Analysis of Sales Promotion Effects on Household Purchase Behavior

Economic theory provides an explanation for asymmetric brand switching. Consumer wants to
minimize costs <strong>of</strong> satisfying his or her demand for the product. By buying a brand at a lower
price, the consumer can decrease purchase costs. Price sensitive consumers could decide to
switch from a store brand to a national brand, when the promotional price <strong>of</strong> the national
brand is lower than the price <strong>of</strong> the store brand. Other consumers, more quality oriented, could
stick to their preferred national brand.
Gupta (1988) concluded that more than 84% <strong>of</strong> the sales increase due to promotions
is accounted for by brand switching (a very small part <strong>of</strong> which may be switching between
different sizes <strong>of</strong> brands). Gupta worked with grocery c<strong>of</strong>fee data. Chintagunta (1993) worked
with yogurt data and the results from his study implied a percentage <strong>of</strong> 40% due to brand
switching. Bucklin et al. (1998) also used yogurt data and they concluded that 58% <strong>of</strong> the
sales increase was due to brand switching at the aggregate level. This suggests that sales
promotions have a bigger impact on the brand choice decision for c<strong>of</strong>fee than for yogurt,
perhaps due to package size or perishability. Bell et al. (1999) <strong>of</strong>fer a empirical generalization
on promotional response. They concluded that brand switching varies systematically across
product categories. Bucklin et al. (1998) also investigated whether there exists heterogeneity
among household with regard to the sensitivity in brand switch behavior. The results showed
that the intersegment variation was substantial (brand switch percentages ranging from 38% to
64%). The research discussed above shows that brand switching varies across households and
across product categories.
4.2.2 Store Switching
Store switching is the analogue <strong>of</strong> brand switching, but instead <strong>of</strong> inducing a consumer to
purchase a different brand, store switching means that a consumer is induced to shop at a
different store. Evidence on store switching is less abundant than evidence on brand
switching. This comes as no surprise, given the fact that store switching asks more effort from
a consumer and from the data collector than brand switching. Store choice precedes the brand
choice decision for most consumers, especially for purchasing FMCG, which are low-
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