The role of promotions and other factors affecting overall store price image in Latin America

Abstract

PurposeTo understand the role of promotions among other key drivers at determining consumer's overall store price image (OSPI) of grocery stores in Latin America, identifying its relative importance.Design/methodology/approachThe study was conducted in five major cities: Bogotá Buenos Aires, Mexico City, Santiago in Chile, and Sao Paulo. Over 3,000 consumers were interviewed away from their shopping places, and 3,000 SKU's covering 30 categories were monitored using AC Nielsen data over a 32 week period of time. Eleven elements widely considered to build price perception were classified in five main heterogeneous levers and tested.FindingsOnly two out of the five levers – prices and assortment – are consistently and broadly relevant accounting for nearly 75 percent of the price perception. Consumers' diversity was apparent and so their attitudes towards promotions. We identified five major segments with different price attitudes and reactions to promotions, that were present in all the five cities covered, though their proportion varied. Consumers considered a limited set of SKU's to form this price perception, and promotions had a minor role, except for those segments more interested in them. Promotions may cloud price perception accuracy among consumers, and drive the existence of bigger “bargain hunting” segments.Originality/valueHow OSPI is built is a relevant issue for retailers. Promotions are frequently used to build traffic, but its role in the OSPI is not so clear. They may strengthen the bonds with customers, but may also have a negative impact. Retailers may benefit from these insights when defining their promotional strategies, especially when considering EDLP strategies. As the study is based on five capital cities in Latin America, its results may also be of interest to retailers working in other emerging regions.