using supermarket data for promotional strategy

Topics: Regression analysis, Statistics, Marketing Pages: 12 (2824 words) Published: November 1, 2014
Melanie Felgate and Andrew Fearne

Using Supermarket Loyalty Card Data to Inform Better Promotional Strategies
Melanie Felgate and Andrew Fearne
Kent Business School, University of Kent, UK
M.Felgate@kent.ac.uk ; A.Fearne@kent.ac.uk
Abstract
This paper reports the use of loyalty card data from one of the biggest retailers in the world – Tesco - to analyse the impact of promotions. The aim is to demonstrate how such data can bring significant benefits to retailers and manufacturers when deciding promotional strategies, over and above traditional scanner datasets, which the majority of existing research is based around (E.g. Raju, 1992; Macé and Neslin, 2004; and Martínez-Ruiz et al. 2006). Regression analysis is used to compare the effects of different promotional mechanics upon different cuts and tiers of product across the fresh beef category in Tesco; using both scanner data and loyalty card data. The results show that using loyalty card data, which enables us to control for shopper life-stage and region (something which cannot be achieved using scanner data), produces more statistically significant results and provides a more detailed picture of how promotions influence sales. Keywords: loyalty card data, promotion, multiple regression model

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Introduction

The use of promotions in retailing has increased rapidly in recent times, yet more often than not promotions are being implemented with an inadequate understanding of which mechanisms are most effective, for which products and for which shopper segments (Felgate et al, 2011). Despite this growth in the use of promotions, particularly in the Fast Moving Consumer Goods (FMCG) sector, consideration of their impact and effectiveness amongst academics has been limited. It has been identified as an important area for future research, as has the greater use of supermarket panel data to provide insights into how different shoppers respond to price changes, including promotions (Grewal and Levy, 2009). Moreau et al (2001) assert that a lack of understanding by retailers about consumer perceptions of promotions can lead to weaknesses in their marketing strategies. Thus, as the use of promotions continues to grow, it is increasingly important to gain a more complete understanding of how consumers actually behave in response to different promotional activities.

This paper reports the use of loyalty card data from one of the biggest retailers in the world – Tesco - to analyse the impact of promotions. The aim of the paper is to demonstrate how such data can bring significant benefits to retailers and manufacturers when deciding promotional strategies, over and above traditional scanner datasets, which the majority of existing research is based around. While the case study is based on data from the UK, it demonstrates how other major retailers with similar loyalty card schemes (e.g. Kroger in the USA, and Casino in France) could make use of this powerful source of behaviour data to gain a better understanding of the effectiveness of promotions in key (destination) categories. The paper also contributes to the existing promotions literature, through presenting a

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Melanie Felgate and Andrew Fearne

conceptual framework to test the moderating effect of shopper specific characteristics such as life-stage and region on promotional impacts.
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Promotions

Promotions can be defined as marketing events limited in duration, implemented to directly influence the purchasing actions of customers with the underlying intention of achieving the objectives set out in the marketing strategy for the retailer and/or manufacturer (Webster 1971; Blattberg and Neslin 1990). These objectives may include improving competitive position, brand extension, category expansion or increasing profitability. The use of price promotions in the UK has increased significantly over the last decade, particularly in grocery retailing where competition between retailers has intensified....
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