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Price Promotions and Brand Loyalty: Empirical Evidence for the German Breakfast Cereals Market

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  • Empen, Janine
  • Loy, Jens-Peter
  • Weiss, Christoph R.
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    Abstract

    Price 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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    File URL: http://purl.umn.edu/114341
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    Bibliographic Info

    Paper provided by European Association of Agricultural Economists in its series 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland with number 114341.

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    Date of creation: 2011
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    Handle: RePEc:ags:eaae11:114341

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    Keywords: Price Promotion; Brand Loyalty; Food Retailing; Ready-to-Eat Cereals; Germany; Instruments; Tobit; Demand and Price Analysis; Food Consumption/Nutrition/Food Safety;

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    1. Berck, Peter & Brown, Jennifer & Perloff, Jeffrey M & Villas-Boas, Sofia B., 2007. "Sales: Tests of Theories on Causality and Timing," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt2g56n1jk, Department of Agricultural & Resource Economics, UC Berkeley.
    2. Talip Kilic & Calogero Carletto & Juna Miluka & Sara Savastano, 2009. "Rural nonfarm income and its impact on agriculture: evidence from Albania," Agricultural Economics, International Association of Agricultural Economists, vol. 40(2), pages 139-160, 03.
    3. Huang, Rui & Perloff, Jeffrey M & Villas-Boas, Sofia B, 2006. "Effect of Sales on Brand Loyalty," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt2qc1p7g9, Department of Agricultural & Resource Economics, UC Berkeley.
    4. Wettstein, Nadine & Brosig, Stephan & Glauben, Thomas & Hanf, Jon Henrich & Loy, Jens-Peter, 2009. "Do Private Labels Generate Loyalty? Empirical Evidence for German Frozen Pizza," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 12(4).
    5. Liran Einav & Ephraim Leibtag & Aviv Nevo, 2010. "Recording discrepancies in Nielsen Homescan data: Are they present and do they matter?," Quantitative Marketing and Economics, Springer, vol. 8(2), pages 207-239, June.
    6. Allender, William J. & Richards, Timothy J., 2009. "Measures of Brand Loyalty," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49536, Agricultural and Applied Economics Association.
    7. repec:cdl:agrebk:135635 is not listed on IDEAS
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    Cited by:
    1. Ebbing, Alexandra, 2012. "Verkaufsförderung Im Lebensmitteleinzelhandel: Empirische Analyse Im Raum Giessen," 52nd Annual Conference, Stuttgart, Germany, September 26-28, 2012 137145, German Association of Agricultural Economists (GEWISOLA).

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