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Full Project – THE IMPACT OF PROMOTIONAL ACTIVITIES ON CUSTOMER PURCHASING BEHAVIOUR

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ABSTRACT

The purpose of this research study is to determine the impact of promotional activities on the purchasing behavior of consumers at Tesco Lotus. The research will be limited to Rama II Branch.

After initial exploratory research at Tesco Lotus to ascertain current promotional activities employed, a survey questionnaire was created to determine consumer demographic data, consumption behavior, attitudes towards promotions, and the effects of promotional activities on consumer purchasing behavior. The first version of the questionnaire was given to ten people randomly at Tesco Lotus Rama II on a Thursday while counting customers to determine the customer population size. After the population size was determined, the sample size was calculated and the questionnaire was updated per respondent suggestions and to decrease the likelihood of errors. Sample data was then collected from consumers at Tesco Lotus Rama II on a Thursday and the data was coded and analyzed using SPSS. The results of SPSS were then reviewed to determine the attitudes of consumers towards promotions employed, the effectiveness of promotions, relationships between attitude and behavior of consumers, and correlations between demographic characteristics and the effectiveness of promotional activities in influencing consumer purchasing behavior.

The findings of this research study show that the promotions which Tesco Lotus currently employs are free samples, brochures, buy-one-get-one free, discount coupon, price-off, at the counter display, membership program, demonstration, cash-back, and bundled free trial promotions. Buy-one-get-one-free promotions are among the most liked and most successful of the promotion methods employed and sweepstakes and at the counter display promotions are among the least liked and least successful of promotions employed, indicating that promotions which are most likely to influence consumer purchasing behavior are promotions which consumers like. The findings also indicate that there are links between demographic characteristics and consumer purchasing behavior.

INTRODUCTION

This chapter describes the proposal of the study. In this introduction, the background, statement of problem, intention and reason for study, research objective, major research questions and sub-questions, assumptions, scope, and benefits of the research study will be discussed. The limitations of this research study will also be included at the end of this chapter.

1.1 Background

Promotion is defined by Merriam Webster as “the furtherance of the acceptance and sale of merchandise through advertising, publicity, or discounting” (Merriam-Webster OnLine, internet, 2010). Today, promotion has evolved to encompass the “coordination of all promotional activities (media advertising, direct mail, personal selling, sales promotion, public relations, packaging, store displays, website design, personnel) to produce a unified, customer-focused message” (Ferrell & Hartline, 2008, p. 282). Because promotions are one of the most noticed of marketing activities, promotions can greatly impact any company’s market share and sustainability. It is therefore imperative to understand which promotions consumers prefer and the effect of promotions on customers and customer behavior.

As stated by “[t]he European Vice-President of a major toiletries group, … [i]t’s no longer enough to have an excellent product at an excellent price; I need a tie-breaker” (Cummins, 1998). This holds true today for not only toiletries groups but products in general and the idea extends itself to supermarkets as well. Therefore, to keep and increase revenues, supermarket chains must find some way of differentiating themselves from each other and “[s]ales promotion[s] offer a tie-breaker in markets in which most products are excellent” (Cummins, 1998, p. 5).

According to the British Chamber of Commerce of Thailand, “Tesco Lotus has grown to [become] the No. 1 modern retailer in Thailand through a multi format platform, which includes Hypermarkets, Compact Hypermarkets for upcountry communities, Express stores for convenience ‘top up’ shopping and Talad Lotus community stores” (British Chamber of Commerce Thailand,

internet, 2010) and is currently present in more than 60 Thai provinces. “Tesco Lotus stores carry over 60,000 products items and service over 1 million customers per day” (British Chamber of Commerce Thailand, internet, 2010).

This research will study the various forms of promotions used by Tesco Lotus. How consumers rank the promotions relative to each other and how those promotions affect consumer purchasing behavior at Tesco Lotus will be the main focus of this study.

1.2 Statement of Problem

Many methods of marketing can and are employed by businesses to gain a stronger hold of their respective markets. Within the supermarket business, with many of the major competitors offering the same or similar products at the same or similar prices, it is necessary for businesses to stand out from each other so that they can maximize profits. Various means of marketing are employed to attract customers and as promotion is both one of the major forms of marketing and in some regards, one of the forms of promotion with the quickest results, it is in the best interest of supermarket stores (as well as business owners in general) to understand effective means of promotion and how promotion affects consumers and consumer behavior.

With the recent and ongoing economic downturn, it is even more imperative that supermarkets entice consumers into supermarkets and get them to make purchases. Therefore, it is more important now that supermarkets are able to deduce what affect promotional activities have on consumer purchasing behavior and how consumers rank promotions relative to each other. Knowledge of how customers rank promotions relative to each other and how those promotions affect consumers can be useful in deciding which promotions made need to be altered and which promotions should be used more frequently.

This research study will analyze various forms of promotion and how those promotion methods affect consumers and their behavior. Tesco Lotus and how Tesco Lotus has used promotions will be the principal focus of this research study. Membership rewards, mailings, pricing, and other methods of promotion at Tesco Lotus will be analyzed so that the effects of those promotions on consumers and on consumer purchasing behavior can be better understood.

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