The Impact of Feature Advertising on Customer Store Choice

By Anand V. Bodapati , V. Srinivasan

Inserts/Coupons

"This research adds a new paradigm -- where actual observed shopping behavior is correlated with the advertised item."

Source:  Stanford University Graduate School of Business Research Paper No. 1935, May 2006.

Type of Promotional Material/Activity Tested: Newspaper inserts and in-store fliers

Sample Population:  548 grocery shoppers who shopped five supermarkets located near one another in a large US metropolitan area.

Study Method:  Predictive modeling employed to discern if there is a relationship between whether a grocery item was advertised in weekly store advertising circulars and grocery store choice.

Metrics:  Purchases in 19 product categories (restricted to advertised package goods, excluding meat and produce), made by customers on major shopping trips over a two-year period.
 

Independent variables:

• Store preference
• Item prices by store
• Whether item is advertised in circular
• Amount spent
• Shoppers household demographics
• “Responder” (highly likely to switch among a subset of grocery stores based on advertising) vs. non-responder (highly likely to shop at one store, regardless of advertising).
   

Dependent variable:

• Consumer shopped in store where he or she does not normally shop and where product category (e.g., hot dogs) was featured in ad circular.
   

Top Line Results:
 

• Almost 10% of sampled shoppers chose a store different from their normally preferred stores for a major shopping trip based on the week’s feature ads in the circular.  Ads for cereal, chips, pizza, cookies, and hot dogs influenced their choice most.
  
  
• This percentage is lower than trade source estimates of 15-25% of shoppers most likely to switch stores based on ads possibly because meat and produce, a large part of the shopping basket, was not included.
  
  
• The only demographic that distinguished between store switching behavior and store loyalty behavior was size of household –  larger households were more likely to switch stores.
  
  
• The most frequently items advertised were less likely to predict store choice (e.g., soft drinks) probably because the promotional offers are predictable by consumer.  If Coke is not on sale this week, it will be next, so shoppers will wait for the expected promotion in near future. 

 
Take-Away:  The impact of grocery store circular advertising has been most often measured by the asking consumers what advertising media they use to make a store choice.  This research adds a new paradigm where actual observed shopping behavior is correlated with the advertised item.  This is a strength of the study, but also its limitation.  Because the data tracked only purchase behavior, the use of feature advertising on store choice was inferred for each shopper and was not observed directly.

Complexity rating of source:  3
(Complex statistical analysis scale:  1= none, 2= moderate, 3 = difficult)
 

Source: The Impact of Feature Advertising on Customer Store Choice. Stanford University Graduate School of Business.