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The secret to in-store displays: Where to place discounted products relative to regularly priced products to maximize sales

Do price promotions on some products differentially impact demand for other products depending on their relative locations within a display? This new study concludes that the answer is yes.

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Researchers from University of Connecticut, Texas A&M University, University of Colorado at Boulder, and University of Florida published a new Journal of Marketing article that examines whether price promotions on some products differentially impact demand for other products depending on their relative locations within a display.

The study, published in the Journal of Marketing, is titled “The Negative and Positive Consequences of Placing Products Next to Promoted Products” and is authored by Christina Kan, Yan (Lucy) Liu, Donald R. Lichtenstein, and Chris Janiszewski.

Consumers select from a variety of competing products in multi-product displays. Some products are discounted while others in close proximity are regularly priced. For example, Costco offers items that are not regularly stocked at a reduced price to train shoppers to enter the store in search of “deals,” as if on a treasure hunt. Finding these deals exposes customers to proximal products in other categories, which allows Costco to capture sales from people not interested in the discounted product.

The key question is: Do price promotions on some products differentially impact demand for other products depending on their relative locations within a display? This new study concludes that the answer is yes.

The researchers say that “When the proximal items (i.e., those placed nearby) and distal items (i.e., those placed farther) are strong substitutes for the promoted item, we find that a price promotion decreases the sales of proximal products relative to distal products. This is known as a negative proximity effect. However, when the proximal and distal items are weak substitutes for the promoted item, the promoted product increases the sales of proximal products relative to distal products. This is known as a positive proximity effect. In this case, the proximal product benefits from the increased attention by virtue of being close to the promoted product.”

The research team finds evidence for these sales patterns across eight studies. In one study, they analyze yogurt sales at a retail grocer. When non-promoted products are strong substitutes for the promoted product, a 1% decrease in the price of the promoted product results in a .25% decrease in sales of proximal products, but there is no change in sales of distal products. However, when non-promoted products are weak substitutes for the promoted product, a 1% decrease in the price of the promoted product results in a .10% increase in sales of proximal products. Again, there is no change in sales for distal products.

Insights from the Studies

The promotion–proximity results provide three insights.

  • It is often assumed that price promotions draw attention toward the promoted brand and away from all other brands. In contrast, these results show price promotions direct attention to the promoted brand and the brands that surround it (i.e., attention spills over).
  • Prior research assumes that goal-directed consumers will search a product display so that all appropriate products enter a consideration set before the purchase decision is made. In contrast, this analysis indicates that a price promotion can increase (or decrease) the likelihood of a proximal (or distal) product entering the consumers’ consideration set.
  • Prior research assumes multiple purchases come from a single consideration set.  In contrast, this research argues that consumers can search multiple locations in a product display, with each location generating a unique consideration set and purchase opportunity.

Opportunities for Marketing Managers

Understanding how attention spills over to proximal products creates several opportunities for marketing managers.

  1. Managers may consider product subcategory boundaries as opportunities to exploit positive proximity effects. Consider butter cookies and chocolate chip cookies bordering each other on a shelf. Placing a border brand on price promotion should draw increased attention to a less substitutable proximal item and increase the probability of a positive proximity effect.

    Managers can take advantage of this to direct attention to full-priced higher margin brands. Taking this further, positive proximity effects may also occur for non-substitutes (e.g., refrigerated yogurt and refrigerated desserts).
     
  2. Retailers commonly conceive of loss leaders (e.g., milk) as items used to increase exposure to other non-promoted product categories in the store (e.g., product categories they pass on the way to the dairy aisle). However, a loss leader can also be used to introduce customers to new products within a product category. For example, imagine discounting a product like almond milk and surrounding it with novel flavors/versions of non-promoted items (e.g., oat milk, soy milk) to induce trial of those new items. In this sense, price promotions benefit the promoted brand and also increase exposure to other high margin items in the product category.
     
  3. Some products, such as wines on a shelf, are organized by price levels. For categories in which substitutability is defined by price, placing any item on sale would have a negative influence on proximal items. Because consumers have little expectation of which cabernets should be located next to each other, managers may place lower margin items proximal to price-promoted items during the promotion.

Strategies

Consumer openness to smoke-impacted wines, offering new market opportunities

Consumers, particularly those that like smokey flavors in food and beverages, are open to drinking smoke-impacted wines. Also, the type of information on the label can modulate consumer acceptance.

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Certain groups of consumers appear to be open to drinking smoke-impacted wines, a finding in a new study that could provide market opportunities for winemakers increasingly dealing with the effects of wildfire smoke on grapes.

The study by researchers at Oregon State University and in New Zealand found that consumers, particularly those that like smokey flavors in food and beverages, are open to drinking smoke-impacted wines. They also found that the type of information on the label can modulate consumer acceptance.

“This research provides vital information for the wine industry,” said Elizabeth Tomasino, a professor of enology at Oregon State. “It demonstrates that with certain wine drinkers there is a potential market for these smoke-impacted wines.”

As the number and size of wildfires grow globally, the wine industry has been heavily impacted. For example, an economic analysis of the 2020 wildfires on the West Coast of the United States estimated wine industry losses up to $3.7 billion.

Following the 2020 fires, a research team, led by Oregon State scientists, received a $7.65 million grant from the U.S. Department of Agriculture to study the impact of smoke on wine.

Since then, the researchers have made several key advances. They discovered a class of compounds that contribute to smoke impact in grapes. They also developed spray-on coatings for grapes that have shown promise in preventing off flavors in wines that result from contact with wildfire smoke.

The latest research, published in the journal Food Research International, focuses on consumer attitudes toward smoke-impacted wine, a topic that has received very little attention.

For the study, Tomasino and Jenna Fryer, a doctoral student in her lab, sent smoke-impacted and non-smoke wine made from Oregon pinot noir grapes to New Zealand. There, working with Amanda Dupas de Matos and Joanne Hort at Massey University, they recruited 197 participants for the study.

They conducted the research in New Zealand, a region where winemaking has not been significantly impacted by wildfire, because they were interested in how people would respond to the wines. Future research will compare the results from New Zealand to findings from tasting panels in Oregon and Ohio.

With the research in New Zealand, two clusters of consumers were identified, one that liked the smoke-impacted wine (110 people) and the other that disliked it (87 people).

Findings of the study included:

  • The smoke-liking group had an average liking score of 6.86 out of a nine-point scale.
  • The smoke-disliking group had an average score of 3.26.
  • The introduction of labels, versus unlabeled wine, increased liking of the smoke-impacted wines for the smoke-dislikers from just over three to more than five on the nine-point scale. One of the labels overtly referenced wildfires with the words “Smoke Stack, experience the 2020 vintage with this unique, lightly smokey wine.”
  • The different labels didn’t have much of an impact on the smoke-likers, but their average scores were still above six, outpacing the dislikers.

The findings indicate that there are potential tools winemakers can use to make a smoke-impacted wine viable for the market, the researchers say. One option is blending, a common winemaking technique that in this case could involve mixing a smoke-impacted wine with a non-impacted wine. Winemakers can also take different approaches to labeling and marketing to specifically target the smoke-liking group.

“Our findings indicate that there is more forgiveness among consumers for these smokey wines than winemakers think,” Tomasino said. “It seems winemakers have a lot more options if they want to sell wine made with these grapes.”

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BizNews

Women more likely to choose wine with feminine labels

The more strongly the participants identified with other women, a phenomenon called “in-group identification,” the greater this effect was. A feminine label also influenced their expectation that they would like the wine better.

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To appeal to the majority of consumers, winemakers may want to pay as much attention to what’s on the bottle as what’s in it.

A three-part experimental study led by Washington State University researchers found that women were more inclined to purchase wine that had labels with feminine gender cues. The more strongly the participants identified with other women, a phenomenon called “in-group identification,” the greater this effect was. A feminine label also influenced their expectation that they would like the wine better.

With women representing 59% of U.S. wine consumers, the male-dominated field of winemaking might want to pay attention to the perceptions of this understudied group, said Ruiying Cai, lead author of the paper in the International Journal of Hospitality Management.  

“When you look at the market segments, women are actually purchasing a lot of wine. They are a large group,” said Cai, an assistant professor with WSU’s Carson College of Business. “We found that feminine cues speak to women consumers. They have more favorable attitudes toward the label and the wine itself. They were also expecting their overall sensory experience to be better, and they were more likely to purchase the wine.”

Gender cues often rely on stereotypes, and in initial tests for this research, a group of 90 women rated wine labels as more masculine when they featured rugged animals like wolves and stags as well as portraits of men. They designated labels as feminine that had cute animals, flowers and female portraits. Labels with castles and bunches of grapes were seen as neutral.

In two online experiments, a total of 324 women were shown fictitious wines with labels designed with these gendered cues. The participants showed higher intention to buy wines with a feminine label, such as a woman holding flowers, as opposed to a wine with a masculine label, such as a bulldog in a spiked collar. When asked about the expected sensory experience, they rated their liking of every sensory aspect higher, including the color, taste, aroma and aftertaste.

The participant’s level of wine expertise moderated their taste expectations but surprisingly, not their purchase intentions.

“Whether they were knowledgeable or less knowledgeable about wine, when they saw those feminine cues, they had a higher intention to buy the wine. The gender cue influence was so strong, it trumped the effect of that knowledge,” said co-author Christina Chi, a professor at WSU’s Carson College of Business.

A third experiment with another set of 138 women involved a taste test—also with a surprising finding. Researchers gave bottles of the same red wine with one of the gendered labels. More women who tasted the feminine-labeled wine ranked it higher in fruit flavors such as red current and blueberry than those who tasted the same wine with a masculine-cued label—and despite the fact those flavors were not dominant components in that particular wine. Women connected more mineral flavors with the masculine-labelled wine.

However, the participants who tasted the feminine-labelled wine reported liking it less than the women who tasted the masculine-labelled wines. The authors said this could be a result of the incongruence between the expected flavor influenced by the feminine label and the actual taste of the wine sample, which had a medium body, tannin and alcohol level.

Few studies have focused on the perceptions of women wine consumers in a field where 82% of the winemakers are men. That lack of perspective is very apparent on wine aisles, said Chi, noting that many vintners seem to favor masculine imagery like stallions, bulls and roosters–and one brand even features a prisoner in a jail cell.

“When designing the labels, winemakers should involve more women in the process, and it’s highly advisable to pilot test the labels among consumers for gender cues,” she said.

In addition to Cai and Chi, co-authors on this study include recent WSU graduate Demi Deng now at Auburn University and Robert Harrington of WSU.

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Strategies

Tips that businesses should consider during the holiday shopping season

Highlight your strengths—whether it’s one-of-a-kind products, exceptional offerings, or a strong local connection. Design your holiday strategy around what sets you apart and amplify these messages through social media and your marketing materials.

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As the holiday shopping season approaches, small businesses are gearing up for one of the busiest times of the year, from Black Friday to Small Business Saturday and beyond. 

SCORE, America’s largest network of volunteer, expert business mentors, offers entrepreneurs practical advice to make the most of the season.

Plan for the Holiday Rush

Reflect on last year’s performance. Did you meet your sales goals? Use your previous data to forecast sales, set promotional strategies and manage staffing needs to provide for outstanding customer care.

“It’s about more than just sales; it’s a powerful opportunity to connect with your community, attract new customers and reinforce relationships with loyal ones,” explains SCORE mentor Lizz Smoak.

If you plan on extending store hours during the holidays, communicate these updates with your team early so you are prepared to handle increased sales traffic. Ensure that employees are aware of the holiday schedule and have submitted any time-off requests to avoid last-minute scheduling conflicts. 

Create an Experience for Customers

“Engagement is key when customer traffic spikes during the holiday season,” notes SCORE mentor Christy Jones. “Consider offering curated gift guides or exclusive bundles to simplify decision-making for your customers, especially as you compete against large retailers like Amazon.” Plan a special event or connect with other local businesses to promote shopping small.

Stand Out from the Crowd

Consider how you can make your store or service the preferred choice. “Small business owners should contact their existing customers and highlight their unique level of service,” advises SCORE mentor John Doyle.

Highlight your strengths—whether it’s one-of-a-kind products, exceptional offerings, or a strong local connection. Design your holiday strategy around what sets you apart and amplify these messages through social media and your marketing materials.

Be E-Commerce Friendly

As you roll out holiday promotions, make sure that your digital doorstep is ready, too. Confirm your hours, location and contact info are updated on your website, Google Business Profile and other local listings. Many customers will be shopping on their phones so be sure your website is optimized for mobile use and that your most popular products are easy to find. A smooth checkout process is vital for keeping customers happy and encouraging repeat purchases.

“Small Business Saturday offers a prime opportunity for small businesses to step into the spotlight,” said SCORE CEO Bridget Weston. “With a strategic approach, small businesses can leverage this season and see big returns.”

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