon and Hill, 2003). Robinson and Carnack (1997) indicated that coupon have been appeared for the trial period of the product. Customers are influenced by the value reduction on coupons; lead to a conclude that coupon is a smart tool (Peter and Olson, 1996)

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Kotler and Armstrong (2006) researched electronic in store coupon machines are a good tool to save customers buying history and based on that to offer coupon depend on past experience of buying and the current bill. Barat and Paswan (2005) stated that there are some possible negative effects of coupon issuing; manager should segmenting customer to introduce the details coupon on each cases. Reviewed Gilbert and Jackaria (2002) research shown that coupon have the least effect on product experimental. According to Wayne (2002) research about three coupon campaigns resulted in promoted products added incremental sales and other non-coupon purchases after.

Price discount

Fill (2000) indicated that price discount is the easiest method of reducing the price of the product that the percentage of the price discounted appears on the package of the product, offering a good price to persuading sales. Lessen the price on the given product or add more number of items to that product and use the same price to enhance value of the product and create an encouragement for the customer to purchase (Raghubir and Corfman, 1999). Some studies have proved that price discount method play an significant role in stimulating the client to try the product offered (Fill, 2002; Shimp, 2003).

Price discounting create a seasonal sales peak, this activities usually attract the occasional clients on the similar brand more probable than getting new clients to buy the product, in addition, the periodic clients seem to get back to their best interested brand after the discount season (Ehrenberg et al, 1994). Ndubisi and Chiew (2006) stated that item trial has an association with price discount, it might be said that the first can be expanded by value reduction for any item. Price discount has a connect with other sales promotional tools in the relationship of affecting each other and persuading the customers to purchase the product, like coupons and sample (Gilbert and Jackaria, 2002; Huff and Alden, 1998). It likewise demonstrates that an extensive price reduction cost for any item that has happened amid the business season will be made by the merchants since buyers aware about the cost (Smith and Sinha, 2000)

Buy one get one free

According to Sinha & Smith (2000) buy one get one free is one of the most commonly used advertising to promote products, in the sense that if you purchase a product, you will have a free product, by utilizing this procedure the client can be effectively pulled in to purchase the item with the fact that there is no extra cost and it ought to be more esteemed from the client point of view, therefore customer can’t ignore such great deal. The extra bundles and additional items without cost motivate the client purchasing behavior to buy the product; since clients are getting positive emotion towards such offer particularly on the off chance that it is in substantial sizes bundles and properly publicized. This sales promotion method also benefits the sellers in speeding up the inventory clearance (Li, Sun & Wang, 2007).

Customer buying decision

To clarify the customer buying decision part, clients usually have boundless demand to fulfill their needs and fulfillment to have something new. There have been a large literature had inspected customer buying decision and reported that there are a lot of issues reflect the consumer behavior buy or not to buy goods. Schiffman and Kanuk (2004) stated that there are four opinions for explaining consumer decision and behavior such as economic view which is outstand others view for making more impact on customer decision followed by passive view, emotional view and cognitive view, they also stated that consumer purchasing behavior reflected on how consumers choose what product they want and how that assessment going and its influence on next purchases. For instance, Customer buying behavior is the study of the procedures elaborate when persons or groups in the processes of select, purchase, use, or dispose of products, services, ideas, or experiences to pleased wants and needs (Solomon, 1983). Naimah and Tan (1999) specified that there are some aspects affect consumer buying decision such as the high ability to perform a purchase and the physical surrounding at the place of purchases. According to Smelser and Baltes (2001), our daily life activities mostly is about buying products, creating our behavior and experiencing services at the place such as shops, city center, shopping centers and so on, where some motivation range can be inspired. Kotler (2003) argued that social and economic factors can significantly affect the consumer choices like cultural and essential factors of consumer behavior. William (2002) social class has huge impact on buying assessment criteria. After that Yip (2003) indicated that the social class of a person can cause limited options when making a buying decision if their income is low. According to Loudon and Della Bitta (2004) consumer behavior studies play an significant part in determining marketing segments and marketing plans, they recommended that customer buying behavior is often being studied because certain debates that suggestively affecting the customers behavior and their predictable actions, for this motive customer behavior is supposed to be an practical discipline, they also designated that the core marketing activities to scheming an effective marketing plans need three items are market segmentation, customer decision making and purchasing behavior.

Sales promotion effect on customer buying decision

The impact of sales promotion on consumer buying behavior has been extensively specified in many investigates and studies, they have exposed that there are a lot of factors can affect customer purchasing behavior, willingly to buy the products or not (Nagar, 2009; Smelser and Baltes, 2001). According to Nijs, Dekimpe, Steenkamps and Hanssens (2001) sales promotions make a significantly impacts on consumers buying behavior in the field of product brand, purchase time, quantity and brand switching. Moreover, consumer purchase decisions occasionally can be founded on the price sensitivity; so consumers seem to be more attracted to promoted goods (Bridges, Briesch and Yim, 2006). According to Quelch (1989) sales promoting, resources and methods have radically increased in the recent years performed by marketers. Then Blattberg and Neslin (1990) admitted that sales promotion has a power on consumer buying behavior by concentrating on occasionally promotion. Schneider and Currim (1991) claimed that customers accepting the promotion methods are built on the out and in store sales promotion. Later on Schultz (1998) directed that sales promotion has a straight effect on customers’ behaviors. Chandon, Wansink, and Laurent (2000) stated that there are more influencing factors in consumer buying behavior rather than just price discount. Pramataris (2001) said that sampling is a good method on sales promotion which has less charging rate and an operative tool to fascinate clients. Fill (2002) designated that sales promotion tools has a enormous impression on consumer purchasing behavior throughout any competition; therefore reduction the price one of these tools can resulted in customers choices. For instance, Pickton and Broderick (2005) researched in sales promotion can result in growing sales capacity but less revenue. Others researchers also agreed that sales promotions is targeting the influence on consumer buying behavior by presenting new brands  with the target of new customers who have no previous experience with it(Solomon, Marshall and Stuart, 2008; Kotler and Armstrong, 2004). Though, Esfahani and Jafarzadeh (2012) indicated that mental variables have an important association with sales promotion; therefore they concluded that there is no substantial bond between impulsive behavior and sales promotion. Rothschild and Gaidis (1981) provided a case on how sales promotions can be used as determining stimulus. In that case, a free sample has been given to the possible customers. Inside the product taster is a voucher offering a great discount, possessed for a future rebuy. The shaping procedures carry on at the point of rebuy (store). Products at retail stores will also bring coupons for the next purchases, inside the products bundle. For instance, both items (samples and products accessible for sale) offer a voucher for a future buy, the distinction between those two discounts is assessed by the amount of discount. The second discount assessed with a lesser total. The achievement the marketers want to achieve is to form the behavior of the buyer over various phases.

Theoretical framework review

Revised the theoretical framework from the research conducted by GilbertN and Jackaria(2002); Mittal and Sethi (2011); Shi, Cheung & Prendergast (2005); Alimpic (2014). Reviewed that researches mentioned above using the model to show the influence of sales promotion tools such as, coupons, price discount, sample and buy one get one free on customers buying decision through many behaviors like brand switching, Purchase Acceleration, Stock Pilling, Product Trial, and Spending more money. The idea of the above researaches is to find out the relationship between the sales promotion tools and the buying behavior of the customers.

Research Methodology

This dissertation using deduction approaches to perform the research. Robson (2002) has itemized five stages to developing a deductive research as following: Firstly, develop a hypothesis showing the relationship between two or more notions or variables. Secondly, voicing the hypothesis in operational terms by representing exactly how the concepts are measured. Third part is, testing the hypothesis. Fourthly, investigate the possible outcome. Last but not least, modifying the theory if the findings necessary. The research using quantitative data research, gathering data through secondary mean, examines academic journal and previous empirical researches on sales promotion effect on customer buying decision in retail market.

Proposed theoretical model   

To satisfying the demand of conducting a research on sales promotions influences on customer buying decision the following theoretical model has been developed due to achieved the ideas from previous study. The model displays the effect of sales promotions tool: coupons, price discount, sample and buy one get one free on customer buying behavior: brand switching, Purchase Acceleration, Stock Pilling, Product Trial, and Spending more money. The theoretical model being drawn in figure 1 shows the relationship. After that the subsequent hypothesis have been shaped to response to the research question

Figure 1: Conceptual framework for the impact of sales promotions tool affecting customer buying behavior

Hypothesis 1: Coupon has substantial effect on customer buying behavior

Hypothesis 2: Price discount has substantial effect on customer buying behavior

Hypothesis 3: free sample has substantial effect on customer buying behavior

Hypothesis 4: buy one get one free has substantial effect on customer buying behavior

Limitations

Findings

To examines the hypothesis has been drawn, researcher used data and conclusion from four previous studies which have the same or equal research model to test the hypothesis and investigate the possible outcome of the studies

Hypothesis 1: Coupon has substantial effect on customer buying behavior

To test the hypothesis 1 the researcher used the study of Alimpic (2014):” The effectiveness of sales promotion tools: customer perspective”. The research method, sampling procedure of this research can be seen on Appendix A. The statistical number on this research is stated in Table 1. According to the result provided by the researcher, repeated measures ANOVA presented that there are no substantial alterations among  buying behaviors to coupons (Wilks’ lambda = 0.979, p > 0.05). The figure shown in Table 1 is 2,22 for brand switching; 2,18 for product trials; 2,28 on purchase acceleration; 2,16 for spending more out of 5 points maximum. This mean coupon method have no intention in making the customer to buy another brand that they do not regular buy, buying earlier, buy more or buy another product that they have never used before and not encouraging customer to spend more money to buy as well. To be more clarify that coupon does not lead the respondents to perform any of the presented buying behaviors. Average points of coupons are 2.22 out of 5. Therefore, coupons have no substantial impact on customer buying behaviors. The first hypothesis: “Coupon has substantial effect on customer buying behavior” is rejected. This hypothesis also confirmed by other researchers on their researches (Gilbert and Jackaria, 2002; Ndubisi and Chew, 2006; Osman and Chan Yin Fah, 2011)

Hypothesis 2: Price discount has substantial effect on customer buying behavior

To test the hypothesis 2 the researcher used the study conducted by Mittal and Sethi (2011):”The Effectiveness of Sales Promotion Tools among Indian Consumers: An Empirical Study”. The research method, respondents profile, and others relating to this research can be seen on Appendix B. The statistical data after analyzed on this research for price discount have been stated in Table 2.  Acquired the figure from the table provided; Brand switching with 2.85; Purchase acceleration at 2.75; Stock Piling at 2.72; Product Trial at 2.96 and Spend more money at 3.73 It can be seen clearly that there are two groups of behaviors responses, the first group included brand switching, purchase acceleration, stock piling, and product trial; the second group is spend more money than monthly budgeted. According to the first group, price discount seem to be more effective in inducing costumers to buy products from another brand that they not regular buy, buy the product earlier due to the discount are available at the time of purchases, price discount encouraged buyers to buy more than expected for the reason that might be because of the reduced price, and consumers also like to try new product that they never bought before when a price discount is on. The second group seems to be less successful because price discount might not be the reason for spending more money than monthly budget. Despite the bad response on spend more money but price discount appear to be very effective on buying behaviors. So the second hypothesis Price discount has substantial effect on customer buying behavior is approved.   

Hypothesis 3: Free sample has substantial effect on customer buying behavior

To test the hyphothesis 3 the researcher used again the study conducted by Alimpic (2014). The research method, respondent’s profile, and others relating to this research can be seen on Appendix B. The statistical data after analyzed on this research for Free sample have been stated in Table 1. Achieved the means from the resulted provided by Alimpic (2014): Brand switching at 2.54; Purchase acceleration at 2.46; Stockpiling at 2.19; Product trial at 2.59 and spending more money at 2.18. According to the note given on the table, 5 is the highest level which is strongly agreed; which mean under 3 is slightly disagree with the statements. For instance, in this data collected and analyze numerically by Alimpic (2014) free sample have no substantial impact towards all behavior responses. To clarify more about this, there are two groups can be seen clearly that there is a group slightly better than the other group; first group is brand switching, purchase acceleration and product trial; the second group which are buy more and spend more have the least influences. But after all the overall proportion still under neutral and this hypothesis is rejected.

Hypothesis 4: There is a substantial relationship between buy one get one free and costumer buying behavior

To test the hypothesis 4, the researcher used the study conducted by Shi, Cheung & Prendergast (2005):” Behavioral response to sale promotion tools: A Hong Kong Study” The research method, respondents profile, and others relating to this research can be seen on Appendix C. The statistical data after analyzed on this research for price discount have been stated in Table 3. The statistic for buy one get one free towards different customer buying behavior are collected and analyzed under the scale of 7. For each category we have: buy one get one free toward brand switching at 3.89; purchase acceleration at 4.86; Stockpiling at 5.01; Product trial at 3.69 and spend more money at 4.58. Overall the result seems really good in some behavioral response. The most significant impact of buy one get one free is on stock piling; after that purchase acceleration at; the third one is spend more money to buy the product; the fourth and the last are brand switching and product trial. The average points toward 5 behaviors for buy one get one free is 4.41, that is over 4 points in a 7 scales that means there are good responses to buy one get one free. To extent the problems, the possible problem that causing brand switching  not so successful on buy one get one free is because of the customers might not know much about that product, so the method might not fit in some circumstance, the same possible explanation for product trial as well. Despite that, the hypothesis 4 buy one get one free has substantial effect on customer buying behavior is accepted.