The Temporal and Spatial Dimensions of Price Search: Insights from Matching Household Survey and Purchase Data

Abstract

Price promotions are pervasive in grocery markets. A household can respond to price promotions by effectively cherry-picking through (1) spatial price search across stores and (2) temporal price search across time. However, extant research has analyzed these two dimensions of price search only separately and therefore underestimates both the consumer response to price promotions and the impact of promotions on retail profit. In this article, the authors introduce an integrated analysis of spatial and temporal price search. They seek answers to three questions: First, what are the predictors of household decisions to perform either spatial or temporal price search? Second, how effective are the temporal, spatial, and spatiotemporal price search strategies in obtaining lower prices? and Third, what is the impact of alternative price search strategies on retailer profit? The authors use a unique data collection approach that combines household surveys with observed purchase data to address these questions. Their key results are as follows: Geography (the spatial configuration of store and household locations) and opportunity costs are useful predictors of a household's price search pattern. Households that claim to search spatiotemporally avail approximately three-quarters of the available savings on average. Households that search only temporally save about the same as those that search only spatially. The negative effect of cherry-picking on retailer profits is not as high as is typically believed.