The Effects of Competitive Context on Consumer Response to Price Changes
This paper aims to understand how a brand’s price level, relative to its competitors, will affect consumers’ responses to price changes of the brand. The study uses experiments to examine brand choice responses to price increases and decreases across contexts differing in competitor brands and their respective prices. These experiments are conducted with six consumer goods categories. The research identifies three key factors that affect the size of responses to brand price changes - (1) passing a competitor brand’s price, (2) narrowing versus widening the price gaps with competitors, and (3) whether competitors are predominantly higher or lower priced brands.
CitationDunn, S., Dawes,J., Bogomolova,S. (2019). "The Effects of Competitive Context on Consumer Response to Price Changes”. Forthcoming in the Journal of Marketing Management.
Modeling Brand Market Share Change in Emerging Markets
The objective of the paper is to examine what happens to key brand performance metrics as brands change in market share, in the context of packaged goods. The metrics are: penetration - the number of buyers a brand has; and loyalty - measured as purchase frequency (PF) and share of category requirements (SCR).
The study utilizes 24 datasets in 17 packaged goods categories in three emerging markets: China, Malaysia and Indonesia. We examine changes in penetration, loyalty and share of category requirements in the context of volume and value market share change. In addition, we examine whether initial price point and price movements influence the results.
The primary finding is that market share change is accompanied by a greater change in penetration than in any other metric. This finding is very consistent across categories and countries. The relative importance of the two loyalty metrics varies by country. SCR was a stronger factor in Indonesia; while PF was stronger in Malaysia. Analysis indicated that pricing strategy (initial price and promotional depth) did not alter the main pattern of results, suggesting the results hold for brands with different price levels and tactics.
Irrespective of circumstance, to grow in value or volume market share, brands should aim to grow in penetration, while the importance of changes in specific loyalty measures depends on market conditions.
This research extends past research on brand growth to the very different economic, geographic and cultural conditions of three crucially important emerging markets. Its main value lies in recommendations on how much to invest in building the size of the customer base versus consumer retention.
CitationRomaniuk, J., Dawes, J., Nenycz-Thiel, M. (2018). "Modeling Brand Market Share Change in Emerging Markets". Forthcoming in the International Marketing Review.
Price Promotions: examining the buyer mix and subsequent changes in purchase loyalty
Price-related promotions are rife in consumer goods categories. Reports say between 50% to 60% of the total marketing budget of CPG firms are spent on temporary price promotions. Price promotions are prevalent for many reasons. These include very large sales uplifts, to maintain brand sales and shelf space, to preserve the brand’s normal price, and to combat store brands. Retailers run price promotions to signal to shoppers they are price-competitive and drive store traffic.
However, price promotions are costly. Various sources say the majority of price promotions are loss-making for both manufacturers and retailers. Unfortunately, managers become reliant on price promotions. The reason is that running promotions can help achieve sales budget for a brand in one year, but it then becomes very difficult to reduce promotion incidence the next year while maintaining market share.
This study investigates the extent to which temporary price promotions attract people who do not normally buy a brand, and whether buyers change their propensity to buy the promoted brand afterwards.
CitationDawes, J. (2017) "Price Promotions: examining the buyer mix and subsequent changes in purchase loyalty". Forthcoming in the Journal of Consumer Marketing.
Empirical regularities in average price paid across different types of households
This research examines the relationship between the average price paid by a household for consumer packaged goods and different types of households. Using panel data that consists of approximately 17000 households per year, we examine 24 consumer packaged goods categories across 6 years (2005-2010) to understand the way in which average purchasing price varies across five key household types or stages, and to highlight generalizability. We find systematic patterns with respect to average price paid as households pass through key household stages.. The changes follow an S-shape pattern across multiple product categories. The average purchasing price declines as households move from the pre family stage to the young family stage, increases at the older family and post family stages, and then decreases slightly at the older single stage. Overall, the most significant change is from the pre family stage to the young family stage, followed by the change from the older family stage to the post family stage. The differences hold across multiple years. The effects, however, are larger for nonfood than for food categories. Our results suggest that in order to broaden the brand customer base, brand managers need to have a product portfolio that includes both low and high price variants as well as presence across different distribution channels to satisfy the need of different types of households.
CitationPare, V., Trinh, G., Wright, M. (2017). "Empirical regularities in average price paid across different types of households." Australasian Marketing Journal Accepted November 3, 2017.
Buying Brands at both Regular Price and on Promotion Over Time
We analyse the purchasing of brands at both regular and promotional price over time. The goal is to better understand the extent of consumer deal-proneness. Our analysis shows most consumers buy brands on promotion at least some of the time, and the tendency to buy on promotion relates mostly to how much promotion is available in a category, suggesting little innate deal-proneness. The extent of promotion can be so high that as many as half of all brand buyers buy the brand solely when it is on promotion. However, this amount of on-deal buying is only very slightly higher than would be expected given the amount of promotion available. We find few buyers buy only on promotion. Promotion buyers of a particular brand also buy other brands on and off promotion more or less in line with the market share those other brands have at regular and promotional price. The three main implications are: (1) brand loyalty is still an important aspect of purchase, (2) a brand’s normal-price buyers are a major source of its volume from price promotions, (3) there is only a small effect of deal-proneness on promotion buying over and above that of promotion prevalence in a category.
CitationScriven, J., Clemente, M., Dawes, J., Trinh, G., Sharp, B. (2017). "Buying Brands at both Regular Price and on Promotion Over Time ". Australasian Marketing Journal, Accepted November 1, 2017.
Consumer Response to Price Changes in Higher-Priced Brands
Price elasticity is a widely used measure of consumers’ willingness or ability to pay for goods and services. This research examines the price elasticity of high-priced brands. We define high-priced brands as those that sell at or above the price point at which consumers begin to consider that product to be luxurious or premium in the category (Kapferer et al., 2014, Sjostrom et al., 2016). More specifically, we use high-priced wine brands as the context for this research. Wine is an ideal product to use because it has a wide price range, and can be purchased for various consumption situations. When prices are high we anticipate that elasticities may no longer function as they do in everyday consumer packaged goods markets. Instead, they might become smaller or possibly even positive if consumers are prepared to pay for the quality they desire. We employ stated choice experiments to investigate how Situational Factors, Consumer Factors and Contextual Factors influence price elasticities for high-priced wine brands in Australia. Results are that price elasticity estimates for the high- priced brands in this study are -1.8 on average. This is lower than the commonly reported figure of -2.6 for brands in general; however, in one part of the experiment respondents chose for a ‘high-importance’ occasion. Smaller price elasticities were found when (1) the perceived importance of the consumption situation was high, (2) among regular high-priced wine buyers, and (3) among brands with a higher initial price position. These results demonstrate that the patterns of price elasticity for high-priced products are mainly similar to that for other FMCG products, but consumers are slightly less responsive.
Key words: Price, Elasticity, Experiment, Consumer
CitationHuang, A., Dawes, J., Lockshin, l. & Greenacre, L. (2017). “Consumer Response to Price Changes in Higher-Priced Brands.” Journal of Retailing & Consumer Services: 1-24.
Retailers’ and manufacturers’ price-promotion decisions: intuitive or evidence-based?
Consumer price promotions account for more than half of many manufacturers’ marketing budgets, and require a significant time investment to manage. Amidst the considerable research on price promotions, little academic attention has been paid to how manufacturers and retailers make price-promotion decisions. Based on in-depth interviews with a broad range of managers, this study investigates factors that influence price-promotion decisions in durable and consumer goods industries. Findings suggest that (1) intuition and untested assumptions are the main inputs into these decisions; (2) practitioners lack solid empirical evidence to guide their actions, and their beliefs are often in stark contrast with academic knowledge about the effectiveness of price promotions; and (3) price promotions are typically not evaluated against the objectives according to which they were justified, impeding appropriate feedback for future decisions. Research priorities are outlined to advance evidence-based decision-making in this area.
CitationSzabo, M, Kennedy, R, and Bogomolova, S (2016), 'Retailers’ and manufacturers’ price-promotion decisions: intuitive or evidence-based?', Journal of Business Research.
The Ehrenberg Legacy: Lessons in Buying Behavior, Television, Brand Perception, Advertising, and Pricing
This review outlines the scienti c principles that underpinned Andrew Ehrenberg’s working methods, then summarizes his ground-breaking ndings in buyer behavior and brand perceptions. It follows on to describe how he applied that knowledge to produce his theory of how advertising works mainly as publicity, now widely if not universally accepted but highly controversial at the time. It concludes with an appreciation of the extraordinary breadth and in uence of the body of work, and the inspiration it provides for future scienti c study, not least as evidenced in this Special Edition of the Journal of Advertising Research.
CitationScriven, John and Gerald Goodhardt (2012), “The Ehrenberg Legacy: Lessons in Buying Behavior, Television, Brand Perception, Advertising, and Pricing,” Journal of Advertising Research, 52 (2), 198-202.