Academic journal article Academy of Marketing Studies Journal

An Exploratory Investigation of Deal Proneness at the Bottom of the Pyramid

Academic journal article Academy of Marketing Studies Journal

An Exploratory Investigation of Deal Proneness at the Bottom of the Pyramid

Article excerpt

INTRODUCTION

Research in the area of sales promotion has shown that a combination of tactics are effective in driving consumer action such as purchase, new product trial and brand switching among others. Odd as it may sound, the bulk of research in deal proneness has been conducted within the context of the developed, western societies. Despite this lack of information, consumer marketers in low income markets continue to spend increasing amounts of funds in promotional offers in the fast moving consumer good (FMCG) category. A growing stream of research under the labels of bottom of pyramid (BoP) and subsistence consumers has increasingly pointed out the market attractiveness of this low income population to multinational companies especially in the FMCG sector. These poor consumers are individuals who earn approximately $2 per day. In this paper, we identify the level of deal proneness amongst the BoP consumer, promotional offers that are successful in the BoP segment and the reasons "why" the poor don't respond favorably towards promotional offers. The findings point to significant insights for marketing managers that propose that deal proneness might not transfer universally across all cultural and/or socioeconomic groups. The data for this paper comes from a qualitative study conducted with 58 urban poor consumers in India. Findings show two dominant patterns in deal proneness amongst the BoP consumer: First, a low level of deal proneness and second, a presence of deal specificity, when deal prone. Four reasons are offered each to explain why BoP consumers are deal insensitive at a generalized level and why two promotional offers - price and volume discount along with a product premium offer are well received and signal the presence of deal specificity amongst the consumers. Finally, implications of the above findings for marketers and public policy makers are offered to address the needs of the subsistence marketplace.

CONCEPTUAL BACKGROUND

Meaning and Profile of a Deal prone consumer

Research in the area of deal proneness falls has followed two streams. The first stream is interested in identifying the deal prone consumer. Research in this area describes the deal prone consumer by drawing correlation with demographic and psychographic traits. The second stream of research investigates the value component that customers derive from a deal.

Researchers have defined deal-proneness as "a function of both the consumer's buying behavior and the frequency with which a given brand is sold on a deal basis", p. 186 (Webster, 1965); as "the propensity of some consumers to purchase products when they are offered on a 'deal' basis", p. 333 (Hackleman & Duker, 1980); and as "a general proneness to respond to promotions because they are in deal form" p. 55, (Lichtenstein, Netemeyer, & Burton, 1990). Important in all of the above definitions is that deal proneness signals the psychological propensity to buy and doesn't stress on the actual purchase of goods on promotion. In addition, a deal-prone consumer responds to monetary benefits because it is in the form of a deal rather than a lower price. Thus, deal-prone consumers place value on the transaction utility rather than, or in addition to, the acquisition utility associated with buying on deal (i.e., buying on deal has psychological benefits irrespective of the financial consequences) (Lichtenstein, et al., 1990; Ramaswamy & Srinivasan, 1998).

Deal Proneness maybe subdivided into three categories (Lichtenstein, G., & Burton, 1995): First, is the generalized level, which is the broadest and encompasses a variety of promotional deals. The second level is deal-specific, where deal-proneness is specific to a domain (i.e. coupon, rebate, or a price discount). Last is the intermediate level which assumes that deal-proneness is specific to monetary and nonmonetary deals with an active and passive orientation. In a separate study, (Burton, Lichtenstein, & Netemeyer, 1997), extend the above findings of deal-proneness at differing levels to argue that deal-proneness may be used as a segmentation base by marketers. …

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