Research Articles Impact Of Sales Promotion On Buyers Behaviour: An Empirical Study Of Indian Retail Customers Gopal Das Lecturer, NSHM Business School, Kolkata Dr. Rohit Vishal Kumar Reader, Xavier Institute of Social Service, Ranchi [peor ronan exe SALES we Abstract Jn the Global Context of open market economies of today, the consumer has became the king. He operates through his autonomous power. He enjoys a fot of {freedom in his purchase decision. A consumer sin a Position to influence the manufacturer or marketer regarding size, quality and contents of the product, price, and past-sale service, among other things. As ‘result the markers no longer remained "seers markets, it obvious med into “bayers markets Wit the Indian retail boo many players are entering with diferent retail formats. As a result, competition is becoming very tough. Keeping jn mind that Indian consumers are price sensitive, each player is tying to attract more customers through different sales promotional acriviles, Bur the exact picture of the ‘impact of sales promotion on consumer behaviour i et unclear tothe retailers. This paper tie to,find ‘ut the impact of retail sales promotion on consumer lying behaviour GMWor Ise L.Jascn= Junt 2009 Keywords: Attract Customer, Buying Decision, Buyers Market, Retin, Sales Promotion Introduction CConsiering the truth thatthe customeristhe king, every ‘ongunzaton wants to inerease marke share and prof Day by day the diffrent types of business formats are also coming tothe Indian market. In todays scenario, ‘organized rl sector isthe mos important ation in Indian economy. The Indian eal sector continvesto be one of the largest sectors attracting fesh investments from private sector Curren Indian el distibation is completely fragmented with about 12 milion payers The majriy ofthese are very small players operating from small shops below 50 square fet in size) and handcat These retail outlets are spread across he country in over 5000 cites and 600,000 villages. India presents huge ‘opportuity tothe world at large, to use asa bsiness hab. A “Vibrant Economy”, India tops in the lst of emerging markets for pobal retailers. The second fastest 4Gopal Das & Dr. Rokit Vishal Kumar growing economy inthe world, the third largest economy in terms of GDP and the fourth largest economy in purchasing power pariy(PPP) ater USA, China and Japan; India is also rated among the top 10 FDI destinations, At presen, the organized sector accounts for only 204 percent of te total markt, although the Economist Intelligence Unit forecasts that on current trends, it will rise upto 20 to 25 percent of the total by 2010 (Ramanathan V and Hari K, 2008) ‘others tremendous grow sope in organized real sector. More and more players are coming inthe market with nes atativeretal formats ike malls supermarkets, departmental sores India Retail Repo (2007) reviewed. that food and grocery comprises 62 percent ofthe (S 270-ilion (Rs 1200-000 core Indian retail market Only 108 percent ofthis segment isin organized sector, and it witnessed year-on-year grovih of 30.8 per ent in 2005 2006 as egunst 2.2 per cent growih of te otal ood and grocery retail market (Refer to Exhibit | for the major players in India and their projected sales) (India Retail Report, 207). [Exhibit 1: Major Grocery Retailers in India Retailer Teall Saks Ret Space No of NRC) SF) ates (am2t7) msm) —__aeeae7) Nii a 2m 4 Sm 0 ist « sibhise asa 18 cs 2 4 FM tm 27.9 ey 8 “Towne Dan Neil 68 2 (Poolfwa Disha 0 6 Spine’ ae 181 « so ‘Nei 2 0 Nan Buzar suai Nee 3 ‘andres ose 3 a pape Dua tA Dae se 3 RleTish Daa Nui Dus Abe 2 o at 2 é Moyo Say Nai 15 a Fooiuedd Das Nun a resis (Darna t (vias) AmabFod B ™ Ma (Soe: Aiaed fom, K Rajan (2007) laa Rel Repo, 27, naps Maida Pt La) 2 ‘Thisindiatesa scope of growth in onganized retail sector, though 95% ofthe otal sales are eld through wadtional retail stores inthe country curently So, the question isthat whether th organized real sector will able to attract customers through fferent marketing activities, ike sles promotion or ot. The frst part ofthe paper deals with ahistorical analysis ofthe Indian retailing structure followed by the review of literature an finally the last pat deals wih the result of empirical studies in an Indian metro. Organized Retail Development Goldman Sachs (2005) has estimated that the Indian economic growth ould actualy exceed tht of Chinaby 2015, We all know that India has been nation of dukandars(shop-eepes), having approximately 12 nillion ears. Therein is in our blood, ther shopkeepers ors ashoper. The Indian real market is estimated to grow from he curt US § 30 bilion to 'US$427 bln by 2010 and US $637 ilionby 2015, Ret contbres to 10% a our GDP andi the rest. soure of employment afer agriculture, Tale ¥ shows theshareof tin lian employment hats one the lowest ofall he counriesmentioned, Indian Context ‘Table 1: Share of retailing in total employment Country Share of Retail India China Poland Brel Usa Korea UK Malaysia ‘Total Employment ‘Theratiof organized-unorganized retail was 3:97 nthe yest 2004 which isexpectodto be 9:91 by 2010, fram the Table 2below: Table 2: Share of ognized and wong rea ini [Mear | Organized — | Unorganized [009 x 6 90% im ‘0 GGAY}.Vor 3. sur LJasuany= Jone 2009‘Impaet Of Sales Promotion On Buyers Behaviow ‘Ther isinerease sophistication nthe shopping patter, ‘of easomers, which has resulted in the emergence of ‘big retail chans in most mets; in metas and towns being the next tars. Customer ate and preferences are changing, eaingto aia ransfoemationi este andspendngpatems, wich in tunis ving rise to new and developed business scopes. Development of mega ‘allsin India is adding new dimensions tothe booming rei sector Thee isa sigan development in eal Jandseape not ony inthe metros, but ls in the smaller cits Retailers inspired by the wallmart story of grow ia ‘Ameria, are tempted to focus on smaller towns and villages in India, However an analysis othe rown-wise population, population growth, migration trends of ‘stor spending anaysisreveasa very ficul picture of Tndia.Dataof Table 3 by NCAER estimates, the share ofthe 35 lowns with presen population greater han 1 nln in India's total population would grow much faster ‘han their counterparts, fom 10.2% today toreach 4% by 2025, Table 3: Urban-Rural usige pattern in middle Income group (per’ 000 Households) Consumer Urban Raral Darables 2001-02 2009-10 2001-02 2009-10 Motoryele | 1643 | 3207 | 1000 | 2509 “Television | 928 | 12589 61635613, Car 34-22 «16 3S Consumer | “Expendale 20012 200910 2001-02 2008.10 Edibleol 10000 | 10000 1000.0) 1000.0 | Shampoos 827.8 | loon0 | 3843 4584 Washing 9047 0000) 7754) 69 | powder ‘This urbanization will help to develop organized rail storia Indi ‘Objectives of the study Inthe etal context, consumer goods enjoy predominant place in terms of volume and sales revenve. In our daily lie, we need convenience goods. The organized retail GM Vou 3.1906 LJasuany Jont 2009 An Empirical Study Of Indian Retail Customers sectors are keeping almost all convenience goods under ‘one roof. This convenience obviously attrects more customers. So, the sizeof organized retail seetr is increasing. Everybody wants io attract more cusomers ‘trough various marketing activites like, sales promotion, Almost every organized real shop is offering some sales promotional schemes throughout the year to ata customers and to inerease soles. But, the exact picture of theimpact of als promotion on consumer behaviour fs yet unclear tothe ears. This paper ies to find out ‘he impactor sals promotion on consumes buying behaviou. Literature Review International Context ‘Aneaxisting research sream considers how the costs and benefits of promotional acvites ae dreted at eustomes, tut empiial results are mixed acording to Blauber, Robert, Richard and Edward (1995). Kopale, Praveen, Carl and Lawtence (1999) find that price promotions enhance consumer pice sensitivity, but aot that, under Some conditions, such promotions can be profitable to oth retilers and manufacturers, An extensive body of academic research has established that emporary price reductions substantially increase shor-term brand sales (Blatborg, Robert, Richard, and Edward 1995), which ‘may explain thei intensity of use by manufacturers and retailers alike, However short-term effects of price romtions tend to be much weaker, From the static into vew these findings imply tht promotions geerlly donot generate long-term benefits tote promoting brand, ‘itmay generate the sales and margin on short erm basis Promotional setions should be accountable forthe net Positive results during the dust-setling period. This accountability has two components. Fist, a promotion must not initiate permanent price or margin drop. After ‘the promotion period, prices mus retum to teir normal levels est they cause permanent erosion of profit margins without ofteting volume increases. Second, promation ‘must generate a net surplus (ineremental revenue and rofitoverbaslne) forthe promoter over the dust-sctling petiod. ‘There is only limited empirical evidence on the overall, profitability ofa given price promotion and its division across manufacturers and retailers. Some argue that, while manufseturer profits from promotions have increased ata steady rat, retailers have been eaming 8Gopal Das & Dr. Rohit Vishal Kumar lower profits (Ailawadi, Faris, and Shames, 1999). Likes, competition among sores may prevent retailers ‘om taslating trade allowances into profits (Kim and Siaelin, 1999), By the same token, Srinivasan and Bass (2001) find thatthe intensity of price competition atthe | retail level exceeds what is optimal fr the marke, but this isnot so for manufacturers. In contrast, some believe that power inthe channel has shifted toward retailers, s0 theirshareofpromtion profits shouldbe onthe rise (See Kaaliali,Vrinda, Pradeep and Naufl, 2000 and Aiwa, Kusum 200, foran extensive review on this issue). Nis (2001) argues that many lading manufacturers would ike to reduce terexcessve reliance on price promotions tut are reluctant to do so, lst they lose the support of retailers who stil appreciate the market expansive power of price promotions Interestingly. sher sources (Urban. ‘Joe! and Dickson) and recent research consistently find that shore-erm promotion effets die out in subsequent weeks or months — a period referred o as dust seting = = leaving very few, if any, permanent gains to the promoting brand. This pattern has been shown to hold for the market shares of promoting brands (Srinivasan and Bass 2000), for category demand (Nijs, 2001), a8 wel a for consumers’ purchase incidence, purchase ‘quantity and brand choice (Pauwels, Hanssens, and Sidharth 2001), Kincade, Woodard, Ginger and Haesun (2002) studied ‘buyer seller eatonshis for promotional supporin the appatel sector which was critical for success, The purpose ofthe study was to describe the promotional activities offered to apparel retailers by manufsturers- “Thostudy was trying to find outthe retailers perceptions fof the offering frequency and importance of the ‘promotional support, and to investigate the relationship ‘hetwoen offering frequency and perceptions of importance, It was found that monetary support Was regarded asthe most important promotional suppor. In a study by Broadbridge and Calderwood (2002) emphasis was given tothe fact hat in anage ofinereasing competition fom large-scale organized grocery eal, Jocal shops ned to have the commitment and willingness tocar forth local community forsurvival whit means ‘oeusng attention more closely on local esidens” wants and needs. ‘Knox and Walker (2003) found the existence of weak | butsigifican relationship between he involvement and 4 brand loyalty in grocery markes, Another study done by ‘Moschis, Canis! and Bellenger (2004) was that older consumers are very price-conscious, (with an often exacting memory far the prices of frequently purchased items necessitating food stores to use frequent prie- reduction promotions} and enjoy interactions and prefer to shop in a store where they can receive special assistance serviees (such as valet parking, delivery assistance cary-outasistnee liberal product return and refund policies). (Overall satisfaction witha store does nt significantly influence customers’ loyalty to that store, And shoppe" intention to emai loyal othe “primary store” as in factinfluenced by several other easons such as fequent buyersreward schemes, ravel distance, preference for an instore delicatessen, size ofthe average grocery bill, store signage andthe level of sleasistance (Miranda, Konya, and Hail, 2005) Spanish consumers perceptions of US apparel specialty retailers products and services, was sued by Hylegard, Eckman, Desals, and Borja (2005). The study focused that specialty retailers’ sucess in intemational markets iscontngent upontheirknowledge of cuitrally-