Exploring product category and promotion type association for impulse buying in malls in India.
"The Mall Hi Mall phenomenon started in India just about twelve years back. Anyone who had a piece of land started building malls without considering the nitty-gritty of this business. Hence today, we find that only a handful of these malls are successful." (Shrikhande, 2012). This statement sums up the situation of malls in India. Malls are a part of organized retail. Organized retail In India saw a shift with the opening up of the retail sector in 1996. The phenomenon of malls in India is approximately two decades old, which started with three malls in India. Today there are approximately 200 malls, spread across metros, tier II cities and towns of India (Singh, Bose, Sahay 2010). Stakeholder's understanding of the concept and utility of malls are undergoing refinement as interactions are increasing. The industry life cycle of malls in India have just crossed the introduction stage to head towards growth stage. At this juncture retailers and mall planners, both domestic and foreign with operations in India carry the responsibility of up keeping the growth trajectory. To do this, research insights are needed, of which, one important aspect is, understanding the consumer shopping behavior in malls. Impulse purchases and sales promotions are two prominent characteristics of mall shopping. This study aims to address these two within the mall environment in India with a view to draw implications for strategic planning for mall managers and retailers in India.
Most shoppers buy on impulse (Welles, 1986; Nicholls 2001). The upward trend in impulse purchases is explained by increased tendency to shop in supermarkets where shopping is easier with highly visible products and the store environment act as prompts (Bowlbey, 1997; Stern 62). The consumption of products may be viewed as modern/ post modern means of acquiring and expressing self identity (Dittmar, 1996). Impulse buying is valuable pastime based on hedonic components and findings from previous studies show that almost 90 percent of people buy on impulse and 30 percent to 50 percent of all purchases were classified by the buyers themselves as impulse purchases (Hausman, 2000). The ratio of leisure shopping to planned buying is as high as 95 percent in apparel products (Rowley, 1999), more than 50 percent of mall shopping and 70% of grocery shopping was on impulse (Nichols et al., 2001, Underhill, 1999). Thus it is imperative for Both retailers and marketers to know how to attract a significant share of unplanned and impulse purchase (Narasimhan et al., 1996).
Literature Review: Impulse Purchases
Clover, (1950) first introduced the idea of impulse purchase in marketing literature. Since then there has been a lot of research in directions of building models that can predict impulse buying. Impulse buying is a recognized and prevalent phenomenon for in- store behavior. Impulse purchases arise when consumers buy products or brands that they had not planned on buying before entering the store (Stern 1962, Baumeister 2002; Berman, Evans and Mathur, 2012). The above mentioned line of thought regarding impulse purchase is reiterated by researchers (Engel and Blackwell, 1982; Philips and Bradshaw, 1993). There is an alternate school of thought that differentiates impulse and unplanned purchase. However for our study, we take the former view, impulse purchase as defined by Berman, Evans and Mathur, 2012. There are three kinds of Impulse purchases;
* Completely unplanned-Before coming to a store a consumer has no intention of making purchase in goods and services category.
* Partially unplanned-before coming into contact with a retailer, a consumer has decided to make a purchase in a goods or service category but has not chosen a brand or model.
* Unplanned substitution-a consumer intends to buy a specific brand of a good or service but changes his or her mind about the brand after coming into contact with a retailer.
Impulse buying can be studied both as a product specific phenomenon resulting in operationalisation of the concept or as a consumer characteristic. Literature on impulse purchase reveals several themes such as impulse purchase as a response to incentives (Stern, 1962; Applebaum 1951), how consumers search through retail settings (Titus and Everett, 1995), the role of convenience and access to transportation in retail consumer behavior (Hallsworth, 1991), impulse shopping as a pastime with hedonic elements (Hausmann, 2000; Rook, 1982), consumer styles inventory (Sproles and Kendall, 1986), role of visual displays and store atmospherics in impulse purchases (McGoldrick 1982, Abratt and Goodey, 1990; Cobb and Hoyer 1986; Nichols 2001 and Narasimhan et a.l, 1996), online behavior (Degeratu, Wu, Rangaswamy, 2000). Nesbit, 1959 says that impulse purchases are intelligent buying. Rook, 1987 tried to work on characteristics of impulse purchase and said that impulse purchase is emotional overpowering over a more conscious and cautious approach to purchase. Rook and Fisher, 1995 worked on Freud's theory related to human psychology where impulse purchase may be treated as a sign of immaturity and human weakness along with generosity. Impulse purchases may also be treated with social desirability bias (Cobb and Hoyer 1986, Mick 1996).
Impulse purchases have also been researched on in store dimensions. One of such directions has been product category and impulse relationship (Cobb and Hoyer 1986, Stern 1962). Researchers over a period have been directing their efforts to establish and understand the role of product category in impulse purchase and this is the first pillar of the study. This study will explore the role of product category for impulse purchases in India.
Literature Review: sales Promotion
"Sales promotion is an action focused marketing event whose purpose is to have a direct impact on the behavior of the firm's customers" (Blattberg and Neslin, 1991). Sales promotions have been used in marketing to induce sales (Abrahams, 1980; Massy and Frank, 1965; Sunoo and Lin, 1978; Schindler, 1992). There has been an increase in interest towards sales promotion from both company executives and academic researchers (Currim and Schneider, 1989), annual promotional budgets of many MNCs are in millions of dollars (Banerjee, 2009). But an ideal combination of freebies is still a matter of chance. Sales promotion are of three types; retailer, consumer and trade. The consumer is the ultimate target of all sales promotion activities. Research on sales promotion have been focused on consumer behavior, economic theories, relationship with sales, experiments, time series analysis, nuances of each type of sales promotion, manufacture planning process and retailer planning process (Blattberg and Neslin, 1991). There is little literature on impact of promotions on consumer behaviour (Raju, 1992). This study analyzes the sales promotion effectiveness within impulse purchases in malls as a part of the consumer shopping behavior.
Role of Product category in Impulse Purchase and sales Promotion
Evidence in impulse purchase literature show that product related factors do influence impulse purchases (Cobb and Hoyer, 1986; Stern, 1962; Jones et al.,2003; Babin et al., 1994) and high involvement products have less chances to be bought on impulse (Kollat and Willet, 1967). Hedonic products are more prone to be bought on impulse (Rook, 1987). Similarly the literature on Sales promotion effectiveness talks of promotional elasticities across product categories (Narasimhan et.al, 1996; Bolton, 1982), to establish benchmarks for cross product category promotion performance (Fader and Lodish, 1990). There is a distinct preference in product category and promotional choice (Banerjee, 2009; Simonson et.al, 1994). The work of Chandon, Wansink and Laurent 2000 build on the Congruency theory which talks of sales promotion being more effective when the benefits are congruent to that of promoted product. The study analyzes the impact of culture on congruency theory in a two country context and finds that the congruency effect between sales promotions and product category are weak and also nonexistent in certain cases. Purchase situations, product life cycle and consumer demographics are some of the factors that may impact the congruency effect. Impulse purchase is a typical purchase situation that this study is addressing in the Mall environment in India.
Taking the above mentioned view of impulse purchases and types of sales promotion. This particular study will explore the following within the Indian Malls;
i. What is the extent of impulse buying in Indian malls and in what product categories?
ii. Is there a significant association between the product category and promotion type for impulse purchases in malls in India?
The findings of the first objective would indicate the volume of impulse purchase happening in malls. This insight will be helpful for retailers to incorporate in their marketing/business strategy. In case of the second objective if there is an association observed then retailers/ mall planners may use it to improve impulse sales. If there is no association, implications of the same will be important for them to work on their marketing strategies.
The study is a cross sectional descriptive study executed in the National Capital region (NCR) of New Delhi, India. India has approximately 200 malls (Singh, Bose, Sahay, 2010) of which almost one third are in the NCR. The region was divided into nine zones. The data was collected from 600 respondents through a mall intercept survey. Altogether twenty seven malls, three from each zone, across nine zones of NCR of New Delhi were randomly selected for the survey. The survey instrument was a questionnaire prepared in consultation from industry and academic literature. Impulse buying has been mostly measured through the difference between difference between purchase outcomes and intentions collected before entering the store. The same approach has been adopted for the survey.
It would have been risky to limit the questionnaire to manager's know how to define product categories as they may unconsciously associate high promotional response categories as being high impulsive buying categories. Kotler, 2005 has given a consumer classification of products that is used in the study. Customer responses have been recorded within these categories. The sales promotion types have been used through Neslin and Blattberg, 1991 and categories formed in accordance. Descriptive date related to customer demographics has also been collected. To conduct the study, SPSS tool has been used in order to examine the variable relationships. Table I shows the sample characteristics. Table II shows proportion of impulse shoppers in Indian malls with data for each category shown in Table III.
53.5 percent of mall shoppers in Indian metros buy on impulse as can be seen from Table-II. Indian malls are in the growth phase and the upward trend of impulse purchases and may be seen in line with the global trend when Mall retailing starts picking up. The volume of impulse shopping is significant for Mall retailers and planners to develop their strategies. Within the impulse shoppers, 65.7 percent shop for shopping goods, 16.9 percent for convenience goods, 14.3 percent for specialty goods, 2 percent for services and 1.1 percent for unsought goods.
[CHI.sup.2] Test for Association
The data is collected in the form of categorical data on ordinal scale through individual interview using a questionnaire from 600 hundred selected respondents. The collected data from the questionnaires were filtered out for missing values, duplication and other anomalies, finally 532 data points were used for the analysis. The chi-square statistic ([X.sup.2]) is used to test the statistical significance of the observed association in a cross tabulation. It assists us in determining whether a systematic association exists between the variables. The null hypothesis [H.sub.0], is that there is no association between the variables. In this case the null hypothesis is that there is no association between product category and sales promotion type. The test is conducted by calculating the cell frequencies that would be expected if no association were present between the variables given the existing row and column totals. The SPSS package gives the p-value at the particular significance level. At 95 percent confidence level set Table III gives the p--values for the [chi.sup.2] test for sales promotion type and product category. The decision rule for establishing a systematic association is that if the p--value is less than 0.05 we reject the null hypothesis, i.e. there is an association between the two variables under consideration.
Discussion and Analysis
Table-III presents the results of Pearson [chi.sup.2] test for association between the product category and the sale promotion type. As per the significance results displayed in the table p value at 95 percent confidence level ther is a visible significant association between the product category and sales promotion types for convenient goods; twelve out of eighteen sales promotion types show a significant association for shopping goods; all eighteen sales promotion types show significant association and for specialty goods; fourteen out of eighteen sales promotion types show significant association.
Price related promotions, loyalty and collaboration related promotions work well for convenient goods except for cobranded membership, and some store related promotions, competitions related promotions and marketing communications related sales promotions also show significant association for convenience goods. For shopping goods, all types of sales promotion types show significant association. For specialty goods competition related promotions show no significant association along with celebrity events and in store signage. The differences observed in associations between sales promotions and product categories may be because of the nature of the products within each category. Services do not show association to any of the sales promotion types except sodexo coupons.
Table-IV shows the p value results of Pearson [chi.sup.2] test for association between the product category and the sales promotion type under Impulse condition at 95 percent confidence interval level. The null hypothesis [H.sub.0], here is that there is no association between sales promotion type and product category under impulse purchase condition. The results are in contrast to Table III. Only four out of eighteen sales promotion types show significant association with convenient goods compared to the twelve in Table III and five each in shopping goods and specialty goods category compared to eighteen and fourteen respectively. Price related promotions (discounted price, buy more for less and freebies) along with store coupons show significant association for convenient goods. Loyalty related promotions (store coupons, Cobranded coupons and Cobranded memberships) and advertisements and newspaper inserts show significant association for shopping goods, whereas Cobranded coupons and Cobranded memberships did not show significant association in without impulse condition. Freebies, Tie in(s), store membership and advertisements and newspaper inserts show significant association for specialty goods and only discounted price shows significant association for services which was not there in Table III. Sodexo coupons may work at the significance level of 0.1 for services.
There is a clear difference in the results of Table III and IV which highlight the difference in Mall shoppers behavior under different purchase situation; impulse and without impulse. As per the congruency theory of sales promotions; those sales promotions work best, whose benefits are congruent to that of product benefits, but other factors may also impact. Purchase situation is one such factor. Given the bulk of impulse purchases within malls in India, a clear understanding of these associations is important for efficient mall / retail strategy. Retailers in India may work upon the sales promotion types and product categories that show significant association and are in their frame of reference; impulse or non impulse purchases. There is a need to identify the other factors that can induce impulse purchases in the Indian context of malls.
In a study on Promotional Elasticities and Category Characteristics (1996) authors Narasimhan, Neslin and Sen find no statistically significant relationship between promotional elasticity and impulse buying. The explanation for that the authors give is that buying on promotion may involve considerable consumer planning and "expert shopping," notions that are inconsistent with impulse buying. This may be the plausible reason for the difference in sales promotion associations with product categories under impulse purchase in the context of Indian malls. Impulse purchase happens on the spot and promotions may be more associated to planned shopping.
1. The Indian Mall shopper majorly buys convenient, shopping and specialty goods in malls. He does not buy services or unsought goods on impulse.
2. Shopping goods have the maximum share.
3. While sales promotion tools show significant association across product categories there are exceptions. In services sales promotions do not work. Reasons for the exceptions need to be explored in the Indian context for better product promotion planning by retailers in India. One probable reason could be the nature of product within product category.
4. The relationship changes under the impulse condition significantly. Given the bulk of sale this is an important finding to be worked upon by Indian Retail industry.
These results have implications for the retail industry. Promotional elasticity is critical in planning and evaluating sales promotions, as it measures the change in demand against promotional expenditure involved. This study analyzes customer responses on demand side to promotions which have important implications for manufacturers, retailers, and academics. The results can provide guidance on the following issues;
a) Both manufacturers and retailers often need to know whether promotions are working well for a particular product category. Understanding how well the typical promotion works in a category should provide a bench-mark for assessing the performance of a particular brand's promotions.
b) Promotion responses vary significantly in different product categories as can be seen in the above results. It is a key factor in determining the manufacturer's trade-promotion policy and, thus the retailer's decision of whether to pass these promotions through to consumers especially under different purchase situations; impulse being one.
c) In planning the role of promotion in a given product category over a multiyear time horizon, managers must forecast how promotion-responsiveness of the category will evolve over time. This study provides the starting point to answer this question in the Indian scenario.
d) The results of this study provide guidance on how to allocate particular types of promotion across categories.
e) Finally, the lack of support for a strong relationship between promotional response and the tendency of consumers to purchase the category on impulse suggests that manufacturers should not assume that high impulse categories should be promoted. Managers of such categories should look at certain additional indicators.
Product attributes and promotion type should show a certain degree of coherence as per literature. Therefore, preference for a type of promotion is a function of the type of product it is being offered with. Thus, there exists an "ideal product promotion" combination, but this may not necessarily be true for impulse conditions. Though this study is an exploratory one, but the results are very vital to not take a note of. The need of the hour is to refine the results scientifically and build retail marketing strategies.
This study converges the two approaches commonly taken for research in the field of impulse purchases; the operational side related to product specific characteristics that the retailer can work upon and the behavioral side where customer response to promotion types under impulse purchases for the product categories is analyzed.
While this particular study analyzes impulse purchases for promotional responses across product categories; an interesting and associated dimension is to study impulse purchases for space allocation across product categories in the Indian context.
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Assistant Professor, Management Development Institute, Gurgaon.
Table-I Demographic Composition of the Sample Data Demographic factors % Age 18-25 years 42.9 25-30 years 25.6 30-35 years 18.8 > 35 years 12.7 Monthly Household < 10,000 8.3 Income (INR) 10,000-24,999 19.6 24,999-49,999 36.4 50,000-1,00,000 17.1 > 1,00,000 18.7 Demographic factors % Education > 12th standard 6.1 Graduation 34.3 Post Graduation 39.4 Professional 19.1 Qualification Gender Male 61.5 Female 38.5 Table-II Proportions of Impulse Purchase Across Product categories in Indian malls Impulse Purchase Percent Yes 53.5 No 46.5 Total 100 Impulse Purchase across product categories Percent Convenience Goods 16.9 Shopping Goods 65.7 Specialty goods 14.3 Services 2 Unsought Goods 1.1 Total 100 Table III Associations between Product category and Sales Promotion in Indian Malls ([chi.sup.2] Tests--P Values at 95% confidence Level) Sales Product Category Promotion Types Convenience Shopping Goods Goods Discounted Price 0.000 0.000 Buy more for less 0.000 0.000 Freebies 0.000 0.000 Tie in 0.000 0.000 Store coupons 0.000 0.000 Store membership 0.000 0.000 Cobranded coupon 0.002 0.487 Cobranded Membership 0.617 0.359 Sodexo 0.002 0.001 In store product display 0.857 0.000 In store placement 0.024 0.000 Signage 0.008 0.002 Contest 0.170 0.000 Games 0.085 0.003 Lucky Draw 0.005 0.001 Advertisements 0.002 0.002 Newspaper inserts 0.124 0.022 Celebrity Events 0.618 0.000 Sales Product Category Promotion Types Specialty Service Goods Discounted Price 0.000 0.592 Buy more for less 0.001 0.697 Freebies 0.000 0.437 Tie in 0.000 0.467 Store coupons 0.000 0.467 Store membership 0.000 0.587 Cobranded coupon 0.000 0.950 Cobranded Membership 0.000 0.593 Sodexo 0.055 0.054 In store product display 0.000 0.813 In store placement 0.007 0.083 Signage 0.132 0.593 Contest 0.607 0.950 Games 0.427 0.843 Lucky Draw 0.672 0.725 Advertisements 0.000 0.072 Newspaper inserts 0.000 0.673 Celebrity Events 0.421 0,668 Table-IV Associations Between Product Category and Sales Promotion in Indian Malls ([chi.sup.2] Tests--P Values At 95 percent Confidence Level) in Impulse Purchase Conditions Sales Product Category Promotion Types Convenience Shopping Goods Goods Discounted Price 0.018 0.364 Buy more for less 0.010 0.400 Freebies 0.008 0.065 Tie in 0.118 0.287 Store coupons 0.000 0.003 Store membership 0.062 0.174 Cobranded coupon 0.208 0.000 Cobranded Membership 0.609 0.020 Sodexo 0.285 0.166 In store product display 0.082 0.257 In store placement 0.721 0.868 Signage 0.270 0.909 Contest 0.810 0.431 Games 0.885 0.303 Lucky Draw 0.266 0.983 Advertisements 0.478 0.001 Newspaper inserts 0.598 0.000 Celebrity Events 0.699 0.650 Sales Product Category Promotion Types Specialty Service Goods Discounted Price 0.431 0.002 Buy more for less 1.000 0.491 Freebies 0.000 0.697 Tie in 0.002 0.334 Store coupons 0.210 0.324 Store membership 0.021 0.426 Cobranded coupon 0.067 0.943 Cobranded Membership 0.088 0.655 Sodexo 0.774 0.098 In store product display 0.124 1.000 In store placement 0.621 0.565 Signage 0.784 0.694 Contest 0.454 0.916 Games 0.665 0.970 Lucky Draw 0.523 0.841 Advertisements 0.003 0.120 Newspaper inserts 0.004 0.525 Celebrity Events 0.730 0.948
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|Date:||Oct 1, 2013|
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