آگاهی از قیمت و استفاده مصرف کنندگان از تخفیف ها در انتخاب نام تجاری (برند)

There is evidence that consumer knowledge of prices is limited, implying that, on occasions, consumers may not be fully informed of prices when making a brand purchase. On such occasions, how do consumers make their brand choice decision? One possibility is that consumers use their expectation of prices. This raises an interesting question. To what extent is brand purchase either a function of preferences and posted prices or, of preferences and expectation of brand prices? Another important issue relates to the role of displays and features in simplifying consumer brand choice. First, do promotions cause consumers to restrict their attention to only promoted brands? Second, do promotions affect the price aware consumers more than the price unaware consumers? Our study uses scanner data on ketchup and peanut butter categories to answer the foregoing questions. We find that between 40 and 50% of the purchases are made by consumers using expectations of prices rather than posted prices. Consumers using price expectations may be thought of as being “unaware” of prices. We also find that promotions cause some consumers to focus exclusively on promoted brands, and this effect is greater on the price aware consumers than on the price unaware consumers. Our findings have an important bearing on the rationality of consumer expectation of prices, especially of the promoted brands. Price aware consumers act as a check against firms promoting without accompanying price cuts.

Research questions Brand choice models estimated using scanner data implicitly assume that consumers make a purchase after considering the prices of all brands. However, there is evidence that consumer knowledge of prices is less extensive (Dickson and Sawyer 1990), implying that consumers may not be fully aware of prices when making a brand purchase. Further, viewing the consumer as an economic agent it is reasonable to suppose that if obtaining price information is costly, consumers might choose to remain unaware of prices, an idea going back to Stigler (1961). Since obtaining price information usually requires an allocation of time by the consumer, it is a costly activity in the sense of Becker (1965). Further credible brands have been shown to reduce price sensitivity making it less important for brand loyal customers to evaluate price at every purchase occasion (Swait and Erdem 2007). Thus some consumers, at least some of the time, are unaware of prices but nevertheless engage in brand purchase. This raises an interesting question: How is such a purchase made even though the consumers do not know the exact prices? One possibility is that the consumer has an expectation of prices of various brands and uses these expectations in brand purchase. The research question is: to what extent is brand purchase either a function of preferences and actual prices, or, of preferences and expectation of prices? Said differently, what fraction of the market can be classified as “price aware” or “price unaware”, on any given occasion? One purpose of this paper is to provide an answer to this question. The “deal”, or temporary price reduction, on frequently bought consumer goods is ubiquitous. It is also common practice for these price reductions to be accompanied by newspaper advertising or feature, displays of merchandise in the store, or small signs on the shelf in the form of “shelf-talkers”. A natural question to ask is: how does a display or a feature, by making some information less costly for consumers, affect brand choice?2 In particular, do consumers use displays and features to simplify their brand choice process? For example, Fader and McAlister (1990) have found that some consumers may restrict their attention to brands with displays and features (i.e., promoted brands). Presumably, the promotions act as a signal for price reduction (Inman, McAlister, and Hoyer 1990). We want to go one step further and ask if such a restriction would be rational for consumers and firms. Clearly, if promotions are accompanied by price cuts, then consumers potentially benefit from restricting their choice set, and thereby save the cost of information search. Should firms lower prices when they have a display or feature? The theoretical work of Salop and Stiglitz (1976) shows that greater the proportion of price aware (informed) consumers, the lower is the price. They argue that the informed consumers act as a check on the firm's ability to charge high prices. In the context of our paper, this has the following implication. A firm's ability to announce a promotion without an accompanying price cut is reduced if a majority of the consumers who restrict their choice set under promotions is in the price aware segment rather than in the price unaware segment. This leads to the empirical question: Do promotions affect price aware consumers more than price unaware consumers? The answer to the foregoing question is important because it tells us whether or not consumers’ decision to restrict their choice set to promoted brands is rational. If such restriction of choice set is made by those who are generally more aware of the price of the promoted brand rather than by those who are unaware of prices, then we can invoke the Salop–Stiglitz argument that firms will have to keep prices low when offering promotions. And this, in turn, would make it sensible for consumers to limit their search when they encounter a promotion. Note that in the above argument a consumer may be aware of prices on many but not all occasions. Finally, since we know that consumers, or households, are different in their cost of time and returns to being informed of prices, we may suspect that whether or not a consumer is aware of actual prices would depend on the household characteristics such as income and family size, and a general propensity to look for deals. An understanding of these determinants of the response to deals would provide insights into consumer behavior and also be potentially useful for mangers in segmentation and implementation of merchandising programs. This paper provides such an understanding. The proposed model demonstrates that about 40% of the purchases are made without consideration of prices of any brand. Further, 73% of the price unaware consumers do not restrict their choice set in response to a price promotion. These results are consistent with prior results reported from survey data. By demonstrating a method to identify these price unaware customers from scanner panel data, we provide a way to segment the market based on price awareness and use the linked demographic characteristics to identify and cater to the needs of the price aware and the price unaware customers differently. Scanner data based analysis allows managers to link customer behavior to firm revenue, and other outcome metrics. We have highlighted the fact that a major challenge for managers is to find ways to attract the attention of the price unaware segment, when you have lower prices.

One of our goals in this paper is to investigate the extent to which consumers use their price expectations in brand choice. We posit that since price evaluation is a costly activity, some consumers, at least some of the time would engage in a less costly evaluation of brands relying on price expectations. We find that on average, on about 40–50% of the purchase occasions consumers appear to make their brand choice based on past prices which influence their price expectations! A second major goal of this paper is to see the extent to which consumers use promotions to simplify their brand choice process. We find evidence that a significant percentage of consumers do restrict their evaluation to only the promoted brands. Given that promoted brands do indeed have lower prices, promotions contribute to efficiency. Even more important, promotions affect price aware consumers more, thereby ensuring that the expectation of lower prices of promoted brands is rational. Firms would find it hard to systematically run promotions unaccompanied by price cuts since this would be discovered by price aware consumers in equilibrium. Some consumers may systematically engage in more price evaluation than others. We develop an understanding of the factors that influence such evaluation behavior. Consistent with theory, we find that large families and deal-prone families are more likely to evaluate prices on more occasions. We have also innovated by developing a multi-state model of brand choice that attempts to systematically test the role of promotions in brand choice. In particular, we omit the promotion variables: display and features from the standard utility specification in the brand choice model. Instead, we try to understand consumer's price evaluation behavior, conditional on promotions and no promotions. Such an approach permits a comparison of behavior in the presence of promotions and in the absence of promotions. It is useful to point out caveats in interpreting our results. We have assumed that a suitable combination of past prices proxies for price expectation of the price unaware consumers. We do not test for the rationality of these expectations. However, with respect to restricting of the choice set, we address the rationality issue more fully both on the “firm” and “consumer's” side. We have modeled price aware and price unaware consumers through an unobserved variable or probabilistic state approach. It would be better to use actual measures, were they available. Another issue relates to the endogeneity of marketing mix variables. Villas-Boas and Winer (1996) point out that firms may set variables as a function of the demand conditions. This endogeneity may result in bias in the estimates. Future research might examine the effect of this endogeneity on our findings. A final caveat relates to the presence of heavy users in our sample. Allenby and Lenk (1995), and Kim and Rossi (1994) have shown that selection of households based on a certain minimum number of purchases will lead to bias in estimates of price elasticities. Our model can be modified and applied to all households in the data as suggested by the above authors. There are interesting directions for future research. Rather than using past prices as a measure of consumer expectation of prices better measures of price expectations could be used in future research. Further, we have restricted our attention to price promotions accompanied by displays and features. Retailers may also engage in other promotions that may not be announced. How these in-store promotions affect the price expectations of consumers can be investigated. Finally, just as we model price aware and price unaware states, one could model awareness of deals. Executive summary Grocery scanner panel data provided by market research companies such as A.C. Nielsen and IRI allows managers to estimate brand choice models to understand the effect of prices and promotions on brand choice, among other things. These models implicitly assume that consumers look at prices and promotions of all brands in the store and then make their purchase decision. However, there is considerable research which shows that consumers do not spend a lot of time in deciding their purchases in a product category and many of them are not even aware of the price of the brand that they just placed in their basket. This raises the interesting question of how consumers make their choice without being aware of price on a given purchase occasion. We posit, consistent with prior research, that consumers may use an expectation of price from past experience to decide on their current choice. This leads to another question: if such an evaluation process were being used, to what extent do consumers decide based only on their brand preferences and expectations of price and to what extent do they engage in active evaluation of current prices in the store. Said differently, what fraction of the market can be classified as “price aware” or “price unaware”, on any given occasion? It is a common practice for stores to offer deals or price reductions which are sometimes accompanied by newspaper advertising or feature ads, displays in the store, or even small signs on the shelf in the form of “shelf-talkers”. A natural question to ask is: how does a display or a feature ad, affect brand choice? Prior research suggests that some consumers may restrict their attention to only the promoted brands. Presumably, the promotions act as a signal for lower price. We go one step further and ask if such a restriction would be rational for consumers and firms. Clearly, if promotions are often accompanied by price cuts, then consumers potentially benefit from evaluating only the promoted brands (that is, they restrict their choice set to the promoted brands), and thereby reduce their cost of information search. On the other hand, is it rational for firms to lower prices when they have a display or feature? A firm could potentially announce a promotion without an accompanying price cut. Consistent with economic theory, we posit that there are ‘price aware’ customers and ‘price unaware’ customers. If a majority of the consumers who restrict their choice set under promotions is in the price aware segment rather than in the price unaware segment then firms do not have an incentive to run ‘pseudo’ promotions. We therefore test whether promotions affect price aware consumers much more than price unaware consumers. Finally, since we know that households differ in their cost of time and returns to being informed of prices, we expect that price awareness would depend on the household characteristics such as income and family size, and a general propensity to look for deals. An understanding of the determinants of the response to deals would be potentially useful for mangers in segmentation of customers and implementation of merchandising programs. The proposed model demonstrates that about 38–46% of the purchases in a product category (e.g., ketchup, peanut butter) are made without consideration of posted prices of any brand. Further, a larger fraction (64%) of the price aware consumers do indeed restrict their choice set in response to a price promotion while only a small fraction (21%) of price unaware customers do. These results suggest that firms do not have an incentive to announce specials without an accompanying price cut. We also find that larger families and deal-prone households are more likely to be price aware customers. Further, the tendency to evaluate only the promoted brands increases with the depth of price cut and declines with store loyalty.