The impact of promotional strategy on retail industry

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TABLE OF CONTENTS

CHAPTER 2: LITERATURE REVIEW1

Marketing strategy1

Place2

Product4

Price5

Promotion5

Promotions and Advertising8

Channel Structure9

Pricing and Promotional Strategy14

High-Low Pricing and Loss Leaders15

Price Rigidity and Ending Digits16

Category vs. Brand Management18

Promotional Depth and Frequency21

REFERENCES24

APPENDICES28

Questionnaire28

CHAPTER 2: LITERATURE REVIEW

Marketing strategy

Holbrook (2007) defines marketing as the planning and implementation of almost everything an organization does to facilitate an exchange between itself and its customers. With this definition in mind, the firm (retailers) may devise a strategy that influences consumers in purchasing decisions, and to satisfy retailer objectives (Holbrook 2007, 45-65 ). Marketing is also defined as the process of planning and executing the conception (place, product, prices, and promotion) to create exchanges that satisfy individual and organizational goals. Specifically, the firm will engage in the marketing mix since that is the controllable aspect of the firm's marketing strategy. Devised by E. Jerome McCarthy in 1960, the marketing mix consists of the Four P's of marketing decision-making -place, product, price and promotion (Heimback 2008, 746-757).

Functional benefits refer to the gained satisfaction that is physically quantifiable. Conversely, emotional benefits are perception-based and cannot be directly measured. A different set of benefit categories differentiates between image (perceived value), personnel (employee competence), service (warranties, guarantees), and perceived product benefits (the benefit derived from the product itself). Holbrook (2007) define specific costs, which include monetary (actual price paid in purchase), time/effort (physical energy required to purchase), and psychic (mental energy required to purchase).

Advertising has several ways to enhance customer value:

Increase benefits, holding cost constant.

Decreasing costs, holding benefits constant.

Simultaneously increasing benefits, and decreasing costs.

Simultaneously increasing both benefits and costs; however, the benefit increase is greater man the cost increase.

Simultaneously decreasing both benefits and costs; however, the cost decrease is less than the benefit decrease.

The marketing mix is used to influence consumer perception of enhanced customer value, and can be linked with the Four P's in the following ways (Holbrook 2007, 45-65).

Place

Place refers to the location where the products are sold. Examples include a retail outlet or online shopping using the Internet. This current project focuses on supermarkets as they account for a large share of fresh fruits and vegetables sales to consumers. Retailers select the location of their stores, taking into account customer value. With respect to place, consumer value is shaped by factors such as the following:

The retailer is within close proximity to the residential area, thus reducing the cost of transportation and increasing the benefit of having more time to do other activities. The retailer is within close proximity to other commercial centers, thus reducing transportation costs and increasing the benefit of more time to do other non-food shopping. This includes being close to other supermarkets or competitors because some consumers may choose to purchase items at more than one location. A retailer may also launch a more successful marketing campaign that entices consumers to switch supermarkets. The retailer is accessible by public transportation or is situated near major roads, thus reducing the burden of traffic and increasing the benefit of convenience (Heimback 2008, ...