Category characteristics and their effect on sales promotion response

Abstract

Abstract Promotions in general are all those means by which marketers communicate with the target market. In recent years, there has been a tremendous increase in the level of promotional activities throughout the FM CG category. Some of the reasons could be attributed to the increased presence of multinationals in the Indian market. With opening up of markets and consequent increase in competition, there has been a relative standardization of products so far as technology of manufacturing and product quality is concerned and hence the actual product differentiation has become almost negligible. Thus there is a need among the marketers to look for other avenues for attracting consumers, one of which is provided by sales promotion. Though manufacturers can see a gratifying sales increase during a promotion period, a nagging question remains - is the increase in sales due to consumers switching from other brands or is the brand borrowing sales from the future as consumers advance their purchases in time or stockpile the product ? Various studies examine the effectiveness of a sales promotion by decomposing the increase in sales into increase due to brand switching, purchase time acceleration and stockpiling. Among many interesting findings, they report that 84% of the sates increase due to promotion comes from brand switching, 14% due to purchase acceleration, whereas less than 2% comes from stockpiling. Other studies examine the effects of a manufacturer coupon on brand choice behaviour. The research suggests that coupons do produce a short term increase in the brand's purchase share that is due mostly to redemption purchases. Research has indicated that four major mechanisms affect promotion response. These mechanisms, include brand switching, store switching, category expansion and purchase acceleration. For the purpose of our research, we decided to narrow down the study to find the effect of promotion two mechanisms only; Brand Switching and Purchase Acceleration. The frame work mentioned above is being used to develop a set of four hypotheses. HI : Promotional response is positively related to level of category penetration. H2: Promotional response is negatively related to the category's average inter purchase time. H3: Promotional response is positively related to the degree of impulse buying in the product category.

H4: Promotional response is positively related to the ability of a product category to be stockpiled. The objective of the study was to measure the effect of Category characteristics on the sales promotion response. The study also ensured careful selection of the category to represent the four hypotheses. Care was taken to ensure that at least two categories represented each hypotheses. In addition to the category selection of instrument was also crucial to the research. A pre-simulation questionnaire was used to confirm the category selection and to get a set of top brands to be included in each category. This was followed by a simulation of an actual grocery shop purchases by arranging various brands as they are found in a store. The data collected was subjected to ANOVA test to ascertain the significance of difference in mean of responses to various categories. This was further interbreed by the qualitative data captured during the simulation. The research indicated that the effect of category penetration on sales promotion response was not as strong as that of branding and differentiation in that particular category. The second hypotheses regarding impulse purchase was ratified. The other two hypotheses were also ratified though to a lesser extent. The study was limited in its scope due to the respondent set, and geographical limitations. Further research can be undertaken to ensure a more heterogeneous respondent set from different geographical areas.