The influence of price and promotion on package size propensity

Abstract

Purpose - The constantly changing prices, promotions, and packaging options have made decision making more complex for consumers of packaged goods. The purpose of this paper is to explore how price and promotions influence consumer propensity to buy a certain package size. Design/methodology/approach - Scanner panel data for shelf-stable salad dressing obtained from Information Resources Inc. were used to compute the proportion of large packages bought, the relative price paid for large packages, propensity to use various types of promotions, and a behavioral covariate for each household. Data of over 5,600 households were analyzed using a multiple regression analysis for hypothesis testing. Findings - The positive nature of relationship between the relative price of large packages and the proportion of large packages bought demonstrates the suboptimal nature of consumer decision making. The inefficiency is partially attributable to the abundance of promotions, to consumers’ lack of price awareness, and to the use of heuristics by consumers. Also, consumers who are prone to use promotions such as displays and temporary price reductions tend to purchase larger packages. They are more likely to buy impulsively and base their decisions on heuristics. In contrast, consumers who are influenced by featured price cuts and who utilize coupons tend to purchase smaller packages. Research limitations/implications - Data were obtained from grocery stores; only a single product category was studied. Practical implications - Offer coupons and advertise featured price cuts on small packages to increase the sales of smaller packages. To move large packages successfully, retailers should rely more on in-store displays and temporary price reductions. Originality/value - The impact of price and promotions on package size propensity has never been investigated. This study is also one of the few that uses a household-level analysis based on observable purchase data for consumer packaged goods.