RESEARCH-GENERATED, LOW-COST, IN-STORE, RETAILING STRATEGIES

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RESEARCH-GENERATED, LOW-COST, IN-STORE, RETAILING STRATEGIES

Steve Vander Veen, Calvin College

ABSTRACT

Small retailers can manipulate cognitive and affective consumer
processes to increase sales. Recent research is categorized according
to two general models. Results from two quasi-experiments are
reported which demonstrate a low-cost way to increase sales of an
impulse product.

INTRODUCTION

Hunt (1991) claims that the accusation made by business practitioners
that academic scholarship is "just" theory is not a valid one: theory
and practice are related because theories explain and predict
phenomena (practice). Weinrauch, Mann, Robinson, and Pharr (1991)
stated that a broadening topic of research is "enhancement of
marketing practices within small business firm," one focus being on
the experiences of small business owners under tight financial
constraints. Weinrauch et al. (1991) report that some business owners
have difficulty finding marketing strategies that are both affordable
and suitable to their businesses. Weinrauch et al's principal
components analysis determined that problems related to cash flow,
marketing expertise, and customer-related problems of a tactical
nature (e.g., buying advertising time) were among the five major
problem areas for small retailers or service firms. Weinrauch et al.
(1991) conclude by saying "the future interface between marketing cost
and specific marketing problem areas must come to fruition."
Likewise, Gaskill, Wickett, and Kim's (1994) factor analysis
determined that competitive and promotional strategies (such as
visual merchandising) were a significant need for small business
apparel and accessory retailers in business five years or less.

The purpose of this article, then, is to help satisfy the need of
small businesses, particularly small retail businesses, for low-cost
marketing strategies. Gruben and Gresham (1994), among others, remind
us that small retailers play a significant role in the U.S. economy.
Small businesses employ nine out of every ten workers, while retailers
employ one out of every six workers. Gaskill et al. (1994) remind us
that 50% to 80% of small businesses fail within the first five years.
Therefore, enhancing the competitiveness of small retail businesses
via low-cost strategies seems a task worthy of effort.

Weinrauch (1987) defines low-cost strategies as those which "cost
little in terms of actual dollars spent, consist of a very small
percentage of the total budget, or cost-effectively enhance total
revenue." Dreze, Hoch, and Purk (1994) define in-store strategies as
tactics the retailer uses "to extract more surplus from consumers once
they are in the store." Retailers can increase profits by decreasing
costs or increasing sales. Cost reduction strategies tend to be
operational in nature. Sales increase strategies, on the other hand,
tend to be market-oriented and consist of out-of-store or in-store
tactics. Because it is assumed that out-of-store tactics cost more
and are less controllable for small retailers, this article focuses on
in-store tactics (and only on low- cost ones). It is also assumed
that most consumers in small retail stores are low-involved; i.e.,
they may lack the ability but more likely the motivation and the
appropriate context (e.g., they are in a hurry) to do issue relevant
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thinking in the store (cf. Petty, Cacioppo, and Schumann's
Elaboration-Likelihood model, 1983). For example, Hoyer (1984) found
that even in supermarkets consumers generally made choices quickly
after minimal search, and Dickson and Sawyer (1990) found that
consumers made choices after without spending much time comparing
prices.

But that does not mean all consumers are low involved. Many are high
involved (e.g., when they are comparing works art in small gallery, or
comparing apparel or accessories in a small clothing store).
Regardless, the retail store environment plays a significant role in
determining a consumer's emotional state which in turn influences a
consumer's approach or avoidance response to a product category (cf.
Donovan and Rossiter's Mehrabian-Russell model, 1982). It also must
be stated that regardless of a consumer's ability to process,
consumers must first perceive that the product is in the store.

Therefore, this article will focus on ways to arouse the consumer's
attention (i.e., make it easier for the consumer to receive
information) and increase the consumer's attentiveness in order to
increase product sales. Such strategies would be appropriate no
matter how involving the products or consumers are.

LOW-COST COGNITIVE TACTICS TO AROUSE CUSTOMER ATTENTION

A primary concern of retailers is how to make consumers aware of
products (Dreze et al., 1994). One low-cost strategy involves shelf
management (sometimes called "micromerchandising"). Shelf management
can consist of (i) space-to-movement strategies (i.e., allocating
shelf space in proportion to market share of individual brands) and
shelf reorganization strategies. Because small retailers cannot
afford to carry a wide assortment of brands due to inventory costs, a
low-cost space-to-movement strategy would be to stock only the most
popular brands.

Shelf reorganization strategies can be broken down into temporary
display strategies and permanent display strategies. Temporary
displays have the greatest potential for attracting attention
(assuming the same shoppers frequent the store) because by their very
nature temporary displays are novel. Permanent displays can attract
attention by altering the location of the product within the display
area (also called facing), altering what the product is adjacent to
(e.g., moving it closer to a complementary product could increase its
sales as well as those of its complement, while moving it farther away
from substitute products could reduce comparisons of it or the
substitute product, depending on which product was in the higher
traffic location within the store), and manipulating aesthetic
elements such as color, size, and signage.

Obviously, arousing the consumer's attention is particularly
important for reminder or impulse purchases. A retailer can increase
the sales of such products (e.g., cigarettes) by placing the highest
share brands in the most visible locations (Stern, 1962). For high
involved consumers, a distinction must be made between thinking (e.g.,
houses, computers, sedans, etc.) and feeling (e.g, motorcycles, art,
fur coats, etc.) products (cf. Vaughn 1986). Directing a consumer's
attention to a list of attributes logically-arranged seems more
appropriate for high involved (i.e., products which consumers have
the ability and motivation to process information about), thinking
products. For high involved, feeling products, making test drives
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and other "trial" experiences seems more appropriate (cf. Smith and
Swinyard, 1982).

Finally, if retailers are competing with competitors on price, it has
been found (at least on an advertising circular) that retailers can
create a lower price image if advertised (and presumably) posted in-
store prices are presented as reductions from previous prices. As it
turns out, consumers do not remember prices as well as they think they
do and need to be reminded of a reference price (see Cox and Cox,
1990). In addition, it has been found that socioeconomic status plays
a role (Wakefield and Mann, 1993): consumers with more income tend to
be less price sensitive because (it is theorized) search costs
outweigh the benefit of price comparisons; therefore, depending on the
small retailer's clientele, it may be more beneficial to give
reference prices in the store.

LOW COST AFFECTIVE TACTICS TO AVOID AVOIDANCE RESPONSES

A second concern of retailers is how to keep consumers in the store or
at least how to keep them from avoiding certain areas of the store.
One low-cost strategy is to establish or maintain a pleasant store or
display environment. Of course the catch is to determine what
consumers perceive as a pleasant environment, but chances are it will
include such things as warm colors and warm, but well-lighted and wide
aisles, no strong aromas and no litter, etc. For example, book
sellers have discovered that book consumers browse longer if they can
get specialty coffee and wander among overstuffed chairs.

It has been found that pleasantness of the in-store environment is a
significant predictor of willingness to spend time in the store,
intentions to spend more money in the store, and actually spending
more money! However, emotional arousal (though this seems difficult
to measure) was found to interact with pleasure such that arousal
intensified pleasure in a perceived pleasant store environment but not
in a perceived unpleasant store environment. Therefore, adding more
vivid colors, e.g., to certain displays makes more sense in a store
perceived to be pleasant, but not in a store perceived unpleasant. In
any event, cleanliness and a fresh coat of paint appear, if not next
to godliness, at least closer to consumers' hearts. Theoretically,
the features of the stores environment are related to approach/
avoidance behaviors within the store environment, and these behaviors
are mediated by the consumer's emotional states aroused by the store
environment (cf. Donovan, Rossiter, Marcoolyn, and Nesdale, 1994).

In addition to color and music, width of product assortment within the
store has been found to influence purchase behavior within the store.
In particular, it has been found the larger the product assortment,
the lower the consumer's brand loyalty and the higher the consumer's
sensitivity to promotions. The latter is good news for small
retailers, since they are usually unable to offer promotions and large
product assortments.

PURPOSE OF STUDY

Because many small retailing stores fail and because small retailing
stores are important to the economy (not to mention their owners), it
is important to develop low-cost in-store marketing tactics which
would increase sales for small retailers. For this reason, a quasi-
experiment (see Cook and Campbell 1979) was conducted to test a low-
cost strategy of using inexpensive (less than $15.00) on-package
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promotions to increase awareness; namely, the use of quarter-size
(i.e., U.S. $0.25 coin-size), flaming red price stickers on the sale
of processed beef (here referred to as beef jerky, though not
technically the same) in small core-city and rural retail convenience
stores. Whether the red price sticker caused the consumer to think
the product was on sale or expensive could not be known; either way
it would have aroused the consumer's attention. Therefore, results
could be exaggerated (if the price sticker caused the consumer to
think the product was on sale and it was not) or minimized (if the
price sticker caused the consumer to think the product was too
expensive).

If it is true that most items near the check-out counter (such as beef
jerky) are not bought because they are homogenous shopping products
but because they are impulse convenience products (for definitions,
e.g. see Bucklin, 1963); it is assumed beef jerky is a product most
consumers will not go into a store to buy but may buy if they see it
once in the store. Thus, it was anticipated that ease of perceiving
an impulse product would increase product sales. Therefore,

(H1) sales of an impulse convenience product will be higher
when it is easier for consumers to perceive the product
(i.e., when on-package flaming red stickers are used).

METHOD

A distributor of beef jerky and other convenience items was solicited
to gather data for this quasi-experiment. He was paid $10/hour for
the extra time he spent attaching stickers and charting and archiving
sales data so that product sales could be compared.

Seventy-eight stores were selected by the distributor to receive
flaming red price stickers. Price stickers were applied to one type
of beef jerky though, on average, five other types were sold. Only
one type of beef was individually labeled in order to provide contrast
between it and the other types.

Most stores were located in low socioeconomic neighborhoods in the
West Michigan region (e.g., in Benton Harbor, Muskegon, Grand Rapids,
Holland). Other stores were in poor rural areas between the various
cities. Sales figures were also gathered for the five-week period
before the five-week treatment period and the identical periods of the
preceding year (as a control).

Therefore, the study could be considered an untreated control group
design with separate pretest and posttest measures (Cook and Campbell
1979). But a main difference between normal quasi-experiments and
this one is that quasi-experiments utilize nonequivalent groups. In
this experiment the same stores were compared inter-year (i.e., they
were matched).

It is important to note that five-week periods were used and that
sales were measured in terms of twenty-four count boxes sold. Since
sales were tallied in terms of boxes sold (versus individual items),
it was thought that a five week period should be used because five
weeks allows adequate time for the "treated" product to be sold and
reordered. A longer time period could have increased the variation
between "treated" and "untreated" product.

RESULTS
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Out of the seventy-eight stores selected by the distributor (virtually
all of his accounts for this particular product), sales figures were
utilized from only fifty. Some stores were eliminated because they
did not purchase a box of the promoted product in July or did not buy
one until the fourth or fifth week (which means the variability in the
dependent measure would not have been noticed). Other stores were
eliminated because they did not buy the promoted product in the June
and July periods of the previous year (which means there was no test
control). Thirteen stores were eliminated because the appropriate
price stickers were misplaced and not placed on the product (the
product sold at four different prices depending on the store).

Sales figures of June, 1994 were subtracted from sales figures of
June, 1995 to obtain a pre-treatment score. Sales figures of July,
1994 were subtracted from sales figures of July, 1995 to obtain a
post-treatment score. A t-test was administered between the adjusted
June and adjusted July scores (June was compared to July to rule out
seasonal factors; 1994 was compared to 1995 to rule out maturation
and/or economic factors).

Results show that there was a significant difference between the
adjusted five-week period for June and the adjusted five-week period
for July. Average adjusted sales were 0.04 boxes (for the five-week
June, 1995 less the June, 1994 period) versus 0.68 boxes (for the
five-week July, 1995 less the July, 1994 period) (t=1.99; n=50;
p=0.050; df=97).

LIMITATIONS

First, sales were measured by 24 count boxes sold. A more precise
(and variable) measure may have been to utilize individual items sold.
Unfortunately, the distributor was unwilling to do such a count.
Second, not all stores received the treatment at the same time and for
the same period. If they had, scores may have been even more
significant. Third, the impact on other items in the product category
is unknown. It could be that while individual item sales increased,
product category sales did not.

Three months later a second study was conducted using 32 stores.
Instead of using flaming red stickers, inventory in the entire product
category was shuffled in an effort to attract consumer attention.
Sales data of September, 1994 were subtracted from sales data of
September, 1995 and sales data of October, 1994 were subtracted from
sales data of October, 1995; then the adjusted sales data of September,
1995 were subtracted from the adjusted sales data of October, 1995.
No significant differences were found.

CONCLUSION

The studies showed that there is a cost-effective way [less than
$15.00 or $0.30 per store; actually, a store could purchase a roll of
stickers for $2.50 and expect to increase sales of the item by $16.00
(16 = 0.64 x 24 count box) and profits by about $4.00 (16 x profit
margin of 0.40 less cost of stickers) in one month's time] to increase
the ability of consumers to perceive an impulse convenience item.
However, merely shuffling product in the category is not enough to
attract attention. Obviously, more research in the area of cost-
effective retailing strategies needs to be done. For instance, what
is the impact on category sales when one item in a impulse convenience
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category is specially marked? Or, is it better to specially mark 10%
of the items in a category or 50%? And, what is the influence of
items or displays surrounding the category in the store? However, one
thing may be certain: it may be more profitable to "tag" the product
in the category with the highest profit margin.

REFERENCES

Bucklin, Louis P. (1963), "Retail Strategy and the Classification of
Consumer Goods," Journal of Marketing (January): 51-56.

Cook, Thomas D. and Donald T. Campbell (1979), Quasi-Experimentation:
Design and Analysis Issues for Field Settings, Boston: Houghton
Mifflin.

Cox, Anthony and Dena Cox (1990), "Competing on Price: The Role of
Retail Price Advertisements in Shaping Store-Price Image," Journal of
Retailing 66:4 (Winter): 428-445.

Dickson, Peter R. and Alan G. Sawyer (1990), "The Price Knowledge and
Search of Supermarket Shoppers," Journal of Marketing 54 (July):
42-53.

Donovan, Robert J. and John R. Rossiter (1982), "Store Atmosphere:
An Environmental Psychology Approach," Journal of Retailing 58
(Spring): 34-57.

Donovan, Robert J., John R. Rossiter, Gilian Marcoolyn, and Andrew
Nesdale (1994), "Store Atmosphere and Purchasing Behavior," Journal of
Retailing 70:3: 283-294.

Dreze, Xavier, Stephen J. Hoch, and Mary E. Purk (1995), "Shelf
Management and Space Elasticity," Journal of Retailing 70:4, pp.
301-326.

Gaskill, LuAnn R., Jennifer L. Wickett, and Hye-Shin Kim (1994),
"Assessing the Needs of Small Business Retailers," in John R. Kerr and
Ronald S. Rubin (eds.) SBIDA Proceedings, 18th National Business
Consulting Conference, San Antonio: pp. 49-54.

Gruben, Kathleen H. and Alicia B. Gresham (1994), "The Competitive
Edge for Small Retailers: Is There Missing Information?" in John R.
Kerr and Ronald S. Rubin (eds.) SBIDA Proceedings, 18th National
Business Consulting Conference, San Antonio: pp. 55-59.

Hoyer, W.D. (1984), "An Examination of Consumer Decision Making for a
Common Repeat Purchase Product," Journal of Consumer Research 11:
pp. 822-831.

Hunt, Shelby D. (1991), Modern Marketing Theory: Critical Issues in
the Philosophy of Marketing, Science, Cincinnati: South-Western.

Petty, Richard E., John T. Cacioppo, and David Schumann (1983),
"Central and Peripheral Routes to Advertising Effectiveness: The
Moderating Role of Involvement," Journal of Consumer Research 10,
pp. 135-145.

Smith, Robert E. and William R. Swinyard (1982), "Information Response
Models: An Integrated Approach," Journal of Marketing 46 (Summer):
81-93.
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Stern, H. (1962), "The Significance of Impulse Buying Today," Journal
of Marketing 26 (April): 59-62.

Vaughn, Richard (1986), "How Advertising Works: A Planning Model
Revisited," Journal of Advertising Research: 57-66.

Wakefield, Kirk L. and J. Jeffrey Inman (1993), "Who are the Price
Vigilantes? An Investigation of Differentiating Characteristics
Influencing Price Information Processing," Journal of Retailing 69:2
(Summer): 216-233.

Weinrauch, J. Donald, 0. Karl Mann, Patricia A. Robinson, and Julia
Pharr (1991), "Dealing with Limited Financial Resources: A Marketing
Challenge for Small Business," Journal of Small Business Management
(October): 44-54.

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