Effectiveness of promotions in retail stores

Abstract

The total retail sales in India will grow from US$ 395.96 billion in 2011 to US$ 785.12 billion by 20151. Organized retail is making strides in all formats of retail but its share of market is still around 10% in this highly fragmented industry dominated by unorganized sector. In such a scenario retailers use promotions as one of the vehicle to drive sales, increase footfalls, move inventory, off-season sales, increase brand awareness and increase switching behavior of consumers. Normally these promotions are offered just before the festive season. We are concentrating on specialty stores in this study. The behavior of adults when they buy for themselves is completely different from that when they buy for their child. The target customer segment is a nuclear family living in a metro or a large city of India where both / one of the parents are working. The effects of changing socio-economic and cultural factors in the country coupled with increasing incomes have accelerated the preference of brands amongst the target customer segment. Traffic and parking problems is cited as one of the most important reasons for sticking to a single store / mall format of retail when going on a shopping spree. Although the whole family goes on shopping the say of the mother matters most in most of the categories. The child is a major influencer in case of toys. Fathers however are just gatekeepers in most buying situations that insist on taking less time while shopping and enforce a maximum cap on spending – highly negotiable by the mother and child. This situation offered us an opportunity to understand the trade-offs between quality and price sensitivity. We find that brand loyal customers are also the ones who want to get all categories under the same roof for convenience. They do not want to haggle over price. They are value conscious in terms of quality per unit price paid but are discerning in terms of the stores that offer quality and hence stick to that store for all their purchases. They even consider very deep discount offers as a signal of poor quality and are willing to pay a premium for quality products. On the other hand shop hoppers are characterized by unplanned spending on discretionary items such as toys etc. They measure value in terms of the bargain that they have clinched. Impulse purchase also depends on the composition of the buying center. If the kid is in a life stage where he can understand what toys he wants then he becomes the decision maker. We finally present recommendations that help marketers use these observations to fulfill their objectives.