A Empirical Study of Sales Promotion and Consumption Patterns in the Department Store Setting Lin, Yu-Jen () Lin, chiu-hui

() Abstract The research proposed and tested hypothesised relationships among four sales programs and two consumer behaviour measures. By focusing on both construct and tests of substantive relationships, the study aims to strengthen the empirical foundation of consumer behaviour. The research findings reported are based on personal interview of 482 female consumers with age 15-44 for the department store context. Personal interview and multiple regression approaches were employed to test the research hypotheses and exploratory propositions. Price-off and event sponsorship were found to be a significantly positive effect on consumer spending and repeat visits. However, confronting the expectations of practitioners, the empirical results indicated that coupons and sweepstake were not the prime explanatory factor of consumer spending and repeat visits. Introduction Sales promotion is the most important component of marketing budgets, in terms of magnitude and growth rates. The increased importance of sales promotion as strategic tools in mature consumer markets has generated strong interest among practitioners in understanding the mechanisms, effectiveness, and efficiencies of different sales promotion approaches( Huff and Alden, 1998). The object of this study is consumer promotions, which include samples, value packs, price-offs, rebates/refunds, coupons, sweepstakes, contests and special events. Their primary role within a comprehensive brand management strategy is to stimulate immediate sales and consumer interest toward the promotion brand. Mirroring the increased practitioner activity is a body of academic research focused on different aspects of consumer sales promotions( Blattberg and Neslin, 1990; Ward and Hill, 1991). The major questions have concentrated on effects of different promotions on consumer choice (Dodson, Tybout and Sternthal, 1978; Guadagni and little, 1983; Gupta, 1988), and characteristics of consumers who might respond to sales promotions ( Blattberg et al, 1978; Teel, Williams and Bearden, 1980). Despite the accumulated efforts of academic and practitioner researchers, a crucial question remains unanswered. At the heart of this discussion is the issue of the expected effects of sales promotion on consumer purchase frequency and repeat visits. One crucial question relating to sales promotion is their effect on consumer attitudes of the promoted brand. Results on sales data at store level, household panel, or market level seem to suggest that the repurchase probabilities of promoted items( a behavioural outcome) are lower for some time after

the end of the promotion period( Dodson et al, 1978; Guadagni and Little, 1983; Shoemaker and Shoaf,1977). One major challenge facing the researchers who found these results was to explain them in terms of theories that fit consumer behavior. The study examined the effects of sales promotion on individual behavior, consumer purchases, category purchases and repeat purchases. The differential effects of the relationship of prior purchase frequency and consumer repeat visits response to sales promotion were also explored. Literature Review Promotion is more important in changing the timing rather than the level of purchasing because customers tend to buy earlier (Doyle and Saunders, 1985). Promotion is the marketing effort designed to communicate to an organization target market. s Promotion is, undoubtedly, the most visible element of the marketing mix( Govoni, Eng and Galper, 1986; Guiltinan and Paul,1994; Lamb, Hair and McDaniel,1992; Pride and Ferrel,1989). There is a growing emphasis on designing the best marketing promotional strategies for targeting and maintaining consumers. A good promotional strategy encompasses advertising, sales promotion, public relations, and personal selling in order to communicate with their present and potential consumersKotler,1994). Promotions is responsible for moving the demand curve upward and to the right by utilizing some or all of the elements of the promotion mix- advertising, personal selling, and publicity along with sales promotion( Ward and Hill, 1991). Sales promotion has been defined as a direct inducement that offers an extra value or incentive for the product to the sales force, distributors or the ultimate consumer with the primary objective of creating an immediate sale (Schultz and Robinson,1982). T et m sl po o ohs h e a s rm t n a r e i been used to represent at least three different concepts: (1) the entire marketing mix, (2) marketing communications (Anderson, 1982),(3) a catch-all for all communication instruments that do not fit in the advertising, personal selling or public relation subcategories( Van Waterschoot and Van den Bulte, 1992). Pride and Ferrel(1989) state that sales promotion methods fall into one of two groups. Consumer sales promotion methods are directed toward consumers and include coupons, contests, bonuses, vacations, gifts, tie-ins and free samples ( Lamb et al, 1992). Trade sales promotion methods focus wholesalers, retailers and salespersons. Examples include sales contests, free merchandise, demonstrations, point-ofpurchase, and display( Anderson, 1986; Pride and Ferrel, 1989). Blattberg and Neslin(1990) summarize the various definitions offered by several authors(Kotler, 1988; Webster, 1981; Davis,1981), and develop the following definition of sales promotion: sales promotion is an action-focused

marketing event whose purpose is to have a direct impact on the behaviour of the firmconsumers s . Different authors have identified different categories of consumer-oriented sales promotion. According to the International Chamber of Commerce (ICC) s International Code of Sales Promotion Practices, consumer-oriented sales promotion encompasses the following techniques: 1. Sampling: by definition, sampling includes any method used to deliver an actual or trial size product to consumers( Shimp, 1993, p.491). Sampling is generally considered the most effective way of generating trial, though it is the most expensive. ( Belch and Belch,1995). Coupon: coupon is a promotional device that A provides cent-offs savings to consumers upon redeeming the coupon Shimp,1993,p.496). ( Coupons can be disseminated to consumers through newspapers and magazines, direct mail and packages. Premiums: A premium is an offer of merchandise or service either free or at a low price that is used as an extra incentive for buyers( Belch et al, 1995, p.494). Several forms of premium offers, serving different purposes exist. The three types of offers are free-in-the-mail premiums, in-and onpack premiums, and self-liquidating premiums. Price-off: It is a reduction in a brand regular s price. According to Blair and London(1981), the major reason for marketers to use the price-off reductions is that this type of deal usually presents a readily apparent value to shoppers, especially when they have a reference price point for the brand, therefore they can recognize the value of the discount. Bonus Packs: These are extra quantities of a product that a company offers to consumers at the regular price by providing larger containers or extra units. Bonus packs result in a lower cost per unit for consumers and provide extra value, as well as more product for the amount of money paid. Refunds and Rebates: Refunds and rebates refer to the practice in which manufacturers give cash discounts or reimbursements to consumers who submit proofs of purchase Shimp, 1995,p.520). ( Typically, a refund refers to cash reimbursement for packaged goods, whereas a rebate more often refers to reimbursements for durable goods. These two sales promotion techniques provide users a delayed rather than an immediate value since the consumer has to wait to receive the reimbursement.( Tat, Cunningham and Babakus, 1988). Contests and Sweepstakes: They offer

consumers the chance to win cash, merchandise or travel prizes. However, there are some differences between the two practices. A contest is a promotion where consumers compete for prizes or money on the basis of skills or ability. In a sweepstakes, winners are determined purely by chance. 8. Event Sponsorship: in general, a company develops sponsorship relations with a particular event. In general, sports receive two-thirds of the event sponsorship budget (Shimp et al, 1993, p.494).

Research Methods Retailing, one stream of service marketing, shares common characteristics with all service marketing. The retailing industry in Taiwan has shown a dramatic change since the 1990s. It is interesting to note that department store sales are concentrated in the Taiwan metropolitan area. Because of the significant of the growing department stores in Taiwan, it is important to investigate the effect of sales programs on consumer behaviour. This study utilized self-report questionnaire data to investigate the relationship between individuals level of purchase frequency and response to sales promotions in one product category(clothing). Four types of sales promotion were studied: coupons, priceoff, sweepstakes and event sponsorship. Key constructs were measured using existing scales. All the items used to measure the constructs were closedended, with 5-point Likert-type scales anchored at strongly disagree and strongly agree. Consumer spending and repeat visits measure use rank scale from low to high. The subject of survey is female with age 15-44. An initial version of the questionnaire instrument was pre-tested on the managers of department stores. The questionnaire was refined based on this pre-test. A personal interview from the front door of the department store yielded 500 responses. After combining the respondents from the pilot study and the main data collection, the total achieved sample size was 482. Data were coded and entered. The empirical analysis will follow the form: The level of consumer spending, repeat visits= f (coupons, price-off, sweepstakes and event sponsorship) Empirical Results The empirical results of the multiple regressions is shown at the table 1.

2.

3.

4.

5.

6.

7.

Table 1. Results of the Multiple Results Variables Coupons price-off

Consumer spending 0.526 0.772**

Sweepstakes event sponsorship Constant R-square F Notes : N=482.,** P< 0.01,*

P< 0.05

the generalizability of the results( McKee, 0.725 0.778 Varadarajan and Pride, 1989). Because one of the 0.819** 0.452** primary objectives was to explore possible boundary 3.951** 3.902** conditions for a fundamental marketing premise, the 0.432 0.454 research attempts to5.72** systematic and random minise 4.63** noise attributable to industry difference. Conclusion The research proposed and tested hypothesised relationships among four sales programs and two consumer behaviour measures. By focusing on both construct and tests of substantive relationships, the study aims to strengthen the empirical foundation of consumer behavior research. The research findings reported are based on a mail survey of 482 female consumers with age 15-44 for the department store context. Personal interview and multiple regression approaches were employed to test the research hypotheses and exploratory propositions. Price-off and event sponsorship were found to be a significantly positive effect on consumer spending and repeat visits. However, confronting the expectations of practicioners, the empirical results indicated that coupons and sweepstake were not the prime explanatory factor of consumer spending and repeat visits. Research Limitations One important limitation relating to the operationalisation of the study was the focus of the single industry. Future research will need to test whether these results hold across industries. Therefore, the extent to which the results obtained are useful will depend on whether similar analyses testing other service marketing also shows such patterns. This study produces a list of marketing strategy indicators that satisfy important measurement criteria. However, this set of indicators should be assessed and refined in other research contexts. References Aaker, D. A.(1991). Managing Brand Equity: Captialising on the Value of a Brand Name, New York: The Free Press. A dr n P F (92. Ma en,Sr ei ne o, . . 18) s r tg tt c ki ag Plani ad t T er o t Fr , Journal of n g n h hoy f h i n e e m Marketing, vol. 46: Spring, pp. 15-26. Blair, E. A. and London, L. (1981) . The Effects of Preference Price in Retail Advertisments, Journal of Marketing, vol. 45:2, pp. 83-93. Blattberg, R. and Golanty, J. (1978) Tracker: An Early Test Market Forecasting and Diagnostic Model for New Product Planning, Journal of Marketing Research, vol. 15:2, pp. 192-202.

When consumer spending and repeat visits were the dependent variables of interest, two of four regression coefficients were statistically significant. Price-off and event sponsorship programs had a significantly positive effect on the consumer spending and repeat visits. Normally, expenditures on price-off and event sponsorship programs can increase customer awareness, facilitate the formation of positive attitudes and behavioural intentions among prospective and current consumers in the Taiwanese department store context. Discussions In the sales promotion response model, price-off and event sponsorship were key predictors of consumer spending and repeat visits. The empirical results suggest that in order to increase consumer spending and repeat visits, department store should invest in mechanisms that enhance price-off and event sponsorship even programs. Surprisingly, the study shows that some sales promotion elements such as coupons and sweepstake do not have a significant effect on consumer spending and repeat visits. One possible explanation for the empirical results is that no department stores gain any competitive advantage from investing coupons and sweepstake program when every department stores spend heavily on the two sales programs. Another possible explanation is that coupons and sweepstake program might have lagged effect on consumer spending and repeat visits. However, due to the nature of cross section in this study, such lagged effect on consumer spending and repeat visits could not be captured. This study has important implications for future research on the use of sales promotions in service industries. More focus should be placed upon individual consumer effects and how this promotional tool affects current and future behaviour. As the Taiwan economy become more dependent on services, it is important for marketers as well as practitioners to understand how sales promotions in department store retailers influence consumer behaviour. This study will aid practitioners in understanding how sales promotion may influence consumer decision making processes. By understanding how sales promotion influence purchase decisions, marketers can gear their promotion campaigns to better reach the largest amount of susceptible consumers while fulfilling the objectives set forth in their marketing plan. Although the research focus on a single industry limits the generalizability of the findings, it should be noted that single industry studies are warranted when the internal validity of the study is more important than

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