Differential Responses to Retail Sales ~Promotion Amdng African-American and Anglo-American Consumers

CORLISS L. GREEN
Georgia State

University

Ethnicpopulations are growing in numbers throughout the UnitedStates, and retailers today are challenged to develop promotional strategies to reach these consumers. Couponing is one particular sales promotion activity to which ethnic consumers have historically responded poorly. This study examines the responses of African-American and Anglo-American consumers to four types of retail sales promotion--coupons, product displays, feature advertisements, and price discounts. Results show that significant d@erences exist between African- andAnglo-Americans only in their useof cents-offcoupons. One implication is that there are possibly some media-related factors contributing to this outcome, since using coupons is the one promotion activity involving media exposure outside of the retail establishment. Thus, there is a needfor retailers to plan promotional strategies so that they are effective in reaching the particular ethnic markets which they serve.

The widespread use of coupons and other retail promotions has motivated researchers to identify the factors associated with deal proneness (Blattberg, Buesing, Peacock and Sen, 1978; Montgomery, 1971; Narasimhan, 1984; Webster, 1965). Coupon proneness can be conceptualized as a single dimension of deal proneness. where individuals who use coupons are referred to as “coupon prone” consumers (Lichtenstein, Netemeyer and Burton, 1990). Several researchers have suggested that a household’s response to coupons is partly determined by household characteristics such as household income, education, and family size, however, there is no clear relationship between demographics and consumer response to deals. Of the demographic variables that have been examined, the positive relationship between deal proneness and both income and household size is the most consistent (Mittal, 1994). One potentially important relationship which has not been adequately explored is the effect of a consumer’s ethnic background on his or her response to deals. The research in this area, however, is limited to only one dimension of deal proneness-response to coupon promotions. The consensus here is that ethnic consumers are not coupon prone (Kaufman and Hernandez, 1990, Yovovich, 1981) and that coupon redemption levels among them are well below that of the general population.
Corliss L. Green, Georgia State University, Department of Marketing, Atlanta, GA 30303.

Journal of Retailing, Volume 71, Number 1, pp. 83-92, ISSN 0022-4359
Copyright 0 1995 by New York University. All rights of reproduction in any form reserved.

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The current study examines behavioral differences in African-American and AngloAmerican response to sales promotion activities including coupons, product displays, feature ads, and price discounts. Most research focusing on the consumption behavior of AfricanAmericans is relatively dated (Alexander, 1959; Sexton, 1972; Bauer, Cunningham, and Wortzel, 1965). Both the economic and social state of African-Americans has changed since this research was conducted. Thus, given the empirical nature of the research question (i.e., linking demographic characteristics with behavioral outcomes without the benefit of strong theory) further investigation on the effects of demographics on market-related behavior is warranted. This study broadens the scope of previous works by examining a variety of sales promotion activities in ad&ion to coupon usage. Also, actual behavioral data is used, where most existing research on ethnic coupon usage has relied on consumer self-report information (Donthu and Cherian, 1992; Hemandez and Kaufman, 1989; Kaufman and Hernandez, 1990). This allows for a direct and unbiased examination of how Anglo-American and African-American consumers differ in their responses to retailer promotional efforts. The major question addressed in this study is whether or not Anglo-American consumers are more prone than African-American consumers to engage in coupon usage and other popular retail sales promotion activities. The likelihood that ethnic consumers may differentially respond to sales promotion is an important issue for retailers, particularly those which primarily serve ethnic markets. Retailers are realizing that in order to reach ethnic markets, they must use differentiated promotional strategies designed for specific groups. These conditions point the need for retailers and manufacturers to critically examine current promotional activities in stores serving a large portion of ethnic consumers. Neighborhoods are often identified by the ethnic or racial background of their residences (i.e., black neighborhoods, white neighborhoods, hispanic neighborhoods, etc.). Data from the most recent Census indicates that residential areas are heavily segregated by race (U.S. Bureau of the Census, 1990). Therefore, some grocery retailers may predominately serve white consumers, while others may predominately serve black consumers or hispanic consumers. Given these circumstances, it is important for such retailers to have an understanding of the extent to which potential markets respond to various sales promotion efforts in and outside the store.

BACKGROUND

LITERATURE

One explanation for existing differences in coupon redemption is that consumers from dissimilar cultural backgrounds may place different values on saving money. Saving money is considered to be the primary motive for using coupons (Babakus, Tat and Cunningham, 1988). Past research seems to suggest that the value of saving money differs across racial and ethnic backgrounds. For example, Sexton (1972) found that for the general population the most important criteria in food store selection are the level of prices and the quality of the food. A study on black homemakers, on the other hand, produced a quite different ordering. Convenience of location and a friendly atmosphere were found to be the most important criteria while low prices were found least important. Alexander (1959) also

Differential Responses to Retail Sales Promotions

85

suggested that saving money is of low priority among black consumers. He found that young black homemakers rebelled against foods associated with low social status. Instead, they commonly purchased packaged foods and quality meats as symbols of social status. Based on this research, it might be expected that black consumers would place a lower priority on using coupons to save money than white consumers. It has also been suggested that ethnic consumers, blacks and hispanics in particular, are more brand loyal than the general population (Bauer et al., 1965) and are probably less likely to use coupons as an incentive try other brands. Another possible explanation for low coupon redemption among ethnic consumers is the limited forms of media in which many ethnic consumers utilize. Research shows that a major problem with communicating to ethnic consumers is media selection (Kaufman, 1991). The literature also suggests that most African-American and Hispanic consumers do not subscribe to major local newspapers (which is the number one source of coupons) and many subscribe to media which are ethnically-oriented (i.e., weekly ethnic newspapers or ethnic magazines) and are not widely utilized by national marketers or local chain retailers for coupon distribution (Chain Store Age Executive, May 1988). It has been suggested that problems unique to ethnic submarkets including preferences for ethnic brands, shopping habits of ethnic groups and limited exposure to print media can limit the effectiveness of traditional couponing techniques (Kaufman, 1991). Thus, the following hypothesis is proposed: Hl: There are significant dzflerences in coupon use behveen Anglo-American and African-American consumers.

Other Forms of Retail Sales Promotion

While most of the literature on ethnic consumers and retail sales promotion pertains to coupon redemption, it is important to note that there may be different responses among African-American and Anglo-American consumers to other types of retail sales promotions including feature advertising, product displays, and price discounts. Feature ads are typically run on a week day which is known as “Best food day,” and the items advertised usually appear with special event or discount prices (Blattberg and Neslin, 1990). Because these ads appear in local newspapers, the same informational barrier (i.e., media selection) that potentially restrains coupon use by ethnic consumers may affect the likelihood of being exposed to advertising for featured products. Thus, African-American consumers who are not being exposed to local newspapers to the extent of their white counterparts, are not as likely to be aware of advertised specials at their local supermarkets and as a result, may be less likely to act on them. This rationale leads to the following hypothesis: H2: There are significant difierences between Anglo-American consumers and African-American consumers in purchase response to feature advertising.

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One of the most important forms of retail promotion is the in-store product display. Product displays, unlike coupons and feature ads, are a form of retail promotion that do not require a media “search” effort on part of the consumer before he or she enters the retail establishment. Thus, the informational barrier that is commonly prevalent with respect to coupons and featured ads are almost nonexistent with product displays. The following relationship is therefore hypothesized: H3: There are MI significant differences between African- and AngloAmerican consumers in the amount of products they purchase on display.

The most popular promotional tool used by retailers is the price discount. Price discounting is psychological in that it encourages the consumer to compare the regular price to the discounted price, enhancing the perceived value of the discount. Like product displays, price discounting is a sales promotion activity that occurs inside the store and does not require out-of-store advertising exposure. Thus, once again, informational barriers are avoided. This rationale leads to the following hypothesized relationship: H4: There are no significant differences between African- and AngloAmerican consumers in the amount of products they purchase on price discounts.

METHODOLOGY

Sample

IRI (Information Resources, Inc.) scanner panel data for frozen snack products including ice cream and frozen novelty desserts were used for testing the hypotheses. Subjects included in the panel were drawn randomly from the population. To have a manageable data set, the analysis was restricted the data for frozen snack products in the Chicago, Illinois market. This particular product category was chosen because it represents one of several major retail product categories that is heavily promoted, ranking among the top twenty product categories in coupon distribution (Nielsen Clearing House, 1990). African- and Anglo-American consumers are approximately equal (in proportion to their populations) in purchases of products within this category. The data set covers a panel of approximately 300 households (250 Anglo-American households and 50 African-American households) making approximately 5300 purchases over a one-year period (1989-1990). It contains records of the purchase history of each household in the panel, as well as information on purchasers’ demographic backgrounds. Purchase data for this study was collected from six grocery stores and the proportion of African-Americans and Anglo-Americans in the sample who shopped at each store was representative of the population.

Differential Responses to Retail Sales Promotions Model

87

Four dichotomous logit models are used to test for differences among Anglo-Americans and African-Americans in their response to retail sales promotion. The dependent variables are coupon use, response to displays, response to discounts, and response to features. Correlation coefficients indicate relatively low correlations among the independent variables and variance inflation factors suggest a low degree of multicollinearity (see Tables, la and, 1b). For each type of promotional purchase a model is estimated in the form:

+

b7iRACE X INCI + bsiRACE X INC2 +bgiRACE X SIZE1

+ bloiRACE X SIZE2 +bl IiRACE X NEWS where standard dummy variables were created as follows:
PI = {

1 if purchased with coupon and 0 otherwise,

INC2 = SIZE1 = SIZE2 =

{ 1 if $21,000-$45,000, and 0 otherwise, (1 if 1 or 2 people and 0 otherwise, { 1 if 3-5 people, and and 0 otherwise, subscription,

P2=
P3 =

(1 if featured, and and 0 otherwise,
[

1 if purchased on display, and 0 otherwise, 1 if purchased OJIdiscount, and 0 otherwise,

P4 =

(

NEWS’ = { 1 if have newspaper 0 if not RACE = { 1 if black 0 if white

INCl = ( 1 if $20,000 or less, and 0 otherwise,

TABLE1 A

Correlation Coefficients of Independent Variables
Race Race Family Size Household Income Newspaper Subscription Family Size Household Income Newspaper Subscription

1.ooo
.013 L334) -.270 C.001) -.207 (.OOl)

1.ooo
.258 (.OOl) .150 C.067) 1.000 .185 (.OOl)

1.000

88 TABLE1 B Variance-Decomposition
Variable Intercept Race Family Size HH Income Newspaper Sub. Condition index 1 .oo 2.00 3.60 4.94 6.48

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Proportions, Variance Inflation, and Condition Indices
var(Race) .OlO .758 .038 .094 .097 var(Fami/y Size) .012 .OOl ,043 ,637 ,306 var(HH var(News Variance

var(/ntercept) .008 .ooo .OlO .OOl .979

Income)
.012 .008 .125 .591 .261

Sub)
.020 .02 1 .893 .013 .051

Mation
0.00 1 .12 1 .09 1.17 1.08

Results

Hl suggests that there are significant differences in coupon use between Anglo-Americans and African-Americans. This hypothesis is supported @ < .Ol). Results presented in Table 2 indicate that Anglo-American consumers redeem significantly more coupons than African-American consumers. The mean scores for coupon use among Anglo-and AfricanAmericans are .09 1 and .034 respectively. Findings also indicate that having a newspaper subscription is not a significant factor in determining the level of coupon usage. This may be the case because most coupons are concentrated in the Sunday edition of the newspaper. Thus, different results are likely to be found when measuring exposure to the Sunday edition. An unexpected finding is that coupon use tends to be greater among smaller families,

TABLE 2 Link Between Demographic Variables and Coupon Use
Variable Intercept Race Income1 Income2 Size1 Size2 Newspaper Race x Income1 Race x Income2 Race x Size1 Race x Size2 Race x Newspaper -2LoGL p-value Parameter Estimate 1 .34 -1 .13 -.939 -.882 ,518 .085 -.117 ,688 ,591 .064 .328 ,035 -3056.40 0.001 (Standard Error) (.154) (.249) C.104) (.089) C.144) (.144) (.076) C.330) (.341) c.178) c.424) c.178) Level

of Significance
.OOl .OOl .OOl ,001 .OOl ,556 ,121 ,037 .083 .718 .439 .840

Differential

Responses

to Retail Sales Promotions

89

TABLE 3

link Between Demographic Variables and Purchases on Feature
Variable Intercept Race Income1 Income2 Size1 Size2 Newspaper Race x Income1 Race x Income2 Race x Size1 Race x Size2 Race x Newspaper -2 LOG L p-value Parameter Estimate 2.65 .450 .144 -.015 -.668 -.526 .258 1.69 .880 -1.06 1.34 .947 6611.15 0.001 (Standard Error) (.299) C.695) (.151) (.129) (.290) (.29.5) (.l 14) (.570) (.561) (.534) (.507) (.581) Level of Significance .OOl .517 ,338 .906 .021 .075 .023 .002 .117 ,046 .007 .113

decreasing as families get larger. In addition, fewer coupons are used by consumers at low and middle income levels in comparison to consumers at higher levels. H2 suggests that a greater amount of purchases made by Anglo-Americans are featured in retail food ads than purchases made by African-Americans. Results presented in Table 3 do not provide support for this hypothesis @ > .OS). One possible explanation for this finding is that copies of most newspaper feature ads are also made available in the store so that everyone patronizing the store can read what the featured specials are. Results indicate that one’s having a subscription to the newspaper is significant in determining the amount of

TABLE 4

Link Between Demographic Variables and Purchases on Display
Variable Intercept Race Income1 Income2 Size1 Size2 Race x Income1 Race x Income2 Race x Size1 Race x Size2 -2 LOG L p-value Parameter Estimate 1.786 .587 -.470 -.489 .902 ,446 -.842 -1.35 1.41 -.579 -4338.24 0.001 (Standard Error) (.185) (.771) (.134) (.113) (.174) (.173) (.757) (.766) (.301) (-537) Level of Significance ,001 .446 .OOl .OOl .OOl .007 .265 .076 .OOl .281

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TABLE5 link
Variable Intercept Race Income1
Income2 Size1 Size2 Racex Income1 Racexlncome2 Racex Size1 Racex Size2 -2LOCL p-value

Between

Demographic

Variables

and Purchases on Discount
(Standard Error)
(.145) C.331) (.092) C.079) C.179) t.138) C.312) C.322) C.167) t.169)

Parameter Estimate
.845 -.306 -.665 -.699 .143 .346 .153 .170 .050 .OOl -7234.62 0.001

Level of Significance
.OOl .355 .OOl .OOl .304 .012 .629 .596 .765 .VVl

products purchased. However, the interaction of race and newspaper subscriptions was not significant. In addition, income was not found to be significantly related to featured purchases and purchases of featured products were greatest among small families. H3 suggests that there are no significant differences between Anglo-American and African-American consumers in the amount of products they purchase on display. Results presented in Table 4 provide support for this hypothesis 0, > .05) thus, race is not a significant determining factor of response to product displays. Findings do indicate that there is a significant impact of income and family size on purchases made on display. Consumers with low and middle incomes (i.e., $45,000 or less) purchase a smaller number of products on display than consumerS at higher income levels. In addition, small and medium sized families (i.e., between 2 and 5 people) make more purchases of displayed products than larger families, and small African-American families make significantly more display purchases than small Anglo-American families. H4 suggests that there are no significant differences between African-American and Anglo-American consumers with respect to the amount of discounted products purchased. Results presented in Table 5 provide support for H4 @ > .05). Thus, race is not significant in predicting consumer response to price discounting. Income and family size, however, have significant effects on discount purchasing. Consumers at lower and middle incomes make more discount purchases than consumers at higher income levels, and middle-sized families (between 3 and 5 people) make the most discount purchases.
featured

DISCUSSION

AND

CONCLUSIONS

The findings of this study indicate that Anglo-Americans redeem significantly more retail or trade coupons than African-Americans. However, no significant differences were found between the groups with respect to theirresponses to product displays, feature ads, and price discounts. These findings suggest that the types of promotion activities that retailers choose to implement is an important decision to be made among retailers that serve specific ethnic

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or racial markets. Store promotions are a major determinant of patronage and results of this study suggest that promotions which appeal to the specific markets served should be implemented in order to attract store loyal customers. A key distinction between coupons and the other forms of sales promotion is that using coupons is the only activity that requires a media search effort before entering the retail establishment. Consumers can only take advantage of the benefits of using coupons (of which over 80% are distributed through print media) by searching through media to collect coupons for the brands that they purchase. On the other hand, features, displays, and discounts are promotion activities that consumers can take advantage of once inside the store. AfricanAmericans in this study have displayed a more favorable response to in-store sales promotions like displays and product discounts. This suggests that retailers serving African-American markets may find the implementation of in-store sales promotion to be more effective. This does not suggest, however, that couponing is necessarily an ineffective method of promotion for grocery stores predominately serving ethnic markets. Technology has brought about a new method of coupon distribution, the automatic coupon dispenser, which issues coupons at the point of product selection. Hence, the effect is not much different from that of a price discount. It is probable that this relatively new method of couponing would elicit the same response among African-American shoppers as displays, features, and price discounts, thereby possibly closing the gap between Anglo- and African-Americans in their levels of redemption. Limitations and Directions for Future Research Findings of the current study indicate that ethnic consumers respond differently than the general population to the activity of using coupons. A limitation of the study, however, is that it does not suggest why these apparent differences exist. Prior research indicates that coupon use is significantly related to media selection. What has not been tested, but may provide an explanation for differences in coupon redemption is a possible difference in the types of media that a large portion of African-Americans are being exposed to. The literature indicates that many ethnic consumers prefer ethnic-oriented media which are not used much by retailers or manufacturers for coupon distribution (Kaufman, 1991). This may suggest that low levels of coupon redemption among African-Americans, as well as members of other ethnic groups, may be due to differences in ethnic media patterns. Prior research has found that pride (i.e., the level of satisfaction experienced by having obtained an item on discount) is a motive of coupon use (Babakus et al., 1988). For African-American consumers, however, the literature indicated that they generally have a negative image of using coupons. For example, Yovovich (1981) suggests that black consumers’ reputation for low coupon redemption is a result of their perception of coupons as handouts. More specifically, coupons have been historically avoided by some low income blacks, and due to their association with welfare they were considered to be a sign of the inability to pay full price for an item. It would be interesting to test for possible differences in perceived savings pride and attitudes towards price between Anglo-and African-American consumers. In terms of using coupons to save money, it could be the case what is considered to be “savings pride” among white consumers is considered a “savings stigma” among their black counterparts.

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NOTES
1. The effect of having a newspaper and response to features. subscription is only included in the models for coupon use

REFERENCES
Alexander, Milton (1959). “The Significance of Ethnic Groups In Marketing New-Type Packaged Foods in Greater New York.” Pp. 557-561 in Advancing Marketing Efficiency, Lynn Stockholm, ed. Chicago: American Marketing Association. Babakus, Emin, Peter Tat and William Cunningham (1988). “Coupon Redemption: A Motivational Perspective,” The Journal of Consumer Marketing, s(2): 3743. Bauer, R.A., SM. Cunningham and L.H. Wortzel (1965). “The Marketing Dilemma of Negroes,” Journal of Marketing, 29: 1-6. Blattberg, Robert C.. Thomas Buesing, Peter Peacock and Subrata K. Sen (1978). “Identifying the Deal Prone Segment,” Journal ofMarketing Research, lS(May): 369-377. Blattberg, Robert C. and Scott A. Neslin (1990). Sales Promotion: Concepts, Methods, and Strategies. Englewood, NJ: Prentice-Hall. Chain Store Age Executive (1988). “Do Hispanic Shoppers Use Coupons?,” Chain Store Age Executive, May. Donthu, Naveen and Joseph Cherian (1992). “Hispanic Coupon Usage: The Impact of Strong and Weak Ethnic Identification,” Psychology and Marketing, (November/December): 501-5 10. Hemandez, Sigfredo A. and Carol J. Kaufman (1989). “Coupon Use Differences Between Hispanics and Anglos: Barrio and Anglo Neighborhood Samples,” in Enhancing Knowledge Development in Marketing, Paul Bloom et al. eds., Chicago, IL: American Marketing Association. Kaufman, Carol (1991). “Coupon Use in Ethnic Markets: Implications From A Retail Perspective,” Journal of Consumer Marketing, &Winter): 41-51. Kaufman, Carol and Sigfredo Hemandez (1990). “Barriers to Coupon Use: A View From the Bodega,” Journal ofAdvertising Research, (October/November): 18-25. Litchenstein, Donald, Richard Netemeyer and Scot Burton (1990). “Distinguishing Coupon Proneness From Value Consciousness: An Acquisition-Transaction Utility Theory Perspective,” Journal of Marketing, 54(July): 54-67. Mittal, Banwari (1994). “Bridging the Gap Between Our Knowledge of “Who” Uses Coupons and “Why” Coupons Are Used.” Working Paper Report No. 94-112, Marketing Science Institute, Cambridge, MA. Montgomery, David B. (1971). ‘Consumer Characteristics Associated with Dealing: An Empirical Example,” Journal ofMarketing Research, 8( 1): 118-120. Narasimhan, C. (1984). “A Price Discrimination Theory of Coupons,” Marketing Science, J(Spring): 128-147. Nielsen Clearing House (1990). Top 20 Product Categories in Coupon Distribution. Clinton, IA: Nielsen Clearing House Promotional Services. 1990 Census of the U.S. Population. Washington, DC: U.S. Bureau of the Census. Sexton, Donald E. (1972). “Black Buyer Behavior,” Journal of Marketing, (October): 36-39. Webster, Frederick E. Jr. (1965). “The Deal-Prone Consumer,” Journal of Marketing Research, Z(May): 186-189. Yovovich, B.G. (1981). “Views on Coupons Changing.” Advertising Age, (May 18): S-15.

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