Abstract

Table of Contents

Abstract

Table of Figures

Table of Tables

Table of Appendices

1 Introduction

1.1 Overview

1.2 Aims

1.3 Research Objectives

1.3.1 Effect of Discounts on Diet Quality

1.3.2 Impact of Discounts on Consumer Behaviour

1.3.3 Individual Drivers of Health

1.4 Implications

1.4.1 Governmental

1.4.2 Retailers

2 Literature Review

2.1 The Role of Price Promotions

2.1.1 Encouraging brand switching

2.1.2 Increasing brand value

2.1.3 Category expansion

2.1.4 Stockpiling

2.1.5 New product promotion

2.2 The Role of Discounts in Vice & Virtue Foods (600)

2.2.1 Marketing of vice foods

2.2.2 Marketing of Virtue foods

2.2.3 Conclusion

3 Methodology

3.1 Experimental Design

4 Results

5 Discussion

5.1 Implications

5.2 Conclusion

6 Acknowledgements

7 Bibliography

8 Appendices

Table of Figures

Figure 1 Consumer thoughts on the role of promotions (Mintel,2013)…………………..

Figure 2 Effect of promotional type on choice of Vice & Virtue products (Mishra, 2011)……….

Figure 3 Image of Online Shopping Scenario……………………………………

Figure 4 Diagrammatic representation of experiment……………………………..

Table of Tables

Table 1 Potential behavioural influencers assessed in questionnaire…………………….

Table 2 Exercise frequency questionnaire……………………………………..

Table of Appendices

1         Introduction

1.1         Overview

As a worldwide population, we are struggling with the overall effects of obesity, which in part is in due to our increasingly sedentary lifestyles, closely linked with our increased consumption of food. There have been studies looking into some of the factors that may have played a role in this onset of obesity, including food portion sizes and our current access to less nutritious, more energy dense foods (Engler-Stringer et al, 2014, Ledikwe et al, 2005 & Young et al, 2001)

Despite this, little research has been conducted on the effects that discounts & promotions play on this health epidemic. With promotions known to boost food sales, (Kopalle et al, 1999), this study sets out to quantify the effect that discounting both healthy and unhealthy products have on overall diet quality.

1.2         Aims

The primary aim of this study is to assess the role that discounts and promotions have on overall diet quality. As previous research has suggested (Mishra et al, 2011), the promotion can impact on the food choices made, leading to a less healthy basket. This is a belief also held by Nakamura et al, 2015 ‘There is growing concern, but limited evidence that price promotions contribute to a poor diet and the social patterning of diet related disease.’

The secondary aim is to attempt to quantify the impact that these play on shopping behaviour in general. By assessing all food choices made, trends may give further insight into what influences consumer behaviour when facing a promotion.

The tertiary aim from this study is to assess how external factors influence the shopping habits of the individual. By assessing the consumer’s activity levels, approaches to exercise and general outlook on health, potential trends may become more apparent.

1.3         Research Objectives

As stated above, there are three main aims that this study sets out to achieve, using a shopping based scenario along with a questionnaire these aims will be assessed. The hypotheses for these are listed below.

1.3.1        Effect of Discounts on Diet Quality

As the primary aim of this study, the effects that promotions & discounts have on the ‘healthiness’ of the food that people choose will be closely looked into. This study hypothesis is that promotions will play a negative role on the diet quality. Ultimately leading to the purchase of more ‘unhealthy’ foods in their shopping basket due to the influence of promotions.

1.3.2        Impact of Discounts on Consumer Behaviour

As shown by Mishra et al, 2011, promotions result in an altered consumer behaviour pattern depending on whether the product is a vice (unhealthy) or virtue (healthy) product. Across our study it is expected that this altered behaviour will result in a change in the ratio of healthy: unhealthy products. This study hypothesises that the number of discounted products bought that are ‘unhealthy’ will outnumber the promoted ‘healthy products’ despite the fact that equal numbers of ‘healthy’ & ‘unhealthy’ were promoted.

1.3.3        Individual Drivers of Health

The final aim from the study was to assess the external drivers of health, and the potential effects that these may have on consumer behaviour in regards to discounts and promotions. In this study the participant’s activity levels are assessed, through a number of quantifiable questions, leading to an overall view of the exercise patterns of each individual.

It is hypothesised that the individuals that take part in more physical activity will have a higher overall diet quality from the shopping scenario. It is believed that this will be due to the fact that regular exercisers are likely to be more health conscious than those who lead a more sedentary lifestyle.

1.4         Implications

Overall there are relatively few studies that are looking directly into the relationship between promotions and diet quality, with recent studies from Hawkes et al, 2009 & Andreveva et al, 2010 starting to look into the topic. Due to this, there is still the possibility to produce new data, which may have real-life implications from this study. There are two main areas where this implementation may eventually be possible, these consist of both a retail and governmental/public health setting. These are detailed below.

1.4.1        Governmental

An area that the results could potentially be used, would be in a public health setting e.g. Public Health England. If results show that the way foods are promoted, marketed & discounted has a negative effect on dietary health, it could help lead to regulation enforcement ensuring that healthy products are promoted ahead of unhealthy foods.

1.4.2        Retailers

This research into the psychology of consumer shopping habits linked with promotions may also be of use to the retail industry. The information may be able to help supermarkets/shops to achieve higher sales by targeting certain promotions & discounts to specific demographics.

2         Literature Review

 ‘Promotions are defined as marketing events limited in duration, implemented to directly influence the purchasing actions of consumers’. This description by Feldgate, 2011 accurately defines the nature of retail promotions, highlighting that their ultimate aim is to facilitate choice for the consumer, whilst increasing sales for the retailer. With US retail sales from food, beverage, drug & department stores totaling $1.4 trillion (D.Grewal, 2011), it is unsurprising that promotions are also used as a significant sales tools for UK supermarkets, with promotions totaling as much as 32% of all UK grocery sales in 2009 (M.Feldgate, 2011).

Their effectiveness is such that this form of marketing has seemingly become the most lucrative in retail, with promotions on average constituting 64% of the total marketing strategy (M.Palazon,2009), a viewpoint shared by Blattberg also.

‘Promotions represent a significant percentage of the marketing mix budget, with non-durable goods manufacturers now spending more on promotions than advertising’

(R.Blattberg, 1995)

This effectiveness is one that shown by the consumers opinions (figure 1), where 71% of individuals agreed that promotions actively encouraged impulse shopping (Mintel, 2013)

Despite the effectiveness of retail promotions, as figure 1 shows, there is a majority belief (73%) that retailers should look to focus on offering every-day low prices rather than the traditional multi-buy, money off or extra free promotions. This method is similar to the business model of UK discounters such as ALDI & LIDL, who have experienced marked growth in the past 5 years adopting this approach. Research is beginning to suggest that EDLP results in higher profits to supermarkets adopting it in competition with promotional pricing (R.Lal, 2009).

2.1         The Role of Price Promotions

As stated previously, the use of promotions is universal in the retail industry, facilitating choice and driving increased product spending. There are however a number of different results that using price promotions can achieve. These include but are not limited to;

• Encouraging brand switching
• Increasing brand value
• Category expansion
• Stockpiling
• Promoting new products

(D.Delvecchio, 2007)

2.1.1        Encouraging brand switching

A major use of promotions is linked to the strains that are placed on brand loyalty, previous research has shown that the monetary value of a promotion affects product choice during promotional periods (D.Delveccio, 2007). This increased choice, whether through a new product to market or a higher quality product dropping into a different price range, aims to influence the purchasing behaviour of a consumer, challenging their current loyalties to certain brands. This influence is necessary due to the strongly held beliefs about familiar brands, ‘it is expected that brands which are familiar to consumers will tend to be judged higher in quality than new brands’ (Bellizi et al, 1980). Ultimately brand switching is only effective when the product quality matches or exceeds the consumers expectation, leading to a familiarity with the new product. Research has indicated that when run, promotions gathered 84% of their sales through brand switching, compared to purchase acceleration or stockpiling (S.Gupta, 1988).

2.1.2        Increasing brand value

Brand value & loyalty are slowly becoming one of the most critical aspects in the retail market. Due to the rising strength of retailers (4 supermarkets account for over 70% of grocery sales), the market has seen reductions in both brand loyalty & product differentiation (M.Felgate, 2011). Economic models have noted that price influences buyers’ expectations, with the view that “you get what you pay for” (A.Rao,1996), due to this notion it is especially important that the framing of a retail promotion doesn’t negatively affect the overall brand value.

This negative effect of promotions on brand value was researched further by (Simonson, 1994 & Valette-Florence, 2011), with an specific emphasis placed on the overall intensity of the promotion (extended time or deep money off) altering consumer perceptions about the specific products. This main risk to retailers of heavy promotions is the loss of previously held brand value, which may ultimately lead to the consumer only looking to buy the product when it is being promoted.

Further research into the overall effect of promotions on brand value is required, identifying the ideal lengths of promotions and the factors most affecting the negative role of promotions. One area of research from Valette-Florence et al found that a strong brand personality mitigated the negative connotations associated with promotions, although only briefly investigated, this may be an important tool for future brands and retailers to implement.

2.1.3        Category expansion

From a retail perspective, it is ‘important that promotions increase overall category sales, not just brand switching’ (M.Felgate, 2011). This quote from Feldgate’s study is critical to retailers, whose overall aims are to increase the expansion of the product category, via attracting new consumers to the category or by increasing category spending in general. This in turn drives profit margins and footfall.

Despite this, the wealth of research into promotions, from a retail & academic standpoint, has focused on their effects on overall sales and brand choice of products. This has resulted in contrasting elements of promotions going relatively unstudied, one of which is their role on category expansion. As stated by Nijs in 2001 ‘little is known about the conditions under which price promotions expand short-run and long-run category demand, even though the benefits of category expansion can be substantial to manufacturers and retailers alike’. This has led to increased interest and research into the potential roles that promotions may play.

Nijs’s study found that price promotions had a generally positive effect on category expansion, a usually stationary trend. Overall results highlighted that there was a strong short term response to the promotions with an average category growth of 2.21%. Unfortunately, despite the strong initial effects, the result was seen to dissipate over around 10 weeks, with essentially no effects found in overall long term category growth. This result was backed up further, where it was seen that promotions were effective in temporary sales spikes (R.Blattberg, 1995), however had a variable impact on category growth across differing product groups, with some promotions leading to no category growth at all (M.Felgate, 2011)

2.1.4        Stockpiling

Stockpiling occurs during promotional periods due to the increased availability of a product at the reduced promotional rate. It has been shown that the majority of stockpiling occurs via brand loyal consumers, with less taking place in consumers unaware of the product (M.Gangwar, 2014). This method of sales is reasonably beneficial to retailers looking to replace or replenish stock, whilst building brand loyalty due to repeat usage. Typically, non-food items are targeted e.g. toilet roll.

As stated by Ailawadi et al in 2007, encouraging stockpiling may also have a negative impact on manufacturers, due to the fact that brand sales are moved forward from a time when full margins would have been made. Due to these effects, it is important for retailers to manage the frequency of promotions, as the sales spike after each one will reduce once the consumer believes that the promotion will occur again (Bolton,1989)

It has been highlighted that the effects of promotions on consumer stockpiling have evolved over a period of time (C.Mela, 1998).

‘The increased long-term exposure of households to promotions has reduced their likelihood of making category purhases on subsequent shopping trips. However, when households do decide to buy, they tend to buy more of a good’ (C.Mela, 1998)

This altered behavioural pattern emphasises the effects that promotions can have on consumer shopping behaviour. From a nutritional point of view it is important to evaluate whether this effect of buying more of the product is playing a role in the overall populations increase of energy dense foods, ultimately leading to the rising obesity epidemic.

2.1.5        New product promotion

When a new product is brought to market, there are a number of promotional questions that require answering, firstly the rate of discount that is applied should be considered. The typical average for money off discounts stands at 20%. However, the impact that ‘deeper’ reductions have is less well known, with the perceived value potentially negatively affected when a deep promotion is applied (D.Moore, 1989). This is believed to the case due to consumers questioning the reason behind the ‘deeper’ than usual discount, with desirability not continuing to increase as discount size increases. Delvecchio found that promotions over 20% reduced post promotion preference by lowering image of brand quality and price expectations.

The frequency of discounting is another issue that requires addressing when promoting a product. It has been hypothesised that brands frequently promoted experienced a smaller boost in brand loyalty over time than those with a lower frequency (Papatla, 1993 & Gedenk, 1999).

The method of displaying discount has been widely debated, due to the range of effects that it appears to have. Delvecchio believes that a % off promotion ‘will attenuate a downward revision of price expectations, minimising the negative effects of promotion (Delvecchio, 2007). The framing of the promotion can vary depending on the overall price of the product, with different methods shown to elicit differing responses from consumers, as shown below from a study by Chen, Munroe & Lou in 1998.

‘Consumers are likely to value $5 off a $10 item more than $5 off a $100 item. For smaller ticket items, they may also prefer savings in % off terms than in dollar terms, whereas for larger purchases, they prefer dollar terms (e.g. $10 off $250 rather than 4% savings’(Chen, Munroe & Lou, 1998)

2.2         The Role of Discounts in Vice & Virtue Foods

A major factor in the negative dietary related health of the UK population is the overall volume of food that the population are consuming, resulting in an elevated energy intake. A 2005 study looking into the relationship between obesity & portion sizes stated that:

“The rise in obesity rates over the past 30 years has been paralleled by increases in the portion size of many foods and the prevalence of eating away from the home. Foods of particular concern are those that have a high energy density (kJ/g)” (J.Ledikwe,2005)

Amongst a huge number of other factors, it has also been hypothesised that supermarkets greatly influence consumer shopping habits, leading to the purchase of excess food. Despite this, the effects that promotions play on diet quality are vastly under researched.  With many researchers only beginning to look into the idea.

‘Sales promotions are widely used to market food to adults, children and youth. Yet in contrast to advertising, practically no attention has been paid to their impacts on dietary patterns’(C. Hawkes, 2009)

‘There is growing concern, but limited evidence that price promotions contribute to a poor diet and the social patterning of diet-related disease’(R.Nakamura, 2015)

2.2.1        Marketing of Vice foods

As the impact of promotions of unhealthy products becomes more relevant in the overall health of the population, it is important to assess through current literature the true role that it has on increased consumer procurement and consumption. This topic was looked into by Nakamura et al, where it was found that on average the greater discounts (thus greater sales) were found on the less healthy products. It was also shown that these less healthy products were less likely to be perishable, leading to stockpiling and ultimately increased consumption. There was an overall 7.7% larger increase in unhealthy product sales (R.Nakamura, 2015).

It is also important to not only assess the impact that these promotions have on sales, but also look into the reasons why this might be the case. The nature of a consumer’s behavioural patterns varies depending on a number of factors, from the type of promotion, amount of discount or the location of the product. A study by Mishra highlighted that the healthiness of a product also impacts the consumers spending habits. When comparing unhealthy (Vice) and healthy (Virtue) foods, it was shown that consumers were more willing to buy if a price discount had been applied to the vice foods, compared to a bonus pack (extra 20%). It was proposed that consumers were unable to generate good justifications for buying a bonus pack, leading to an increased consumption of the vice foods. Whereas the price discount provided enough guilt-mitigating justification that the purchase was deemed acceptable. This is highlighted below (Figure 2).

This notion of guilt affecting consumer behaviour is one that was further looked into by K. Wertenbroch, who assessed that ‘consumers voluntarily and strategically ration their purchase quantities of goods that are likely to be consumed on impulse’ (K.Wertenbroch, 1998). This study highlighted the idea that consumers were aware of the products unhealthiness, prompting them to refrain from stockpiling, despite the ‘better’ deal that it may have given.

2.2.2        Marketing of Virtue foods

As shown in figure 2, the factors influencing consumer behaviour vary depending on the healthiness of the produce. Mishra highlighted the difference with virtue foods, in that consumers were more willing to purchase bonus packs (62.5%). This was explained due to ‘the absence of both anticipated post-consumption guilt and the resultant need to justify consumption’. This theory was backed up when the demand of virtue goods increased more during promotional periods compared to vice goods (K. Wertenbroch,1998).

Despite this insight into the influencers of purchasing of healthy foods, our consumption and sales of unhealthy foods is still significantly higher (R. Nakamura,2015). This issue is one that particularly needs addressing. Research has been suggested via numerous studies (K.Ball. 2015, Story, 2008. French, 2001 & Glanz, 2004) that a simple price promotion will increase uptake of fruit and vegetable sales. With this in mind, research is aiming to find why this doesn’t correlate with reduced obesity rates. A potential explanation for this may have been the fact that despite promotions increasing healthy sales etc. the nature of these promotions are leading individuals to switch to the promoted product (e.g. purchasing a promoted apple over an orange), rather than increasing overall category growth and ultimately intake (C. Hawkes, 2009). It may be that due to the relative inability to produce new ‘exciting’ fruit and vegetable products, compared to processed foods, the lack of new product promotion has led to the category stalling.

2.2.3        Conclusion

Overall, there is a great need for the influence of promotions on diet quality to be understood. This ultimately could lead to the increased intake of healthy foods, and improving the overall diet of the general population. This would be an important step as currently, eating a healthy balanced diet is more difficult than it needs to be. This was shown by P.Ryden where healthier eating was associated with higher diet costs, in part due to the price differences between healthy & unhealthy food.

Few studies have looked into methods of using promotions to improve dietary health, with Waterlander showing discounted fruit and vegetables improved intake, which when coupled with nutritional education improved intake up to 6 months later. Whether this approach, or a more innovative approach to promotions (e.g. eye tracking or personalised in-store marketing (D.Grewal, 2011)) is implemented, there is a societal requirement for this to be further researched and discussed.

http://www.sciencedirect.com.sci-hub.cc/science/article/pii/S0148296309002537

http://pubsonline.informs.org/doi/abs/10.1287/mksc.13.1.23

http://pubsonline.informs.org/doi/abs/10.1287/mksc.20.1.1.10197

3         Methodology

3.1         Experimental Design

In the study (X) participants were recruited to take part in a questionnaire and an online shopping scenario. The decision on participant numbers was based on the time allowed to recruit, along with a decided minimum number of 120. This number was chosen, as it allowed each treatment group an even number of individuals, and also ensured that any results gained would have a level of significance. The time to completion for the participants was roughly 5-10 minutes, and only consisted of one sitting, it was believed that this was ideal, due to the fact that the role of impulse shopping was assessed and that no monetary incentives were provided to the participants. This reduced level interaction also helped to recruit participants.

Participants were allocated a £25 weekly budget to spend in the virtual store. This figure was decided, as a limited budget would lead the participants to factor in the effects of the discounts when deciding what they wanted. This study aimed to collect data from university students, due to the similar socio-economic status that encompasses them, and their relative lack of disposable income. This is shown in the results with (X%) of participants identifying as under the age of 25 years. This compliments Steenhuis’s research showing that lower income consumers (students) are more likely to use promotional tools, due to their greater awareness of price.

The shopping scenario consisted of (679) food & drink products. These products consisted of 8 different categories, in which the items would all be classed as staple items (see figure 3). The products (Figure 3), along with any nutritional information were gathered from Tesco online. The important information provided for those products in the study was the recommended retail price of the products before promotion and the nutritional composition for each item. These factors were suited to using Tesco products, due to the clear display of all relevant nutritional information, along with a comprehensive coverage of product types.

All products in the shopping scenario were designated a nutrient index score to assess whether they classed as a healthy or unhealthy product, fundamental to assessing overall diet quality. This formula was developed by the Food Standards Agency (FSA, 2009), whilst also utilized by Nakamura et al into a similar study of promotions and health. By assigning a score to each product for total energy, saturated fats, sugar and sodium, it is possible to quantify the levels of ‘unhealthy’ nutrients. After calculating the ‘healthy’ characteristics, % fruit, veg & nuts, NSP fibre and protein. A simple equation of the ‘healthy’ score subtracted from the ‘unhealthy’ score gives an overall quantifiable health score for each product.

The values for the above nutrients were found using the Tesco website, with detailed nutritional info provided for each product. These values were taken per 100g, as this negates the impact that portion size can have on the healthiness of a product. The % fruit & veg was calculated using the ingredients list provided.

Before taking part in the shopping scenario the participating individuals were informed of their virtual £25 shopping and made aware that they could spend as much/as little as they wished to in store. Any unspent budget was unused and played no part in research. Due to the level of involvement required, an incentive wasn’t included.

The primary aim of this study was to test the impact of promotions on the overall diet quality of their selected basket. The study design consists of a 2 (No promotion vs Promotion) x 2 (Healthy vs Unhealthy) between participants experimental design for the (X) participants involved. The participants after completing a registration and consent form are then introduced to the shopping scenario. This is then followed by a question form which assessed the participant’s activity levels across a week in both a gymnasium and team sports setting (Table 2). This was included for secondary analysis into whether the activity levels of the individual participants affected their shopping choices, potentially relating back to the guilt mitigating effects shown by Mishra et al, 2011. Finally, a questionnaire is completed assessing a range of potential behavioral influencers (Table 1).

Table 1 Potential behavioural influencers assessed in questionnaire.