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The Effects of In-Store Marketing Tools for the Sales of New Consumer Packaged Goods

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The Effects of In-Store Marketing Tools for the Sales of New Consumer Packaged Goods Bachelor Thesis Marketing Department Innovation in Grocery Retailing The effects of in-store marketing tools for the sales of new Consumer Packaged Goods Jeroen Cox ANR: s263889 International Business Supervisor: P. Lin Tilburg University 1 Table of contents Page Table of contents …………………………………………………………….. 2 Abstract…..…………………………………………………………….......... 3 Chapter 1: Introduction………………………………………………............ 4 1.1 Problem Statement……………………………………………………............ 5 Problem Definition........................................................................................... 5 Problem Statement……………………………………………………............ 6 Research Questions……………………………………………………........... 6 1.2 Conceptual Framework………………………………………………………. 6 1.3 Managerial Relevance………………………………………………… ........... 7 1.4 Academical Relevance………………………………………………………... 7 1.5 Structure of the thesis………………………………………………………… 8 Chapter 2: Definition of Constructs................................................................. 9 2.1 In-store marketing……………………………………………………………. 9 2.2 In-store marketing tools……………………………………………................. 10 2.2.1 Shelf facings…………………………………………………………….. 10 2.2.2 Pricing………………………………………………………………….. 10 2.2.3 Price promotions……………………………………………………….. 11 2.2.4 In-store displays…………………………………………………………11 2.2.5 Sample product…………………………………………………………. 11 2.3 Sales of new CPGs…………………………………………………………….12 2.4 Consumers’ risk avoidance…………………………………………………… 12 Chapter 3: The effects of in-store marketing for the sales of new CPGs….. 13 3.1 Shelf facings and the effects for sales of new CPGs…………………………. 14 3.2 Pricing and the effects for sales of new CPGs……………………………….. 15 3.3 Price promotions and the effects for sales of new CPGs…………………….. 17 3.4 In-store displays and the effects for sales of new CPGs……………………... 18 3.5 Sample products and the effects for sales of new CPGs……………………... 18 3.6 Chapter Overview……………………………………………………………. 19 Chapter 4: Moderating influences…………………………………………… 21 4.1 Consumers’ risk avoidance as a moderator………………………………….. 21 4.1.1 The moderating effects of consumers’ risk avoidance on the relationship between price and new CPG sales……………… 21 4.1.2 The moderating effects of consumers’ risk avoidance on the relationship between price promotions and new CPG sales.. 22 4.1.3 The moderating effects of consumers’ risk avoidance on the relationship between sample products and new CPG sales… 22 Chapter 5: Conclusions………………………………………………………. 24 5.1 Conclusions of the study…………………………………………………….. 24 5.2 Limitations and suggestions for further research……………………………. 25 5.3 Managerial implications……………………………………………………… 25 Reference list…………………………………………………………………. 27 2 Abstract This paper investigates the effects several in-store marketing tools have on the sales of new consumer packaged goods, mostly referred to as new CPGs in the rest of this study, in the retail environment. Past research often has not made a clear distinction between the several in-store marketing tools available and their effects on the sales of new consumer packaged goods. Therefore, a short explanation of the tools used in this research is given. After having distinguished the in-store marketing tools from each other, the influences they have on new CPG sales are discussed. Finally, the moderating influence of consumers’ risk avoidance on the relationship between the in-store marketing tools and sales numbers of newly introduced CPGs was investigated. 3 Chapter 1: Introduction When research on the acceptance of new packaged goods first began, the majority focused on investigating the behavioral sciences behind the choices consumers make (e.g. Donnelly Jr., 1970). According to Donnelly Jr. products that are not significant departures from those previously offered may be tried more quickly and easily because the risk involved by the consumer is less (Donnelly Jr., 1970). For a wide range of products this line of reasoning is applicable, but for a more complete understanding of consumers’ choices with regards to newly introduced CPGs, the role of in-store communication and cultural aspects have to be taken in to account as well. Recent research indicates that the retailing sector has long been a sector which was mainly dominated by managers practicing product management instead of consumer management. However, this orientation is changing because of the availability of databases on the purchases of individual customers, which make it possible for retailers to keep track of consumers’ buying behavior (Mulhern, 1997). In a world of integrated retailing, retailers will be less concerned with the profitability of items in stock and more concerned with the profitability of the customers in store (Mulhern, 1997). This change in focus is a direct reason for retailers to differentiate from its competitors in order to attract consumers to buy products at their stores. In order to attract consumers to buy at their stores, retailers came up with in- store marketing tools which were intended to invite the consumer to buy a certain product by means of presenting a product in a tempting manner. Unfortunately, the relationship between in-store marketing and sales of new CPGs has not been widely investigated under the recent retailing environment. This paper will make a contribution to extant research on the effects in-store marketing has on consumers’ purchasing decisions. More specifically, this study will address the effects of in-store marketing on sales volumes of new CPGs. In past research it has been found that marketing tools have an impact on purchase decisions a consumer makes (see e.g. Mulhern, 1997). Since it has been found that marketing has an effect on consumer choice, this paper will focus on how the selected in-store marketing tools affect the choice for newly introduced consumer products. 4 1.1 Problem Statement Problem Definition Historically, research in the field of marketing has focused on cultural, economical and personal aspects to find explanations for the acceptance of new CPGs (e.g. Gielens and Steenkamp, 2007; Tellis, Stremersch and Yin, 2003). Unfortunately, less research has been done about the relationship between in-store marketing tools and the sales of new product innovations. So there is still a lot about the influences of in-store marketing tools on sales of new goods that remains to be uncovered. Knowledge of this relationship is beneficial for retailers and producers of new innovations such that they can design a marketing strategy in order to attract customers to buy their products. This in combination with the changing retail environment of the last decades and the fierce selling price battle of 2009, in which Dutch retailers were fighting each other on the basis of product prices in order to attract customers and push direct competitors out of the market, makes it interesting for this paper to provide a clear view on how in-store marketing influences new products’ sales volumes. For the purpose of this research, a distinction will be made in consumers’ risk avoidance and other types of customer characteristics. Although all characteristics mentioned by Tellis et al. (2003) may have an influence on purchasing decisions made by a customer about a new CPG, the focus of this paper is on the level of uncertainty avoidance because this could be a factor influencing most of the in-store marketing efforts made by the retailer. Now that all important variables have been briefly introduced to the reader, and a short introduction and problem definition have been given, the problem statement can be presented. Problem Statement How does in-store marketing contribute to the sales of new CPGs, and how does consumers’ risk avoidance influence this relationship? 5 Research Questions 1. What is in-store marketing and how can we distinguish in-store marketing from other forms of marketing? 2. What kind of in-store marketing tools are available in the retail environment? 3. What are the effects of in-store marketing on the sales of new CPGs? 4. How does consumers’ risk avoidance influence the relationship between in-store marketing and sales of new CPGs? 1.2 Conceptual Model The conceptual model presented below has been created from the problem statement and research questions stated above. 1.3 Managerial Relevance When talking about factors influencing consumer’s purchasing decisions, Gielens and Steenkamp (2007) have found that product factors, competitive environment and consumer characteristics are of importance in the decision making process of consumers. Besides the factors mentioned by Gielens and Steenkamp (2007), in-store marketing may have an effect on this process as well. However, little academic research has been done on in-store marketing and the effects of it for new CPG sales. Previously, a lot of research has been done to the effects of in-store marketing on the buying behavior of consumers in general. According to various studies, a majority of brand choice decisions are made inside the store, yet consumers only evaluate a fraction of the products available for sale (Inman, Winer and Ferraro, 2009). In this context, improved attention through in-store marketing activities should influence consumer behavior at the point of purchase, and the results found in the study done by Chandon, Hutchinson, Bradlow 6 and Young (2009) show that this is indeed the case to a certain extent. Consumer choices are without doubt of interest for retailers and producers, since companies heavily rely on consumers buying their products, as they will not survive in the current competitive
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