Price Promotions and Brand Loyalty: Empirical Evidence for the German Breakfast Cereals Market
AbstractPrice promotions are important marketing activities for (food) retailers; brand loyalty is a major requisite to foster brands' assets. Several theoretical papers have analyzed the relationship between price promotions and brand loyalty resulting in mixed or perhaps contradictory outcomes; only a few empirical studies for (European) grocery markets are available to test which model(s) might be most relevant to reflect pricing strategies in food retailing. In this analysis, two detailed data sets for the German ready-to-eat breakfast cereals market are merged to investigate the relationship between price promotions and brand loyalty. We find significant empirical evidence that stronger brands tend to be promoted less frequently at lower discounts compared to weaker brands. The reason might be that price reductions are more costly for brands having loyal customers who are willing to accept higher mark-ups. Therefore stronger brands might need to come up with alternative measures to recruit new customers instead of offering attractive promotional sales.
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Bibliographic InfoPaper provided by European Association of Agricultural Economists in its series 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland with number 114341.
Date of creation: 2011
Date of revision:
Price Promotion; Brand Loyalty; Food Retailing; Ready-to-Eat Cereals; Germany; Instruments; Tobit; Demand and Price Analysis; Food Consumption/Nutrition/Food Safety;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-15 (All new papers)
- NEP-COM-2011-10-15 (Industrial Competition)
- NEP-MKT-2011-10-15 (Marketing)
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