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Store Price Promotion Strategies: An Empirical  Study from Chile

ISI: Store Price Promotion Strategies: An Empirical Study from Chile

SERGIO OLAVARRIETA S., PABLO FARÍAS N., PEDRO HIDALGO C., ENRIQUE MANZUR M.

2013 - Academia - Revista Latinoamericana de Administración - Vol. 26, Nº 3, Pp. 356-372

Abstract

Purpose – The purpose of this paper is to examine two popular price promotion strategies – price matching guarantees (PMGs) and everyday low prices (EDLP) – and their effects on Chilean consumer behavior in terms of consumer perceptions of low prices, search behavior and purchase intention. Design/methodology/approach – A quasi experiment with three scenarios was conducted to test price promotion effects. Subjects were instructed to respond a questionnaire that included the dependent variables.

Findings – Results show that EDLP and PMG strategies increase perceptions of low prices and affect purchase intentions. These effects are significantly higher for stores offering EDLP than PMG. However, when consumers are exposed to two or more price promotion strategies (rather than one) they reduce their purchase intentions for a specific store and increase their search intentions.

Research limitations/implications – This is an initial study exploring the effects of price promotion strategies on consumers. Future research could test the hypotheses advanced in the study across different samples and contexts (supermarkets, department stores, convenience stores, and other retailers) and might privilege external validity, using experiments mimicking decisions with real consequences.

Practical implications – Retailers and marketers in Latin America – particularly those companies stressing price or value as their differential advantage – should consider the use of price promotions when designing marketing strategies. On the other hand, retailers should be aware that an intensive use of these of promotions could lead to increases in consumer search behavior.

Originality/value – While findings from the USA suggest that price promotion strategies can be effective in several contexts, there has been a limited number of studies addressing whether suchstrategies are effective in other countries, particularly in Latin America and emerging nations

Keywords

Purchase intention, EDLP – everyday low prices, PMG – price matching guarantees, Price perception, Price promotion strategies, Search behavior.

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