How does the promotion strategy effect the customer purchase - Literature review Example

?Impact of Promotion Strategy on Purchase Literature Review Mela, Gupta and Lehmann (1997) discussed the long-term impact of promotions on brand performance. Even though, this article takes dependent variable as brand performance instead of customer purchase, it has been chosen because brand performance is, after all, a determinant of customer purchase. Mela, Gupta and Lehmann (1997) investigated the long-term impact of advertising and promotion on customer’s brand choice behavior. Customer’s brand choice behavior depended upon two decisive factors. i. Is there any response of customers on the variables of marketing mix such as product, price, place and promotion? ii. If so, are these changes related to the promotional policies of retailers and manufacturers? The results of the study revealed that in long run, price promotion makes both types of customers; loyal and non-loyal. In addition to that, Mela, Gupta and Lehmann (1997) concluded that advertising has good affect on consumers’ brand choice behavior whereas promotions have bad affect on the brand choice behavior of consumers (Mela, Gupta and Lehmann, 1997). Personalization, also known as customization, is the popular concept of marketing. It has become a necessity for many organizations. Savadkoohi (2012) conducted a study to investigate advantages and disadvantages of customization for companies as well as customers. The paper emphasized upon the personalized online promotions and its impact on consumers’ buying behavior. Savadkoohi (2012) concluded that the successful online personalization strategies can increase the buying behavior of the customers and thereby, can affect the companies’ profitability (Savadkoohi, 2012). Nowadays, online marketing, selling and promotion have become very common. Companies utilize the platform of internet in order to attract more customers. Ye, Haohong and Fei (2010) conducted a study to investigate the impact of sales promotion on C2C online shopping behavior of consumer. In order to examine the relationship between these variables, Ye, Haohong and Fei (2010) used an empirical method. The results of the study revealed that online promotion has direct influence on the attitude of customers but the intention of purchase is not significant. However, it might help in building a brand perception in minds of customers. Therefore, online promotion can be effective in increasing the brand awareness (Ye, Haohong and Fei, 2010). Modi and Jhulka (2012) conducted a study in order to measure the impact of promotional schemes on the buying behavior of consumers. Modi and Jhulka (2012) examined five types of promotional schemes, which included Festival Season Offers, Special Gift, Exchange Offer, Product Warranties and Contest Prizes. A questionnaire was constructed in order to perform the research and gather the relevant data. Chi square test was performed to test the null hypotheses. The results of the study revealed that promotional schemes can be proved as effective tool to organizations for selling their products. The authors further stated that promotional schemes can be very useful especially in the car purchasing decision of consumers (Modi and Jhulka, 2012). Costa, Epperson, Huang and McKissick (2002) conducted a study to determine the impact of advertising and promotion on the scanned purchases of Vidalia onion. Another aim of the study was to examine the expected return on expenditure of promotion. In order to gather the data of Vidalia onion, scanned copies from the supermarket were collected. Vidalia Onion Marketing Order generates the promotion expenditure. In order to carry out the research, Costa, Epperson, Huang and McKissick (2002) utilized error component model for 10 different markets for the period of 1996 to 2001. Results of the study revealed that advertising and promotion expenditures influenced the demand of Vidalia onion substantially over the research period. Keeping in mind the seasonality of Vidalia onion, more promotional activities can be done in order to increase the consumption of Vidalia onion (Costa, Epperson, Huang and McKissick, 2002). Malik, Zaidi and Rizvi (2012) conducted a research to study the long-term and short-term impact of sales promotion on the profitability of the organization. The author conducted this study in two diverse sectors of Pakistan, i.e. Foam Manufacturing Industry and Beverage Industry. The companies, which were selected from each industry, were Diamond Supreme Foam and Shezan International Ltd respectively. Through utilizing consumer survey, total of 200 samples were analyzed in order to measure the impact of perception of consumers for sales promotion. Financial indicators including Cross Tabulation, Pearson Correlation and Regression Analysis were employed to investigate the results. Results of the study revealed that there are various extraneous factors, which influence the effectiveness of promotions (Malik, Zaidi and Rizvi, 2012). Lindholm, (2008) conducted a study to determine the relationship between consumer behavior and sales promotion in regards to financial services. The purpose of the study was to determine the impact of sales promotion on consumer behavior in the area of marketing of financial services. In order to do so, Lindholm, (2008) gathered the data related to purchases of credit cards, before and after the time of promotions. Statistical methods of two-way ANOVA, one-way ANOVA, t-test and cross tabulation were utilized. Results of the study showed significant variation between the consumer buying behavior and promotional schemes. However, lack of sales frequencies and marketing communications leave the question undecided (Lindholm, 2008). Wiebach and Diels (2011) conducted a study to examine the relationship between promotional schemes and consumer buying behavior in the times of out-of-stock (OOS) situations. Usually, when customers are encountered with such situations, they are forced to react. Potential customer behavior include, brand switching, item switching, purchase postponement, store switching and cancellation. The results of the study showed that customers who encounter the situations of stock-outs for those items on which the promotion is being given, they postpone their purchase or move to another outlet of the same retail store in order to purchase the promoted product. Some customers seem to behave in both store loyal and brand loyal manner. They neither switch to other brand nor to any other retailer and make substantial effort in order to obtain the desired brand within the promotional offer (Wiebach and Diels, 2011). Research of Wiebach and Diels (2011) indicates that in case of stock out situations of promoted products, customer often behave in a brand loyal manner. Gupta (1988) performed a research in order to discover the impact of marketing variables on the consumer decision. The effectiveness of the promotional schemes can be investigated by decomposing the ‘bump’ of sales. The emphasis of the research was on the impact of marketing mix variables on the purchase decisions of customers. The four marketing mix variables are; Product, Price, Place and Promotion. Therefore, in this paper, along with promotion, other three variables are also taken in order to investigate their impact on buying decision of customers. The results of the research showed that the total sales increase because of promotion. The findings of the author further stated that promotion could be very effective in attracting the customers for competitive brands. The author concluded that this research could be very beneficial for managers in order to gain insights about the effectiveness of sales promotion (Gupta, 1988). Mela, Jedidi and Bowman (1998) stated that brands have amplified their promotional spending significantly in numerous categories, over the past years. Mela, Jedidi and Bowman (1998) conducted panel based research for stock piling behavior of customers. In this regard, Mela, Jedidi and Bowman (1998) developed a model to investigate the quantity purchase and purchase incidence in order to determine whether this increase in promotion has influenced the domestic stock piling decision of customers in long run. The panel data has been selected for more than eight years. The most frequently purchased consumer packaged-goods nonfood products were taken. The results stated that stock poling behavior of consumer has changed a lot as compared to previous years. The increased level of promotions on domestic products has reduced the probability of making category buying in subsequent trips of shopping (Mela, Jedidi and Bowman, 1998). Das and Kumar, (2010) conducted a study in order to determine the influence of sales promotion on buying decision of Indian consumers. Das and Kumar, (2010) argue that consumer has become a king in today’s open market economic system. There are number of options available to them based upon which they take purchase decision. Today’s consumers enjoy freedom purchase decisions. Nowadays, consumers hold the power to influence the retailer or manufacturer to change or alter the size, content, quality, quantity, post sales services or price of a product. In this regard, today’s markets are no longer the “sellers market”, but in fact, have become “buyers market”. It must be kept in mind that Indian consumers are price sensitive; therefore, every other retailer tries to attract more customers by offering different sales promotions. Das and Kumar (2010) studied to find out the relationship between sales promotion and customer purchase behavior. Since it is quite clear that price sensitive customers will make purchase decision based upon the sales promotions schemes therefore, the results of the study also supported this fact (Das and Kumar, 2010). Esfahani and Jafarzadeh, (2012) state that sales promotion is a vital element, which is used worldwide in order to influence the purchase decision of the customers. Typically, the budget that is allotted to sales promotion has been increasing rapidly, which shifts the attentions of marketers to utilizing sales promotion rather than other strategies such as advertising. The increased utilization of sales promotions has induced customers to become more prone to ‘deals’ as compared to past times. Based upon these artifacts, Esfahani and Jafarzadeh, (2012) investigated the impact of sales promotions on customer’s psychographic variables in order to influence their purchase decisions. The result indicate that psychographic behavior such as price consciousness, quality consciousness, store loyalty, variety seeker, innovativeness and planning have been affected by sales promotion and therefore sales promotion possesses significant impact on these variables. Despite of that, some of the factors such as brand loyalty, impulsive buying, financial constraints and time do not influence the sales promotion and the relationship between these variables and sales promotion is not significant (Esfahani and Jafarzadeh, 2012). Anderson and Simester, (2004) examines the relationship between price promotion and purchase decision of existing and potential customers. For this purpose, the authors emphasized on considering durable goods instead of packaged goods, which are sold in grocery stores. Good discounts in prices reduced the future purchase decision of existing customer but increased the future purchase decisions of first-time purchasers. The results revealed evidence of forward buying, increased deal sensitivity, selection and customer learning. However, short terms metrics ignore these changes. As far as first time customers are concerned, short-run metrics undervalue the increase in demand. Prices will be too high if they are based on short run elasticity (Esfahani and Jafarzadeh, 2012). Customer purchase decision or buying behavior can also be regarded as customer loyalty because if the customer will make repeat purchase then certainly, he will be a loyal customer. Therefore, customer loyalty is also a determinant of customer purchase decision. Heryanto, (2011) attempted to study the relationship of product, price, place and promotion on the customer’s loyalty. The research utilized primary data where a sample of 100 people was taken out of the population of 5750 people. Techniques, which were utilized to test the hypothesis included t-test, ANOVA, f-test and regression analysis. The results of the study revealed significant difference between the two variables. Therefore, according to Heryanto, (2011), stronger linkages cannot be found among these variables (Heryanto, 2011). Moi and Ndubisi, (2005) analyzed the impact of sales promotional tools such as price discount, coupon, bonus pack, free sample, in-store display and product trial on the repeat purchase behavior of the customer. In order to do so, a sample of 420 customers were selected and surveyed in order to fill the questionnaire. Out of 420, 312 questionnaires were completed. The results of the study revealed that free sample, price discounts and bonus packs are related to product trial whereas there is not any significant impact of coupon on product trial. Here, product trial ascertains the repurchase behavior of customers. On a concluding note, it can be said that in some cases and in some regions, sales promotions or promotional strategies influence the buying behavior of consumers but it is not the case everywhere. Works Cited Anderson, E. T and Simester, D. I, (2004). Long-Run Effects of Promotion Depth on New Versus Established Customers: Three Field Studies. Marketing Science. 23 (1), pp.4-20 Costa, E. F., Epperson, J. E., Huang, C. L. and McKissick, J. C, (2002). Impacts of Advertising and Promotion on the Demand for Scanned Purchases of Vidalia Onions. Journal of Food Distribution Research. pp.52-61. Das, G and Kumar, R. V, (2009). Impact of Sales Promotion on Buyer Behaviour: An Empirical Study of Indian Retail Customers. Journal of Management. 3 (1), pp.11-24. Gupta, S, (1988). Impact of Sales Promotions on When, What, and How Much to Buy. Journal of Marketing Research. 25, pp.342-355. Heryanto, H, (2011). Effect of Marketing Strategy on Customer Loyalty Bajapuik . International Journal of Lean Thinking. 2 (1), pp.59-87. Jafarzadeh, M and Esfahani, A. N., (2012). Studying Impacts of Sales Promotion on Consumer’s Psychographic Variables. INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS. 3 (9), pp.1278-1288. Lindholm, O., (2008). THE INFLUENCE OF SALES PROMOTION ON CONSUMER BEHAVIOR IN FINANCIAL SERVICES. Master's Thesis, HELSINKI SCHOOL OF ECONOMICS, pp.1-84 Mela, C. F., Gupta, S., and Lehmann, D. R., (1997). The long-term impact of promotion and advertising on consumer brand choice. Journal of Marketing Research. 34, pp.248-261. Mela, C. F, Jedidi, K. and Bowman, D, (1998). The Long-Term Impact of Promotions on Consumer Stockpiling Behavior. Journal of Marketing Research. 35 (2), pp.250-262 Modi, S. and Jhulka, T., (2012). IMPACT OF PROMOTIONAL SCHEMES ON BUYING DECISIONS OF A CONSUMER. International Journal of Sales & Marketing. 2 (2), pp.40-48. Moi, C. T and Ndubisi, N. O., (2005). Customers Behavioral Responses to Sales Promotion: The Role of Fear of Losing Face. Asia Pacific Journal of Marketing and Logistics, pp. 32 Rizvi, S. N. Z., Malik, S. and Zaidi, S. F. B, (2012). Short Term and Long Term Impact of Sales Promotion on Organizations’ Profitability: A Comparative Study between Convenience and Shopping Goods. International Journal of Business and Management. 7 (5), pp.247-255 Savadkoohi, F. B, (2012). Personalized Online Promotions: Long-Term Impacts on Customer Behavior. Massachusetts Institute of Technology (MIT) . Available at SSRN: http://ssrn.com/abstract=2142857. Wiebach, Nicole and Diels, J. L, (2011). The impact of context and promotion on consumer responses and preferences in out-of-stock situations. Discussion paper, Humboldt-Universitat zu Berlin, Germany, pp.1-48 Ye, L., Haohong, Z. and Fei, Z., (2010). The Impact of Sales Promotion on the C2C Online Purchasing Behavior: An Empirical Study. 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