Consumer impulsive buying behavior

Consumer impulsive buying behavior Abstract In this study, we investigate the relationship between sales promotion and consumer impulsive buying behavior in Retail Industry of Pakistan. More specifically, we investigate whether there is a positive relationship between sales promotion and consumer impulsive buying behavior or not? For this purpose we have conducted 80 Questionnaire from Metro, Macro and Hyper Star Located in Lahore, Pakistan for our research project. We have measured sales promotion by three dimensions that are (1) length of offer period, (2) incentives and (3) return policy while customer impulsive buying behavior by three dimensions that are (1) income level, (2) worth of product and (3) tendency to spend. We have used Questionnaire as a tool for the collection of data in order to prove our hypothesis. Afterwards we have applied the regression and correlation technique, which have given us the result that there is a positive relation between Sales Promotion and Impulsive Buying Behavior. In the end we discuss ed that our research goes in support of our literature review that we have conducted before starting our project. Keywords: Sales Promotion, Consumer Impulsive Buying Behavior INTRODUCTION AND OVERVIEW In this era of globalization, competition has become more intense than ever. Every marketing campaign tries to win the support of the consumers that the product of the organization is entailed to suffice them and is the best to meet their expectations. If the purpose is successfully attained the consumers acknowledge the product of the organization and colligates specific benefits to the product (Murphy Enis, 1985). Consumer routinely faces the decision problem of what product to purchase, from where to purchase and in what quantity to purchase. Moreover, the decision is complicated by consumer characteristics ( e.g., income, age, gender, purchase frequency etc) and by temporary price reductions for various products and by the fact that the size of the price reductions varies across deals. These price reduction (sales promotion) techniques can affect the decisions of different consumers differently. For example, price reduction might cause brands switching to one segment without any effect on purchase timing and quantity, while heartening another segment of brand-loyal consumers to buy quick and more of the product. Common sense and formal economic analysis suggests that a consumers decision on product and purchase quantity may depend on the size of the price reduction and the time until the next price reduction (Blatberget, 1978). Interest in the study of sales promotion is increasing due to the acceleration of promotional expenditures. Three-fourth of the marketing budget in most of the consumer product companies is for sales promotions. Sales promotions are a potential tool because it works on behavioral level and most of the sales promotion techniques directly impact the decision making process and thus purchase decision. Sales promotion is capable of shift in behavior because it transforms the price-value relationship that a product or service offers a buyer (Schultz, Petrison Robinson). pp 1- 6 Manufacturers are spending more money on sales promotion as compared to advertisement due to the quick and direct impact of sales promotions on sales volume (Blattberg, Briesch and Fox 1995). There are several reasons why advertising has become less effective. The growing diversity of the population of consumers makes it more difficult to reach a mass audience with a single message. Moreover, the cost of advertising media has grown faster than the rate of inflation, but its effectiveness has fallen as television channels, magazines, radio stations, and websites proliferate, and as consumers take control of their exposure to ads with remote control devices. It has become increasingly expensive and difficult to build brand awareness and brand loyalty. According to Kahn and McAllister (1997), it has almost become impossible to build brand awareness and brand loyalty by advertising. Furthermore, a result of the overwhelming product proliferation is that the distinctions between brands have become blurred. These (and other) developments have driven manufacturers and retailers marketing mix expenditures towards sales promotions. (e.g., Lal and Rao 1997, Bell and Lattin 1998) In vestigating the exact results from sales promotion expenditures on individual consumers buying behavior is the mainspring of our study. 1.2 Sales Promotions Sales promotions are action-focused marketing events whose purpose is to have a direct impact on the behavior of the firms customers. There are three major types of sales promotions: consumer promotions, retailer promotions, and trade promotions. Consumer promotions are promotions offered by manufacturers directly to consumers. Retailer promotions are promotions offered by retailers to consumers. Trade promotions are promotions offered by manufacturers to retailers or other trade entities (Blattberg and Neslin 1990). This thesis is focused on promotions offered to the consumer, therefore a combination of consumer and retailer promotions. Throughout the world, sales promotions offered to consumers are an integral part of the marketing mix for many consumer products. Marketing managers use price-oriented promotions, such as coupons, rebates, and price discounts to increase sales and market share, entice consumers to trial, and encourage them to switch brands or stores. Non-price promot ions such as sweepstakes, 7frequent user clubs, and premiums add excitement and value to brands and may increase. brand attractiveness. In addition, consumers like promotions. They provide utilitarian benefits such as monetary savings, increased quality (higher quality products become attainable), and convenience, as well as hedonistic benefits such as entertainment, exploration, and self-expression (Huff and Alden 1998, Chandon et al. 2000). Blattberg and Neslin (1990) stated that the influence of sales promotions could be exerted in many ways. The consumer can be influenced to change purchase timing or purchase quantity, switch brands, increase consumption of the product category, switch stores, or search for promotions. However, not all consumers are influenced in the same way. For example, some consumers might be influenced to switch brands but not change their purchase timing, while others might be influenced to change timing but not brands. Still others might be influenced in both ways. Blattberg and Neslin (1990) concluded that promotion response is therefore a multidimensional concept. Identification of the degree to which a certain consumer is influenced by a promotion? Figuring out, whether there are some consumers who respond to every sales promotion? Are there differences between households in the way they react to promotions, does one household show consistent brand switch behavior, whereas a second household shows consistent purchase acceleration behavior? These are questions we want to answer with this study. Retailers also want to know how planned decisions such as the product range is to be offered in their stores and how these planned decisions such as price promotions and special displays affect the likelihood of consumers adding impulse behavior to their sales. Research Questions With respect to the effects of sales promotions we have formulated one central research question. Under which conditions and in what way do sales promotions influence household purchase behavior? We have investigated the impact of sales promotions on purchase behavior at the individual household level. We agree with Blattberg and Neslin (1990) in the sense that promotion response can be exerted in many ways. There are so many factors that can influence a consumer promotion purchase behavior. 1.4 Scientific Contribution A considerable amount of research has been undertaken in an attempt to identify and understand consumer promotion response. Different operationalizations and measures of promotion response have been developed and applied. This abundance hampers comparison and makes the prospect of building a cumulative tradition for promotion response elusive. Furthermore, a large part of the empirical work is not grounded on consumer behavior theory. We provide an integrated framework that describes the effects of sales promotion on household purchase behavior applying insights from consumer behavior theories. Furthermore, measures are developed for household sales promotion response. We investigate whether the observed magnitudes of the promotion response variables can be explained by observable household characteristics (such as social class, available time, size and composition), product category characteristics (such as average price level, number of brands), and promotion environment variables (which promotion types were present). Furthermore, we will present an intertemporal decomposition of household promotion response to find out to what degree the different sales promotion reaction mechanisms are exhibited in household purchase behavior within and across categories. The intertemporal aspect means that besides effects during the promotion itself, also pre-and post-promotional effects are taken into account. The microscopic level of research offers the opportunity to study (in)consistencies in household purchase behavior within and across different product categories to make a statement about the concept of deal proneness. 1.5 Managerial Relevance The results and insights obtained concerning the promotion response will be used to infer conclusions about the effects of sales promotions. Do specific sales promotion types mainly lead to stockpiling behavior, therefore not really rewarding, or do some consumers really consume more (category expansion). What household characteristics and product category characteristics are important in explaining the effects of sales promotions? Are some categories more attractive to promote than others? The results on category expansion effects form an important indicator of retailer and manufacturer profitability. They could be used as a starting point for deriving estimates of these profitabilities, though that is outside the scope of this dissertation. Currently, everyday low pricing (EDLP) is appearing in managerial circles. The change from a promotion-intensive environment (the so-called high-low pricing) to an environment characterized by lower average prices and fewer promotions has interesting short- and long-run implications for brand choice, store choice, purchase acceleration, category expansion, and repeat purchasing. It is therefore interesting to know the percentage of households whose purchase behavior is influenced by promotions. Promotion shoppers could abandon EDLP stores and EDLP brands. Furthermore, incorporating demographic variables in household purchase behavior models is conceptually appealing and has numerous managerial benefits. Retailers and brand managers can assess demographic variations in demand and marketing mix response in order to implement micromarketing strategies (Neslin et al. 1994, Kalyanam and Putler 1997). For example, a retailer planning to locate a new outlet can get some sense of the differences in demand patters and price and promotion sensitivities in the new trading area in order to make initial stocking, inventory, pricing, and promotion decisions. SIGNIFICANCE RATIONALE Researches and techniques are continuously being added in the field of sales promotion (Lancaster Massingham). Many of the sales promotion researches described the impact of demographics on deal-prone consumers and explained the impact of their income, gender and ownership on their purchase patern (Bawa and Shoemaker 1987; Blattberg et al. 1978) and other researches explored personal traits such as coupon-proneness, value-consciousness or market mavenism (Feickand Price 1987; Inman, McAlister and Hoyer 1990; Lichtenstein, Netemeyer and Burton 1990, 1995; Mittal 1994). Influences of personal (self-image) and social characteristics on impulsive buying behavior has been explored (Dittmar, Beatie and Friese 1996) We acknowledge that consumer characteristics also influence impulse purchase decisions but our research is directed at factors over which retailers have control. Based on previous impulse research, we obtained measures of consumer characteristics that have been shown to influence impulsive buying behavior and included these variables in our research so potential space of relationship between the sales promotions and consumer impulse buying behavior exist. Keeping this gap in mind, our research contributes to defining the relationship between these two concepts. OBJECTIVES Our study has three general objectives. The first is to develop a conceptual model to describe the relationship between sales promotion and consumer impulse buying behavior. It also indicates how retailers can influence promotional activity and use information on consumer purchasing decision. The second objective is to conduct an empirical analysis of the model. These findings are expected to improve our understanding of how consumers react to price promotions. The third objective is to test hypothesis. These findings could be used to segment the market, for mailing coupons, for designing specific promotions. LITERATURE REVIEW A lot of research work have been done in the area of consumer behavior in which, its relationship is associated with the different aspects of marketing for example advertisement, quality of the product or services, pricing acceptability of the product, bundling and promotional frames were influencing the perceived value of the product, variety seeking and reinforcement behavior that resulted in purchase intention (Munger Dhruv, 2003; Joseph, 1999; Barbara Jagmohan, 1991; Joseph, Carl Terence, 1999; Aridhan, Imarn Robert, 1991; Donald, Nancy Richard, 1993; Charles Michael, 1982; Manohar Chi, 1992; Carl, kamel Douglas, 1998 ). Many a researches examining impulsive buying have used the terms Impulsive buying and Unplanned buying interchangeably (Kollat Wallet, 1969; Stern, 1962). Consumer statement that they had purchased those items, which they had, no intention of purchasing, prior to entering the store were generally conceptualized as impulsive buying. This definition of impulsive buying was one of the reasons for the researchers to investigate the issues related to shelving displays that facilitate purchasing. Impulsive buying behavior is a sudden compelling hedonically complex purchasing behavior in which the rapidity of the impulse purchase decision process predicts thoughtful deliberate consideration of information and choice alternative (Kacen Xu, 2001). Furthermore Charles and Michael (1982) examined marketing and financial implications of offering a discount to retail customers to encourage cash payment rather than credit card payment to increase buying behavior. Also in research study published by American Marketing Association of Aradhna, Imran and Robert (1991) explained the relationship of promotional activity with consumer perception comprehensively. The use of different sales promotion techniques varies substantially from one country to another. Promotions provoke two reactions in people .The first is an increase in consumption, i.e. more quantity of a product is acquired. The second is storage of the product for the future, i.e. the consumer acts anticipating his purchases. On the other hand, it is possible that consumers who do not buy the brand will want to acquire it because they are attracted by the sales promotion (Gupta, 1993). However, Brandweek (1994) found that some people who change brand due to a promotion change back to their favorite brand when buying that category of product later. It is necessary to highlight that the use of sales promotions to encourage brand and product purchase and consumption has to be sufficient. However it is necessary to stay alert, as the opposite effect could be provoked on certain occasions. This occurs when the consumer perceives that he is paying for unnecessary activities to enhance and position the product: this then provokes the opposite effect to the desired effect, i.e. the consumer will stop buying the promoted brand (Simonson, 1989). It is also possible that the consumer avoids buying the promoted brands so as not to have to justify his behavior to his peer group. There is also another reason why promotion may not obtain the expected results: the consumer may feel he is being manipulated and will punish the retailer by not purchasing the promoted brand or product (Simonson, 1989). Customer perceived value is thus the difference between the prospective customers evaluation of all benefits and all the costs of an offering and perceived alternatives. Total customers value is the perceived monetary value of the bundle of economic, functional and psychological benefits customers expect from a given market offering. (Marketing management 12 e, page no 141, Philip Kotler and Kelvine Lane Keller, 2005) Marketing analysts have shown that consumers can be characterized based on their brand purchasing patterns within a product class (Morrison, 1966). For example, some consumers purchase behavior can be characterized as reinforcing, i.e., a tendency to repurchase the last brand bought (Morrison, 1966; Jeuland, 1979), while other consumers purchase behavior can be characterized as variety-seeking, i.e., a tendency to shift away from the last brand purchased (Givon, 1984; Kalwani, 1992; Morrison, 1966). Several models of consumer response to promotions suggest that a current decision on brand and purchase quantity depends on the expected time until the next price reduction and the expected size of future reduction. Blattberg, Peacock, Robert and Sen (1978) define a purchase strategy as a general buying pattern which incorporates several dimensions of buying behavior such as brand loyalty, private brand proneness and deal proneness. Researchers studying the brand choice decision for example, Gupta (1988), Schneider and imran (1990) have found promotions to be associated with brand switching. It was found that all the individuals have built-in impulsive spending mechanisms: (1) Desire to buy, and (2) Ability to control urge of buying. When the former overtakes later then it results in impulsive spending (Hoch Lowenstein, 1991; Mischel Ayduk, 2004; Mischel Ebessen, 1970). Research findings suggest that emotions and feelings play a decisive role in purchasing, triggered by seeing the product or upon exposure to a well crafted promotional message. Such purchases ranges from small (chocolate, clothing, magazines) to substantially large (jewelry, vehicle, work of art) and usually (about 80 percent of the time) lead to problems such as financial difficulties, family disapproval, or feeling of guilt or disappointment. Moods also influence the impulsive buying behavior. Researchers found that that the respondents were of the opinion that the most frequently mentioned mood state for stimulating impulse purchase was pleasure followed by mood states care free and excited. Consumer believes that, impulsive buying helps in extending these feelings. Most of researchers findings are that positive moods facilitate impulsive buying, but a few researchers also found that negative moods also facilitate impulsive buying (Gardner Rook, 1987) Negative moods adversely aff ect self control, therefore, the individual fell prey to impulsive buying (Herman Polivy, 2004). Consumer in negative mood turns to purchasing with the hope that this would alleviate their unpleasant mood (Mick Demoss, 1990). Rook (1987) defined impulse buying as when a consumer experiences a sudden, often powerful and persistent urge to buy something immediately. We extend this definition slightly. Impulse buying is sudden and immediate purchase with no pre-shopping intentions either to buy the specific product category or to fulfill a specific buying task. The behavior occurs after experiencing an urge to buy and it tends to be spontaneous and without a lot of reflection (i.e., it is impulsive). It does not include the purchase of a simple reminder item, which is an item that is simply out-of-stock at home. Dramatic increases in personal disposable incomes and credit availability have made impulse buying in retail environments a prevalent consumer behavior (Dittmar, Beattie Friese 1996; Ferrell 1998). Impulse buying behavior is sudden and compelling (Bayley Nancarrow, 1998). Several researchers have reported that consumers do not view impulse purchasing as wrong; rather, consumers retrospectively convey a favorable evaluation of their behavior (Dittmar, Beattie Friese, 1996; Hausman, 2000; Rook, 1987). Other researchers have treated impulse buying as an individual difference variable with the expectation that it is likely to influence decision making across situations (Beatty Ferrell, 1998). Our research project is going to be investigating the impact of sales promotion on consumer impulse buying behavior because we have not found work done on this topic. Theoretical Frame work The two major concepts examined in this research are sales promotions and consumer impulsive buying behavior. The brief introduction to these concepts is as below: Consumer Buying Behavior. Buying behavior of people who purchase products for personal or household use and not for business purposes. Impulse buying An unplanned buying behavior resulting from a powerful urge to buy something immediately. 179 Routinized Response Behavior. A type of consumer problem solving process used when buying frequently purchased, low cost ietems that require very little search and decision effort. 178 Limited Problem Solving. A type of consumer problem solving process that buyers use when purchasing products occasionally or when they need information aboutan unfamiliar brand in a familiar product category.178 Extended Problem Solving. Type of consumer problem solving process employed when purchasing unfamiliar, expensive or infrequently bought products.178 Foundations of Marketing (2nd ed) 2007 Page 177 By William M. Pride, O. C. Ferrell Chapter 8: Consumer Buying Behavior, Publisher:Cengage Learning HYPOTHESIS H1: There is positive relationship between Sales promotions and consumer impulse buying behavior. H2: Female consumers are attracted more by sales promotions as compared to male consumers H3: Responsiveness to sales promotions is more in young consumers as compared to old consumers H4: Low income consumers are attracted more by sales promotions as compared to high income consumers Dependent Variable In our analysis, consumer impulse buying behavior is our dependent variable. Independent Variable Independent variable is Sales promotion. Relationship between Dependent and Independent Variable Consumer Impulse Buying Behavior Sales Promotion Independent Variable Dependent Variable Operational Definitions Sales Promotion- Short term incentives to encourage purchase or sales of a product or service (Kotler, Armstrong 1999). Dimensions of Sales Promotions Incentives- These are benefits given by retailer such as coupons, cash rebates, advertisement specialty; price packs (e.g. 50% off) to consumers. Offer Period- It is the lengths of time for which the consumer can avail the incentives given by retailers e.g. 3 month spring season offer, Eid offer, Ramzan offer etc. Return Policies- It is the money back guarantee or replacement of the products given by the retailer to increase the confidence of the consumer. Consumer Impulse Buying Behavior Impulse buying as when a consumer experiences a sudden, often powerful and persistent urge to buy something immediately. (Rook, Dennis and Stephen, 1985) Dimensions of Consumer Impulse Buying Behavior Income Level It plays an important role while determining the consumer impulse buying behavior as it helps the consumer to decide about the purchase of the product. Worth of the Product- It is the value of the product for consumer e.g. consumer impulse buying behavior is affected by the price packs given of those products which have worth for consumers. Tendency to Spend- It is the potency and likelihood in one self that he or she spends money irrationally. Research Design A research design according to Zikmund (1997), a master plan by which we specify the techniques and operations for collection and examination of the required information (p. 199). Choice of research The choice of research will be Causal Research which describes data and characteristics about the population or event being studied. It allows us to have greater understanding (Zikmund, 1997). Descriptive research tends to be very structured and strict for the collection of data (Stevens, Wrenn, Ruddick, Sherwood, 2000). The purpose of using this research is that it will help understanding the attitudes and behavior of customers, who are likely to respond towards the organizations undertaking a societal marketing campaign and hence, the degree to which societal marketing and corporate image are connected will be determined (Kinnear Taylor, 1996). Hence, this design is most suitable to examine the impact of societal marketing on customer behavior towards corporate image. Sampling Sampling is the process of selecting a sufficient number of elements from the population, so that a study of the sample and understanding of its properties would make it possible for us to generalize such properties to the population element. Population. The population relevant to a study is described as a complete group of entities that share some common set of characteristics (Zikmund, 1997, p. 414). Target population is considered for this study was adult consumers with age 20-45+ years whose income range Rs.15000-55000+ available in the retail markets of Pakistan. The departmental stores and superstores offers a good place to find this kind of population. Sampling frame. The sampling frame in this study will be the customers visiting Makro, Metro and Hyperstar located in Lahore. Each customer in the store is a single member of the population and is defined as a sample unit (Zikmund, 1997). Sampling method. To understand how sales promotion affects the consumer impulse buying behavior a self administered survey was conducted at major super stores METRO, Makro and Hyperstar at Lahore. A probability sampling method has been used for analysis as all the customers Sample size. Data from 80 respondents was collected due to budget and times constraints. Instruments Sales promotion- A five-point Likert scale (Strongly Agree/Strongly Disagree) was adopted in the questionnaire. It contained 12 statements. Consumer impulse buying behavior- A five-point Likert scale (Strongly Agree/Strongly Disagree) was adopted in the questionnaire. It contained 13 statements. Statement 9 is more psychological in nature and statement i4 is a repeated statement, so it was dropped while analyzing data. REsults and Analysis 5.1 Reliability Analysis All questionnaires were valid for analysis as missing values were converted 3 (neither agree nor disagree). For a reliability check, the Cronbachs Alpha of each scale above 0.60 found, as shown in the following table. 6 Discussion From table 1 it can be interpret that measurement scale of sales promotion is 66.5% reliable and consumer impulse buying behavior is 69.5% reliable. Form table 2 it can be interpreted that the hypothesis is true and the two variables are positively correlated and level of significance is .005 for to tailed and confidence interval is 99%. Table 4 represents that while calculating regression Enter Method is used . From table 5 it is interpreted that Value of adjusted R2 (.099) shows the effect independent variable on dependent variable, remaining effect will be caused by other variables which are not the part of this study. Table 5 represents ANOVA summary also from this analysis significance is found .005.from table 6 the coefficient of independent variable sales promotion ÃŽÂ ²=0.334 have appositive effect on dependent variable consumer impulse buying behavior. Fig1 shows the regression line and variation can be seen through scattered points which are almost near the line.Fig2 show the pattern of data represented by histogram and the curve shows normal distribution pattern. 7 Conclusions Our study focused on understanding the relationship sales promotion to consumer impulse buying behavior. Charles and Michael (1982) proved in their research that cash discount can increase the customer buying behavior. Similarly Givon(1984) and kalwani (1992) proved their research of increasing sales through variety seeking behaviors , Morrison (1966) developed the relationship of buying behavior with consumer status ,and Blattberg (1978) same devlope relationship with buying behavior but with brand loyality ,Schneider and imran (1990) have found promotions to be associated with brand switching. So we got area to find significance relationship between sales promotion and consumer impulse bung behavior The answer to our research study concerning the relative strength of the retail environment in impulse purchases is deep this is not to say that if a retailer puts items on special display they will not generate impulsive purchases, they will. Our study makes a useful contribution to retailers understanding of impulsive buying behavior among consumers. 8 Limitations First, the data comes from a small panel and from a very small area whereas researchers gather data in forms of thousands. Second, while we have included the major gap that exists between variables to influence impulse buying behavior, there is the possibility that other unmeasured factors (e.g. time of day) also influence purchase decisions. Third Shortage of time was another limitation in this study. Due to which data collected was limited to very small area. Last but not least the respondents were very non-serious many questioners were found on which pattern of filling questionnaires found. 9 Future Implication The results of this study can be helpful for retailers. One of the major implications of this research is that retailers can increase sales by offering the right promotional tools to encourage product sale. So decision should carefully be planned. Promotions that emphasize in-store display, cash rebates, and price packs are likely to be more effective than coupons. Another fruitful area that a retailer must keep in mind that the promotion pattern should be regular or long lasting so that consumer perception can be improved .Giving short term incentives for temporary periods can cause low quality perception in consumer s which can effect impulse purchase To increase impulse purchase at store a wide range of competitors products can be helpful to encourage impulse purchase since consumer compare price level and a deep discount is attractive to them. Our research project is comprised to pilot study there is a great potential