MBA Dissertation

Research Topic: Relationship between Store Patronage and Price sensitivity

Submitted by:

London School Of Commerce

Acknowledgment

I would like to thank my Dissertation Supervisor without whose able guidance and continuous support this research work would not have been possible. I would also like to thank my Course Leader ..and my other Professors who have helped me in completion of my course work. In the end I would also like to thank my family and friends for there continuous help and support during this demanding time.

Table of Contents S No. Topic Page No.

1 2. 3 4 5 6 7 8 9 10 11. 12 13 14 15 16 17 18

Abstract Chapter 1 Introduction Customer Value and satisfaction Aims and Objectives Chapter 2 Literature Review Retail Industry Customer Buying Behaviour Price Sensitivity Price Promotion Techniques Store Patronage & loyalty Theories of Retail Change Chapter 3 Research Methodology Qualitative Research Quantitative Research Questionnaire Chapter 4 Research & Findings Chapter 5 - Conclusion References

4 5 6 14 18 18 19 26 30 34 41 45 46 46 47 56 64 67

Appendix I

Questionnaire

Abstract

To investigate the relationship between Price and Store patronage. The objective is to find that how changing price affects store patronage. The nature of the relationship will help answer the question: How important is price for a customer when he is loyal to a particular store. The idea is to find out the relationship between price and store patronage? Our results show that price is not the most important factor which can lead to a customer change its loyalty. It basically depends on for what reason has the consumer selected the store which he patronises. Key Words: store brands; store patronage; store loyalty; retail competition;

Chapter 1

Introduction

Where are you going mate? I, am going Tesco for shopping, you wanna come? Why do you always go to Tesco? Why not anywhere else?..... Introduction This chapter is the introduction to the dissertation where the reader gets to understand the topic of dissertation, the reason why the particular topic was chosen. This chapter also describes what areas have been covered in this dissertation along with the way in which this dissertation has progressed. It also gives the reader an insight of the overall dissertation by providing a brief overview on each chapter in the dissertation.

Since marketing is more focused on affecting the ultimate consumers, the dissertation chosen is focused on the retail and consumer market. One of the most important factors that drives the retail industry today is the price. So the aim was to study the pricing strategies of these companies and finding out rationale behind them. Since price factor is an integral part in success or failure of any company in todays dynamic business environment, there is both qualitative and quantitative data available on the issue to be researched as a lot of researchers have been attracted by this area of research. Marketing is so basic that it cannot be considered a separate function. It is the whole business seen from the point of view of its final result i.e., from the customer point of view. Business Success is not determined by the producer but by the customer. This 5

is as defined by Peter F. Drucker. There are other scholars who define marketing as the criteria & delivery of a standard of living. Therefore Marketing is a social & managerial process by which individuals & groups obtain what they need & want through creating, offering & exchanging products of value cost & satisfaction exchange, transaction & relationships, markets & marketing & marketers. A human need is a state felt deprivation of some basic satisfaction. Needs are not created by their society or by marketers, they exist in the very texture of human biology & the human condition. Wants & desire for specific satisfiers of these deeper needs. Human needs are continually shaped by social forces, peoples needs are few their wants are many. There are different needs and wants of people at different stages of their life. This has been discussed in details in further literature review.

The concept of value, cost & satisfaction are crucial in the final product choice, the several alternatives of the customer constitute his product choice set, the additional needs associated with the product is called the need set. Customer rank the products from need satisfying to the last need satisfying value is the consumers estimate of the products overall capacity to satisfy his or her needs. The value of each actual product would depend on how close it comes to the ideal product. It is through these concepts that an organisation tries to gain customer loyalty. Defining Customer Value & Satisfaction

Peter Drucker insightfully observed that a companys first task is to create customers. But todays customers face a vast array of product and brand choices, prices and supplies. This is the question how the customers make their choices.

It is believed that customers estimate which offer will deliver the most value customers are value maxi misers within the bounds of search costs and limited knowledge, mobility and income. They form an expectation and this affects their satisfaction and their repurchase probability.

Customer Value Gardial and Woodruff (1996) define customer value as customers perception of what they want to happen in a specific use situation, with help of a product and service offering, in order to accomplish a desired purpose or goal. Customer delivered value can be explained in terms of an example. The buyer for a large construction company wants to buy a tractor. He will buy it from either Caterpillar or Komatsu. The competing salespeople carefully describe their respective offers to the buyer. The Customer-Value Perspective on Business Success CVIs services help clients develop strategies for enhancing the value of their products to their customers. Customers look for value, a combination of quality, features, service, and price that makes products from some vendors more attractive than others. Powerful techniques are available that help companies deliver high value. These include techniques for:

measuring customers needs and wants, understanding how customers perceive the products of various competitors targeting high-profit customers formulating strategies that enable the company to deliver high value to targeted customers.

identifying who has to do what in order to implement a value-improvement strategy

Collectively, these techniques fall under the heading Customer Value Management. Most managers support customer value as a goal. Those who have actually made a commitment to value are the ones who have realized superior growth and profitability. CVIs goal is to move customer value from a slogan to a science.

Customer Satisfaction Customer satisfaction is a customers positive or negative feeling about the value that was received as a result of using a particular organisations offering in specific use situations. This feeling can be a reaction to an immediate use situation or an overall reaction to a series of use situation experiences. (Gardial and Woodruff, 1996) Satisfaction is the level of a persons felt state resulting from comparing a products perceived performance in relation to a persons expectations. The satisfaction level is a function of the difference between perceived performance and expectations. A customer could experience one of three broad levels of satisfaction. If the performance falls short of expectations, the customer is dissatisfied. If the performance matches the expectations, the customer is satisfied. If the performance exceeds expectations, the customer is highly satisfied pleased of delighted.

The companies that lead customer where they want to go (but don't know it yet) create the future and do more than satisfy customers; they constantly amaze them. Meeting customers' needs start with a customer satisfaction survey, and Tool Base sources can

get you started. Because if you can satisfy your customer then only he will think of becoming loyal to the brand or store. In order to do that more and more customer value needs to be created. The organisation or the product has to live upto customers expectation or more than that.

Customer Expectations Expectations are formed on the basis of the buyers past buying experience, statements made by friends and associates and marketers and competitor information and promises. If marketers raise expectations too high, the buyer is likely to be disappointed. For example, Holiday Inn, ran a campaign a few years ago called No Surprises. But hotel guests still encountered a host of problems and Holiday Inn had to withdraw this campaign. On the other hand if the company sets expectations too low, it wont attract enough buyers although it will satisfy those who buy. Some of todays most successful companies are raising expectations and delivering performances to match. These companies are aiming for TCS Total Customer Satisfaction. One of the long-standing cornerstones of marketing philosophy has been the principle of identifying and satisfying customer needs and wants. While this sounds simple, the reality is that organizations have found it to be increasingly difficult. The challenge lies in trying to match, and in ideal circumstances, surpass customer expectations. Why is this so important? Because expectations directly relate to the consumer's perception of value. Meet expectations and the customer will most likely deem the transaction as satisfactory and worthwhile. In today's hyper-competitive marketplace, the endeavour should focus not just on meeting expectations but surpassing them. The marketer must exceed expectations. In doing so, the marketer can expect the return to come in the form of customer delight,

and perhaps even a WOW, which will likely extend into customer loyalty and over time strengthen the most desirable point on the continuum: the marketer/customer relationship. The market reality is that few organizations understand this phenomenon. Customers now face baffling timesall the choices, the deals, the promises and claims. On the surface, companies seem keener than ever to promise almost anything in order to sell their products. So why do you so rarely feel like you're getting a special deal? The answer lies in the mismatch between what is promised and what is delivered. While lofty claims raise customer expectations and enhance the probability of purchase in the early stages of the consumer decision cycle, this short-sighted approach leads customers to quickly discover that the product does not live up to its billing. On the other hand, being overly conservative in an initial claim may make a marketer non-competitive from the start. The successful marketer realizes that the smart strategy is to accurately portray the product and service attributes with the expectation that, at minimum, the product will satisfy, and with a little effort, even delight, thus moving the customer further into the relationship. This strategy of under promising and over delivering is being adopted by some organizations that have come to recognize the value of taking a long-term perspective in the sustained effort of keeping the customer satisfied. An article in Fortune magazine (March 22, 2004) credits WIU alumni Mr. Robert Nardelli, the current head at Home Depot, of adopting such a strategy. Mr. Nardelli is credited with being conservative in projecting earnings for Wall Street analysts and then over delivering earnings by a large margin. This has been met with the WOW that marketers strive for. Overall, the securities market reaction has been overwhelmingly positive. Business owners and company executives are often myopic in their belief that they

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define customer expectations. The reality is that customer expectations are regularly defined by their interactions with the direct competition, the indirect competition, and often by organizations in non-affiliated industries. Further, these expectations are dynamic and constantly evolving. In the end, sustained customer relationships are a result of superior value, prompt service, relentless attention to detail and an organizational culture that has been able to imbibe into its employees the importance of sending its customers away smiling. This represents a difficult challenge. No wonder firms with such a value system are amazingly successful. It's also no surprise that they're amazingly rare.

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Price.

Channels Product Target Market of Distribution .

Communic ation.

Source: Gilbert A. Churchill, Jr. and J. Paul Peter, Marketing: Creating value for consumers (Burr Ridge, III.: Austen Press, 1995), p-17.

Marketing research is a much broader activity than most people realise. There is much more to it than simply asking ultimate customers what they think or feel about some product or ad. To be sure, consumer survey and focus groups are very important marketing research tools. However in an effort to learn about the consumer and complete effectively in the market place, an organization may need to employ other methods.

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The scope of marketing research activities goes beyond simply asking individual consumers for their likes and dislikes. Observation, either personal observation or mechanical observation, is also a legitimate marketing research activity. At the same time, some very productive research involves no more than the study of readily available data; some involves the systematic testing of an ad, a new package, or a product. The fundamental point is that marketing research is a pervasive activity that can take many forms, because its basic purpose is to help marketing managers make better decisions in any of their areas of responsibility.

For every marketing research it is very important to keep these factors into consideration. Marketing research is the function which links the consumer and the customer to the organization through information information used to identify and define marketing problems; generate, refine and evaluate marketing action; monitor marketing performance; and improve our understanding of marketing as a process. (Gilbert A. Churchill, Jr, (1995). Marketing research is divided into some basic stages. The specific stages are: 1) Formulate Problem. 2) Determine research design. 3) Determine data collection method. 4) Design data collection forms. 5) Design sample and collect data. 6) Analyse and interpret the data. 7) Prepare the research report.

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The sustained financial growth of UK has raised the standard of living of the masses. Consequently, Individuals are willing to shell out extra money for the oomph factor. Thus it's expected that the operation of the retail sector is greatly impacted by the consumer tastes and purchasing trends. UK retail market has developed at the rate of 4% annually over the past 5 years. This type of growing market presents a huge dare for its participants, particularly the numerous large supermarket chains that function on slender profits. It is obvious from the situation in UK retail market that significant participants like TESCO have been capable of yielding a satisfactory operation in the past years. Tesco is a frontrunner in the UK food retailing market with above 30% contribution to the market in 2005. Armed with income of more than 2 billion and an output of 34billion in 2005, it amassed a market share twice that of its closest competitor and double the number of retail stores compared to its closest rival. RNCOS' market research report named, "UK Food Retailing Market Forecast (20052010)" observes that the UK food retailing market touched 120.3 billion GBP in the year 2005. Convenience Stores comprised about 21% of market segment or 24.5 billion GBP. Expert also concluded that the gross retail sales of grocery, food and beverage represented 67% and the percentage stake of non-food grocery extended to 15% of the gross retail sales in 2005.

Aims and Objectives/ Hypothesis: Stores these days are cutting down the prices to attract more and more number of customers towards themselves. Analysis is done to know whether this strategy works in changing the customer preferences or not.

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The aim of this dissertation is to find out: Whether a change in price can make a consumer change or shift his/her brand or store loyalty? The objectives, which will help in attaining the aim of the dissertation, are formulated as follows: To study the retail industry and understanding its emphasis on lowering the prices of products. Knowing how important is price for todays consumer? To understand the concept of store patronage. To know how customer relationship management helps in attaining consumer loyalty. Does a consumer actually become loyal to a brand or a store, even after the high level of competition these days?

Chapter two is the literature review. There is a lot of literature that has been written on retail industry. To achieve the aim to this research work the literature has been studied in a particular manner. It starts with study of the retail industry to understand what exactly does retail means, along with the latest developments and scope in future in the industry. Then the focus shifts to consumer buying behaviour. To understand the concept of brand or store patronage it is very important to study what factors influence the buying decision of a consumer. Understanding the need of a consumer is an integral part marketing activity of retail organizations. Especially FMCG companies and firms who sell consumer goods have to focus on customer needs keeping in mind the changing fashions. Customer Relationship Management or

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CRM is a field which has been in limelight in the past few years. This stream of business focuses on maintaining good business relations with existing customers. CRM helps a company in achieving customer loyalty along with word of mouth publicity. Price sensitivity influences a consumers shopping preferences and ultimately his final buying decision to a great extent. That the reason that price is one of the most important factors that guides a companies marketing strategy these days. Customers belonging to different income groups react differently to change in prices. Some customers look for a cheap product, some want value for money and a few consumers choose the product for its snob value or status value. The study also focuses on different pricing techniques that stores and companies use these days to attract consumers. Focus is also on understanding different reactions from consumers to these pricing strategies, basically knowing how these strategies affect consumers psyche. The literature review then talks about store patronage and loyalty. How is loyalty created, increased and the benefits that both consumers and organisations get out of creating and increasing store/brand loyalty. The concept of loyalty cards and discount coupons are also studied and discussed. Another area on which literature has been studied in this research work is the concept of retail change. Retail change talks about different stages in retail life cycle, changes that are caused due to changes in fashion and consumer preferences. Chapter three is about the research methodology used. It talks about different approaches that can be used to conduct the research. Both quantitative and qualitative research is discussed in brief, and the reason why quantitative research was selected as the main mode of research. Selection of primary and secondary data, source and

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methods of collection are also discussed. Other details related to research methodology are discussed in details in the chapter. Chapter four is research and findings where all the information collected through means of questionnaire is processed and final results are studied. The software used to process the data is SPSS, which is widely used for marketing researches worldwide and is believed to be reliable. Graphical and tabulated data has been presented in this chapter. Cross tabulation charts, frequency table etc. have been used to analyse the data. Its in this chapter that the research question is answered. Chapter five is conclusion of the dissertation. This chapter talks about how the objectives and aims of the dissertation were achieved. The limitations and problems that were faced while doing this research work. The results and findings are also mentioned in the conclusion along with the recommendations made.

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Chapter 2

Literature Review
Retail Industry According to the Oxford English Dictionary, retail is "the sale of goods to the public for use or consumption rather than for resale." For example, when www.upi.com, in an article published, speaks of sharply falling crude oil prices dramatically cutting the retail price of gasoline, the beneficiaries are the end consumers in the US. It would be impractical to expect such fall in retail price of petrol or diesel in other countries or other economies especially developing economies. Merriam-Webster Online Dictionary says that retail is "to sell in small quantities directly to the ultimate consumer. Since small quantities can add up to big numbers, businesses try out "special promotions, new year discounts, and other fantastic offers," and so on. Retail is `not wholesale,' says Encarta. "Retailing consists of the sale of goods/merchandise for personal or household consumption either from a fixed location such as a department store or kiosk, or away from a fixed location and related subordinated services," states Wikipedia. An obsolete meaning is "to sell at second hand". Retail at/for is used when talking about what is sold at a particular price, as in the example, "This model of computer is retailing at 650," that Cambridge Advanced Learner's Dictionary gives.

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Over the past decade, retail markets in the U.S. and Europe have experienced significant growth of store brands (also commonly referred to as private label brands), which are owned and marketed by retailers themselves. Due to growing demand and the increasing per capita income has also helped the boom in retail industry. The trends in US and UK retail markets are quite similar to each other. The consumers preferences and buying behaviour is very similar in these two markets. Between 1996 and 2000, the dollar sales of store brands in the U.S. market grew at twice the rate of national brands to reach a 15% dollar sales share by the end of 2000 (Sethuraman, 2003). The current unit volume share of store brands in the U.S. is about 20% and it is even higher in several European countries including the United Kingdom (Private Label Manufacturers Associations website: www.plma.org). Reports and surveys show that store brands are consistently a top priority for grocery retailers (Alaimo 2003; Wellman 1997).

Factors affecting customers buying decisions: Model of Consumer Buyer Behaviour Philip Kotler (2003) gives a model of consumer buyer behaviour. It is known that consumer is someone who consumes the finished product produced or sold by an organization or a company. It is also known that there are a lot of organizations and companies in the market today who offer a particular product to these consumers. The study of reason behind the decision of a consumer to buy a particular product or to use a particular service is known as studying Consumer Behaviour. It is a study of the processes involved when individuals or groups select, purchase, use or dispose of products, services, ideas or experiences to satisfy needs and desires.(Michael R. Solomon, 2004). The field of consumer behaviour covers a lot of ground. It is the

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study of the processes involved when individuals or groups select, purchase, use, or dispose of products, services, ideas, or experiences to satisfy needs and desires. Consumer plays a leading role in the market. The success of a company depends on many factors in which consumer behaviour plays a vital role. Because people act differently at different times they sometimes alter their consumption decisions depending on the particular stage they are in at the time. The criteria they use to evaluate products and services in one of their moods or stages may be quite different from those used in another mood or stage. A company cannot serve all customers in a broad market. The customers are too numerous and diverse in their buying requirements. A company needs to identify market segments it can serve effectively. It is not only price or brand loyalty (store patronage in our research) that influences an individuals or groups buying decisions. The chart below shows the buyer behaviour model, it reflects the different factors that influences buying decisions of consumers.

Buyer Behaviour Model

Marketing Stimuli Other Stimuli Buyers Characteristics Buyers Decision process Problem Recognition Information Search Evaluation of alternatives Purchase decision Post purchase behavior Buyers Decision

Product Price Place Promotion

Economic Technological Political Cultural

Product choice Brand choice Dealer choice Purchase timing Purchase amount

Cultural Social Personal Psychological

Source: Adapted from Philip Kotler, Analyzing Consumer Markets and Buyer Behaviour, Marketing Management, Pearson (11th edn.), 2003, 184 During early stages of development, the field was often referred to as buyer behaviour. This use to reflect an emphasis on the interaction between consumers and producers at the time of purchase. Marketers now recognize that it is an ongoing process. The entire consumption process is taken into consideration now which

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includes the issues that influence the consumers before, during and after purchase. (Solomon, 2004). A consumers buying behaviour is mainly influenced by cultural, social, personal and psychological factors. Cultural Factors: Culture is the fundamental determinant of an individuals wants and behaviour. The set of values, preferences, perceptions and behaviour that an individual acquires from his families and friends or basically the environment in which he has been brought up influences all his decisions to a great extent. Culture is something which an individual imbibes and inculcates in him/her from his surroundings. Each culture consists of smaller subcultures that provide more specific identification and socialization for their members. They include religions, geographic regions, racial groups and nationalities. When these sub cultures reach a substantial level to influence the buying decisions, companies often alter their marketing strategies to target these groups. When individuals of a particular culture are combined together, they go on to form social classes. These social classes reflect income, occupation, area of residence, education etc. In a nutshell it segregates different groups according to their standard and style of living. Social classes show distinct product and brand preferences in many areas. These areas include automobiles, home furnishings, clothing, food items etc.

Social Factors: Social factors which include a persons reference groups and family etc also determine consumer buying behaviour. A persons reference group consists of all the groups that have a direct or indirect influence on a persons attitude or behaviour

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(Philip Kotler, 2003). Groups which have a direct influence on a person are called Membership groups. This includes family, friends neighbours and co-workers. Membership group also includes religious, professional and trade union groups. Reference groups introduce an individual to new behaviour and lifestyle. These groups are known as secondary groups. Reference groups expose an individual to new behaviours and lifestyle. According to Kotler (2003) influence of these groups creates pressure for conformity that may affect actual product and brand choices. Other than these groups aspirational groups, group which a person wants to be a part of and dissociative groups, a group to which an individual does not want to be related, also determine the selection of a brand or store for any individual. (Rosann L. Spiro, 1983)But family is still the most important consumer-buying organization in society, and family members constitute the most influential primary reference groups. George Moschis (1985) says that the family orientation consist of parents and siblings. From parents a person acquires an orientation towards religion, politics and economics along with sense of ambition, self-worth and love. Personal Factors: Buying decisions are dependent on personal characteristics as well. They include buyers age and stage in the life cycle, occupation, economic circumstances, lifestyle and personality and self-concept. Different stages of life-cycle also influence the buying decision of a person. People eat baby food when they are infants, all kind of foods when they are growing up, while in the mature years of their life people stick to a special and healthy diet. Lifecycle groups are quite often chosen as target markets by different marketers.

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Lawrence Lepistos (1985), research has identified different psychological life stages. He is of the view that adults experience certain passages or transformations during their life span. Occupation also affects the consumption patterns. An operational or middle level executive will buy work clothes, work shoes etc, while on the other hand a top-end executive would prefer spending his money in buying an expensive suit, business class travel or having lunch at a fancy up-market restaurant. Similarly people belonging to different income groups or with a different mindset would make their retail purchases from different stores. It can be Asda, Tesco, Waitrose or a Marks & Spencer. Product gets greatly affected by economic circumstances, disposable income, savings, debts etc. these factors also lead or contribute in the decision a person takes to select his/her store to shop at. Personality of a person influences his or her buying behaviour as well. Personality means a set of psychological traits that lead to relatively consistent and enduring responses to environment stimuli. (Harold H. Kassarjian and Mary J. Sheffet, 1981) being self-confidence, dominance, autonomy, deference, sociability, defensiveness and adaptability. Marketers attempt to develop brand personalities that will attract consumers with same self-concept. These factors contribute a lot towards buying behaviour or preferences of an individual.

Psychological Factors: Philip Kotler (2003) is of the view that a persons buying choices are mainly influenced due to four major psychological factors: Motivation which means a need that is sufficiently pressing or forcing a person to drive the person to act.

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A. H. Maslow (1970), people are driven by particular needs at particular times. He is of the view that human needs can be arranged in a hierarchy, from the most pressing to the least pressing. He categorizes human needs in 5 different groups or segments. 1. Physiological Needs ( Food, water, shelter) 2. Safety Needs (Security and protection) 3. Social needs (sense of belongingness, love) 4. Esteem Needs (self-esteem, recognition, status) 5. Self-Actualization (self-development realization) This theory basically says that people have different kind of needs at different times or stages. For any individual the priority is that of satisfying basic needs in the first stage defined in the theory, the second stage says that the focus shifts from basic needs to his security and health. A person then wants clean air to breath, becomes health and hygiene conscious. The third and the fourth stage focus on how a person is perceived by others and his social status. Someone who earns more than 10000 per month would probably prefer to shop at Marks and Spencer rather than a Tesco or Asda, because Marks & Spencer has that brand image of being an up market highstreet retail outlet while on the other hand stores like Tesco and Asda promote themselves as EDLP (Everyday Low Price) stores. Frederic Herzberg (1984) also developed a two factor theory that distinguishes between satisfiers and dissatisfiers. The theory has two implications. First, sellers should do their best to avoid dissatisfiers for example, a training manual will not help the product to sell but a bad manual might reduce its sales. Second, the manufacturers should identify the major satisfiers or motivators of purchase in the market and then supply them to the customers. This brings advantage to both the customers and the organization.

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Buyer behavior may be viewed as an orderly process whereby the individual interacts with his or her environment for the purpose of making market place decisions on products and services. Every consumer goes through the same decisions process, which consists of their following stages; Problem recognition, search for information, evaluation of information, purchase decision and post purchase evaluation. The individual a specific behavior in the market places is affected by internal factors such as needs, motives, perception and attitudes, as well as by external or environmental influences such as the family, social groups, culture, economics and business influences. Stages in Buying Decision Process: Buying decision process can be broadly classified in to five sections namely: 1. Problem Definition: The buying decision process starts when the buyer recognizes a problem or need. The need can be triggered by internal or external stimuli. 2. Information Search: Based on the problem or need the consumer is inclined to search for more information and hence he may collect the information from any of the following sources namely public sources, commercial sources, personal sources and experimental sources. 3. Evaluation of Alternatives: Based on the information collected through various sources, the consumer evaluates them on conscious and rational basis. 4. Purchase Decision: After evaluating the alternatives available the customer will be able to purchase the product with less deliberation. 5. Post Purchase Behavior: After purchasing the product, Marketers must monitor post purchase satisfaction, post purchase actions and post purchase product uses.

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Buyer behaviour is what influences or makes an individual decide about his buying preferences and choices. But its very important for stores to understand the buying behaviour and pattern of customers in order to do accurate forecasting. Today price is considered as the most important factor which influences or makes a person change his mind about a particular product, brand or a store. Especially in the retail industry where there are a number to competitive products and stores which may be offering product at a cheaper price or with a few add-ons. Price sensitivity: Pricing is being used as a strategic and marketing tool to gain competitive advantage. Lowering down the prices due to competition has resulted in low-profit margins, which in turn has made the industry less attractive for new entrants. The report also states that this decrease in profit margins has made these market players realize that they will have to look for other avenues to gain competitive edge over their rivals. Supermarkets have already started focusing on Product and Process innovation. They have realized the fact that to retain its loyal customer base, they will need to give them something extra. If the products are identical and the prices the same, why would a customer patronise a particular brand or store. Of all the tools available to marketers, price is supposed to be the most influential factor or tool. Pricing of a product influences both consumers buying behaviour and consequently firms sales and profit. So it does not come as a surprise when price promotions suck up majority of the marketing budget and an almost ubiquitous aspect of consumer choice. This has influenced the customers expectation so much that they expect deals when they enter any store. According to a study conducted by (S. Han, S. Gupta and Donald R. Lehman for Journal of Retailing, results indicate that by discounting by competing brands does not have a significant effect on the threshold

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for gain, but it significantly decreases the threshold for loss. In other words, while consumers feel a significant loss or disappointment toward a target brand if competing brands offer substantial discounts, they do not perceive any gain toward a target brand if competing brands are not discounting. Price sensitivity however is not just about charging high prices to maximize revenue. It might also make sense to cut prices - sometimes dramatically - to encourage people who may otherwise not be part of the market to use the services or goods being provided. Identifying the extent to which individuals in the market are price sensitive is an important part of the marketing mix. Most of the times this price cut are based on the assumption that the number of customers would increase because of price-cuts and this increase in the overall turnover will compensate for the loss in margin. It is also assumed that existing customers would start consuming more because of the price-cuts. According to Byung-Do Kim, Robert C. Blattberg, Peter E. Rossi(1995) Marketing researchers have long recognized that differences among consumers play an important role in the development of pricing policy and the positioning of consumer products. Consumers have a pre-conceived notion about quality of different brands within a product category. Sanjay K. Dhar and Peter E. Rossi (2004) claim that retailers have relied on three types of retail promotional tools to sell their products: temporary price cuts, feature advertisements, and in-store displays. This study was conducted with all US markets and all major retailing chains taken as a sample to investigate the role of retail competition, retail strategies and demographics in determining consumer response to these three different types of promotion. The findings of the study revealed that retail strategies and consumers characteristics influence the response from customer. They

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suggested that retail competition is still important but has less impact on the way consumers respond. According to Dhar Retailers make long-term decisions when setting up their store, such as determining the size of the store, its price positioning, geographical location etc. These strategies are undertaken with the assumption that they will help the retailer sell more and differentiate themselves in the marketplace. Two major retail strategies affect consumer response: price format and store format. Retailers typically use the Everyday low Pricing (EDLP) or Hi-Lo pricing strategy. Since the EDLP stores reduce the prices regularly, they do not offer as many promotions. The discounts offered at these EDLP stores is also comparatively lesser to other stores, because their products are already heavily discounted. While Hi-Lo stores normally have high regular prices, and then reduce those processes by substantial amount, discounting mire frequently than EDLP stores. The study also indicates that EDLP customers are less sensitive to short-term price cuts than customers at Hi-Lo stores. The study says that the greater is the competition in retail market, the greater would be the price sensitivity, making the consumers more responsive to price cuts. Higher level of competition in the sector makes it easier to compare prices across national brands. Other things that affects the prices in the quality of the product and he general belief. Consumers often form assumptions about companies, products and stores. These market beliefs then become the short-cut

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Common Market Beliefs

Brand All brands are basically the same. Generic products are just name brands sold under a different label at a lower price. These brands are the ones that are purchased the most. When in doubt, a national brand is always a safe bet. Specialty stores are great places to familiarize yourself with the best brands; but once you figure out what you want, its cheaper to buy it at a discount outlet. A stores character is reflected in its window displays. Salespeople in specialty stores are more knowledgeable than other sales personnel. Larger store offers better prices than small stores. Locally owned stores give the best service. A store that offers a good value on one of its products probably offers good values on all of it items. Credit and return policies are most lenient at large department stores. Stores that have just opened usually charge attractive prices.

Store

Prices/Discounts/Sales Sales are typically run to get rid of slow-moving merchandise. Stores that are constantly having sales dont really save you money. Within a given store, higher prices generally indicate higher quality. Advertising & Sales Promotion Hard-sell advertising is associated with low-quality products. Items tied to giveaways are not a good value. Coupons represent real saving for customers because they are not offered by the store. When you buy heavily advertised products, you are paying for the label, not for higher quality. Largest-sized containers are almost always cheaper per unit than smaller sizes. New products are more expensive when theyre first introduced; prices tend to settle down as time goes by. When you are not sure what you need in a product, its a good idea to invest tin the extra features, because you will probably wish you had them later. In general, synthetic goods are lower in a quality than goods made of natural materials. Its advisable to stay away from products when they are new to the market; it usually takes the manufacturer a little time to work the bugs out.

Product/Packaging

Source: Adapted from Calvin P. Duncan, Consumer Market Beliefs: A Review of the Literature and Agenda for Future Research, Advances in Consumer Research 17, Provo, UT: Association for Consumer Research, (1990), 729-35.

Peter & Alan (1990) studied model of grocery shopper response to price and other point-of-purchase information was developed and hypotheses were tested by using interviews and observations. The results showed that shoppers wanted to spend only a short time making their selection and many did not check the price of the item they selected. More than fifty percent of these customers did not remember the price of the product they had just bought and more than half of the shoppers who purchased a product which was offered at a discounted price were unaware that the price was reduced.

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Russell S. Winer (1986) did considerable amount of research econometric and conjoint-based, focusing on how marketing mix variables affect household demand for frequently purchased products. The purpose of the research was to develop and test a simplified model of consumer behaviour emphasizing (1) the multidimensional nature of price when examining it from consumers perspective-in particular, the importance of reference pricing. The studies highlighted on the fact that retail price or promotion-adjusted price explains more change or variance in consumer demand than any other marketing-mix variable does. They found considerable evidence from both marketing and economics supporting the notion that, from the consumers prespective, price is a complex factor and has more than one dimensions and not composed of only retail prices. Apart from being complex, prices from consumers perspective are dynamic for many product categories. Observed retail prices either after or before adjusting for promotions can fluctuate to a great extent over a period of time. These changes in observed prices could influence manufacturers to change their strategies, retailers to sun short-term pricing deals etc. Knowing that pricing is one of the most important strategies that retailers focus at, there is also a need to understand different ways in which retailers implement these pricing strategies. Since the ultimate aim of these strategies is to attract more and more number of customers towards themselves.

Common Price Promotion Techniques According to an article published in the Harvard Business Review by Dickson and Sawyer (2003) there are three broad categories in which retailers attract the consumers on the basis of pricing:

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1. Sale 2. Prices that end in 9; and 3. Signpost items

Sales For most of the items they buy, consumers dont have an accurate sense of what the price should be. To a great extent they rely on the retailers to tell them if they are getting a good price. Retailers send signals to customers in different ways telling them whether a given price is relatively high or low. If used appropriately, they can be effective tools for building trust with customers and convincing them to buy your products and services. But if these tools are not used properly, the same pricing cues may breach customers trust, reduce brand equity and give rise to law-suits.

Consultant and a former Harvard Business School Professor Gwen Ortmeyer, in a review of promotional pricing policies refers to, a 1990 San Francisco Chronicle article, in which a reporter priced the same sofa at several bay area furniture stores. The sofa was on sale for $2170 at one store, the regular price was $2320 and it cost $2600 35% off the original price of $4000 at other stores. Interview with store managers and the researchers own observation of actual prices at department and specialty stores confirmed that when an item is discounted, it almost invariably has a sale sign posted nearby. The cases where sale signs are placed on non-discounted items are infrequent enough that the use of such signs is still valid. Customer learned to recognize that even stores which offer sales through out the year are actually compromising on the quality of product offered.

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There was a study conducted by Dickson and Sawyer (2003) and the analysis of sales data revealed that the more sale sign used, the less effective were those signs were at increasing demands in certain section. Specifically, putting signs on more than 30% of the items diminished the effectiveness o the pricing cue. Misuse of sale signs can also result in prosecution indeed; several department stores have been targeted by attorneys. The cases often involve jewelry department, where consumer are particularly in the dark about relative quality, but have also come to include a wide range of other retail categories, including furniture and mens and womens clothing.

Prices that End in 9 According to the same article prices that end in 9 (for example Buy two pair of XYZ for 19.99 only) are also a very common and widely used price based marketing strategy. In fact, this pricing tactic is so common; its believed that customers would ignore it. But on the contrary researchers have found out that response to this pricing technique is remarkable. Generally it is expected that demand for an item will go down as the prices would go up. The end of the price acts the same way as the sale sign does, helping customers evaluate whether they are getting a good deal. Buyers are often more sensitive to price endings than they are to actual price changes. The sale sign informs customers that the item is discounted, so little information is added by the price ending.

Signposts Items For most items, customers do not have accurate price points they can recall at a moments notice. But all the consumers are probably aware of some benchmark prices, typically on items bought frequently. Many customers, for instance, know the

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price of common products like coke or movie tickets so they can easily distinguish between expensive and inexpensive price levels for such signposts items without the help of pricing cues. Research suggests that customers use the prices of signposts items to form an overall impression of a stores prices. That impression then guides their purchase of other items for which they have less price knowledge. The signpost item strategy is intended to be used on products for which price knowledge is accurate. Selecting popular items to serve as pricing signposts increases the likelihood that consumers price knowledge will be accurate and may also allow a retailer to obtain volume discounts from suppliers and preserve some margin on sales.

Another way of using pricing techniques is pricing guarantees. It is also known as price matching. It is a widely used tactic in the retail market where store that sell, for example, electronics, hardware and groceries promise to match or beat the competitors price. An article in Harvard Business Review (September, 2003) analyses whether customers find these price-matching policies re-assuring. It sites a study conducted by University of Maryland marketing professors Sanjay Jain and Joydeep Srivastava, where customers were presented with description, customers were more confident that the store prices were lower than its competitors. Closely related to price-matching policies are the most-favoured-nation policies used in business-to-business relationships, under which suppliers promise customers that they will not sell to any other customers at a lower price. These policies are attractive to business customers as they can be rest assured as they know that they are getting the best prices. So they can focus their attention on increasing the volume of sales.

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To maximise the effectiveness of price cues, retailer should implement them systematically. Ongoing measurement should be an essential part of any retailers use of pricing cues, infact, and measurement should begin even before a pricing cue strategy is implemented to help determine which items should receive the cues and how many should be used. Store Patronage and Loyalty. Customer Relationship is very important for creating loyal customers. Customer Relationship Marketing is a practice that encompasses all marketing activities directed toward establishing, developing, and maintaining successful customer relationships. The focus of relationship marketing is on developing longterm relationships and improving corporate performance through customer loyalty and customer retention. How much should a company invest in relationship marketing, given the extra cost and effort that it involves? To answer this, there is a need to distinguish five different levels of relating to customers. Basic: The salesperson sells the product but does not contact the customer again. Reactive: The salesperson sells the product and encourages the customer to call if he or she has any questions or complaints. Accountable: The salesperson phones the customer a short time after the sale to check whether the product is meeting the customer's expectations. The salesperson also solicits from the customer any product improvement suggestions and any specific disappointments. This information helps the company continuously improve its offering.

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Proactive: The company salesperson phones the customer from time to time with suggestions about improve product use of helpful new products.

Partnership: The Company works continuously with the customer to discover ways to effect customer savings or help the customer perform better.

Importance of Quality Quality is an equally important element in order to ensure customer satisfaction. (Hassan and Kaynak, 1994) are of the view that Promotional strategies should emphasize intrinsic cues, such as quality, styling, prestige and value in consumer products. Price, an extrinsic cue, does not outweigh the importance of quality and styling in product selection. A companys marketing will not be effective if it is only entrusted to the marketing department. The greatest marketing department in the world cannot compensate for deficient products or service. Todays top executives view the task of improving product and service quality to be their top priority. Many global successes of

Japanese companies are due to their building exceptional quality into their product. Most customers will no longer accept or tolerate average quality performance.

Companies today have no choice but to adopt total quality management (TQM) if they want to stay in the race, let alone be profitable. There is an intimate connection between product and service quality, customer's satisfaction and company profitability. Higher levels of quality result in higher level of satisfaction, while at the same time supporting higher prices and often lower costs. Therefore quality

improvement programs (QIP) normally increase profitability. Customers have a set of needs, requirement and expectations. It can be said that the seller has delivered quality

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when ever the seller product & service meets or exceeds the customer's expectations. The company that manages to satisfy most of its customers needs most of the time is a quality company.

Relationship between Marketing and Trust

An article published in www.ifama.org talks about the relationship between marketing and trust. It says that researchers have emphasized on the fact that trust is fundamental in developing customer loyalty. They have always believed that winning the consumers confidence and trust is the foundation stone to gain customer loyalty. Doney and Cannon (1997) studied trust in the buyer-seller relationship. Their model of trust in the buyer-seller relationship consisted of six variables: trust in the salesperson, trust in the company, attitude toward the product, communication openness, loyalty intention, and loyalty behaviour. They defined trust as perceived credibility and goodwill. They related trust in the firm to trust in the sales personnel. Chow and Holden (1997) adopted a similar approach to studying trust in the buyerseller relationship. They defined trust as the expectancy held by an individual that the words, promises, verbal or written statements of an individual or groups can be relied upon. They concluded that trust is a significant predecessor to not only attitude toward the product, but also to buyer loyalty. Schurr and Ozanne (1985) suggested that higher trust levels eventually lead to a more favourable attitude toward loyalty. In their study, they defined trust as the belief that a persons or an organizations word or promise is reliable and that a person or organisation will fulfil his/her obligations in an exchange relationship., Schurr and Ozanne conducted an experiment to examine the interaction of trust and bargaining

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stance on cooperative behaviour in buyer-seller negotiations. They manipulated the levels of trust and bargaining stance. The results suggested that trust not only moderates buyer reactions to sellers bargaining toughness, but it also facilitates favourable attitude towards the seller. Similarly, Morgan and Hunt (1994) used commitment-trust theory to develop a model of relationship marketing that includes precursors and outcomes of relationship commitment and trust. They defined trust as existing when a party is confident of exchange partners reliability and integrity. They found that shared communication, opportunistic behaviours, and values effects trust directly. They also identified a positive relationship between trust and commitment and identified commitment and trust as key intermediaries contributing to relationship marketing success. The same article published in www.ifama.org cites that Swan, Bowers, and Richardson (1999) analysed the background and consequences of trust in a sales context. They figured out several unsolved issues in the trust literature including the relationship between trust and suspicion. Two important categories or background of trust emerged from the meta-analysis, including determinants associated with the salesperson and with the salespersons firm. They also found that trust positively effects purchase behaviours, customer satisfaction, favourable customer attitudes, and purchase intentions. It also says that Geyskens, Steenkamp, and Kumar (1998) developed a casual model of past history and consequences of trust based on a review of the concept of trust within marketing channels. They found strong support for trust as an intermediary in marketing relationships. Laurent and Uncles (1997) conceptualise loyalty as an attitudinal measure (including commitment, brand preference, intention-to-buy and liking) and a behavioural measure (including exclusive purchase and repeat purchase

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probability). Sirohi, McLaughlin, and Wittink (1998) examined store loyalty intentions for current customers of a multi-store grocery retailer. They used three measures of store loyalty intentions: 1) customers intention to continue purchasing, 2) intention to increase future purchases, and 3) intention to recommend the store to others. They found that service quality perceptions and merchandise quality perceptions are strongly related to store loyalty intentions. Researchers such as Macintosh and Lockshin (1997) emphasize the role of interpersonal relationships when examining store loyalty. They presented a model of store loyalty consisting of customer-to-salesperson and customer-to-store relationships. Conceptualising loyalty as including both positive attitudes and repeat purchase behaviour was another determinant. The findings indicated trust and commitment to salespersons have positive impacts on both attitudes toward the store and purchase intentions. Furthermore, these consumers tended to be more loyal to the store. It is generally accepted that satisfaction may be related to loyalty but is not synonymous with loyalty (Jones & Sasser, 1995) Jones and Sasser (1995) argue that the link between satisfaction and loyalty is not linear. They measured loyalty as the customers stated intent of repurchase and found that moving customers to a higher level of satisfaction helps to develop long-term loyalty. Dube & Maute (1998) conducted an experiment in which value-added strategies and value-recovery strategies were manipulated under various competitive environments to study the impact on customer satisfaction and loyalty. The researchers adopted two types of loyalty measures: situational loyalty and enduring loyalty. Their findings revealed that both types of strategies had positive impacts on customer satisfaction and loyalty with differing sensitivities to the competitive environment.

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It is also important to understand why retail stores are focusing on increasing their loyal customer base. When the previous Mintel reports were researched in 2002, there were signs that loyalty card schemes may be about to fall out of fashion. Safeway had dropped its scheme and Sainsburys decision to join a coalition scheme rather than run its own scheme implied that the days of standalone schemes may be over. According to Mintel report, (2004) two years on the three biggest schemes Tesco Clubcards, Boots Advantage Card and Nectar Card each claim over 11 million regular users. Tesco clubcard is held by 10 million households but has 13 million active collectors due to second-card holders in the same household. Both nectar and boots have 11 million active collectors. The report also says that a new generation of loyalty club schemes, not based on points, are being developed. These schemes collect personal information and spend data about regular shoppers and offer incentives, bonuses and prize draws in return. Use of database to provide additional incentives indicates that these schemes help the retailers develop Customer Relationship Management commonly know as CRM programmes and provide a stream to grow sales with known, regular shoppers. Many more store cards now offer loyalty point features than was the case in 2002. However, the underlying use of store cards by retailers and finance companies is to make money out of credit balances and, while loyalty points may make these schemes more attractive, they remain an expensive way of borrowing money. There are few reasons for supposing that retailers that have so far shunned loyalty card schemes will alter their view. Retailers that have their focus firmly set on price and value will continue to emphasise these attributes because it is what motivates their targets shoppers, mainly value conscious, less affluent consumers. The cost of operating loyalty card schemes is rising too fast for there to be much interest in spending on technological

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features of these schemes. Tesco is keeping things very simple and investing in improving its targeting through more accurate data mining. Its direct mail costs are vast and so improving accuracy of reach and refining quality of offers made to each recipient group have considerable benefit, resulting in most of its investment being out of sight of shoppers. Not surprisingly, the impressive growth and penetration of store brands in retail markets have attracted attention and discussion. The discussion at the practitioner level in the business press has predominantly focused on sales or market share (Sethuraman 2003). An online subject search reveals scores of practitioner articles, mostly discussing how well store brands are doing or what retailers can do to increase sales of their store brands (e.g., Alaimo 2003; Karolefski 2003). On the academic research front, the predominant focus of initial studies was on profiling the characteristics of store brand consumers (e.g., Dick et al. 1995). The focus of recent studies in this area consistent with that in the business press has shifted to estimating the effect of marketing actions on national brand and store brand sales or market share, and specifying optimal store brand marketing strategies for retailers (Mills 1995; Raju, Sethuraman and Dhar 1995; Sethuraman 2003). "Price wars," write Akshay R. Rao, Mark E. Bergen and Scott Davis, "are a fact of lifewhether we're talking about the fast-paced world of 'knowledge products,' the marketing of Internet appliances, or the staid, traditional business of aluminum sidings. If you're not in a battle currently, you probably will be fairly soon." It's not only necessary to understand why price wars have become a global phenomenon in the retail industry, but it's also critical to recognize where to look for resources in battle. It's important to carefully analyze your customers, company,

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competitors, and other players within and outside the industry that may have an interest in how the price war plays out. Retail industry is a highly competitive industry in United Kingdom or rather most of the developed economies around the world, where the market share has been captured by Retailing giants like Wal-Mart, Tesco etc. These retail outlets have based their marketing basically on offering lowprices. Therefore, the idea is to figure out the reason for pricing strategy being the most important strategy and to understand what can be the other factors that can affect the change of retail strategies, the reasons which can make a consumer change his/her mind or buying preferences. Theories of Retail Change Its important to understand the different Theories of retail change to understand what leads to change in customer buying behaviour. Because changing buying preferences may very well lead to discontinuation with a particular brand or store. If retailers fail to determine or forecast the change they might end up loosing store loyalty they enjoy. Johan Hagberg (2005) published on internet a research work on retail change theories. It has often been said that the only constant in retailing is change, and retail change, if never a burning issue, has been a constant feature of marketing thought (Brown, 1987, p.5)

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Brown (1987) made distinction of the theories to retail change into three broad categories: Cyclical theory Environmental theory Conflict theory

Cyclical theories: Johan Hagberg (2005) in his research work published on the internet (www.asb.dk/upload/ accessed on 27/7/2006) internet says the cyclical theories mean that change occurs in a cyclical manner, with repetition of earlier trends. The cyclical theories consist of different contributions; the wheel of retailing (McNair, 1957), the retail accordion (Hall, Knapp & Winsten, 1961; Hollander, 1966), the retail life cycle (Davidson, Bates & Bass, 1976) and the polarisation principle (Dreesman, 1968). Mc Nair (1957) the wheel of retailing theory says, retail institutions start as a low price, low cost and narrow margin actor, which afterwards deals with the changes in offering, driving up prices, expenses and overall margins eventually. The institution then moves on to become to a high cost, operator based on high quality and services rather than low prices in the long term. This change opens up for the next low cost innovator and the wheel revolves. The retail life cycle is based on the same ideas as the Product Life Cycle and maintains that just like a product retail institutions also evolve through the stages of birth, growth, maturity and decline. When a retail outlet or institution gains competitive advantages over its competitors, it enjoys rapid sales increase. The success initiates the competitors to follow, which means that this institution increase significantly in terms of sales, profitability and market share. This stage ends with

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increasing costs and the institution reaches the maturity stage, followed by the decline stage with loss of market share and reduced profitability. Environmental theories The environmental view of institutional evolution holds that changes in the environment (economic, demographic, social, cultural, legal and technological) are reflected in the structure of the retail system (Dreesman, 1968; Markin & Duncan, 1981). Institutions emerge, develop, mature and decline as an effect of environmental circumstances. The institutions have the ability to adapt to the changes in the environment are the only ones likely to survive. Conflict Theories This theory states that innovations in the retailing system force the established players to respond or adapt to the innovation. Responses could be of two major types, by copying the characteristics or by differentiating the threatened institute from the threat. According to McGoldrick (2002) these theories has attracted heavy criticism, and one of the responses to this criticism is the suggestion to focus more upon the evolution of individual retailing institutions in order to increase understanding of internal and external causes of retail change.

After studying the trends in retail industry and analysing consumers buying behaviour, price sensitivity, what is store loyalty and why do customers get loyal to a store the focus of analysis shifts to the different ways in which these pricing tactics are implemented by the stores and what are the better ways to do it. The retail change theories included the study of above literature shows that wowing a customer and

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making him loyal to a particular brand or store is a tedious task to perform. There are so many factors that contribute to a customer getting loyal to a store. The attempt is to find out that how many customers are actually loyal to a particular store and if yes are they ready to change there ready to give up there patronage if there is a change in price.

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CHAPTER 3

Research Methodology
To get the correct answer to the research question drafted after the literature review is to research on it scientifically. Research has become a science and has its own share of dos and dont. In order to get correct, reliable and accurate results the need is to understand and follow the methods. Research philosophy precedes research methodology. Saunders M., Lewis P., Thornhill A., (2007), suggest that research philosophy relates to the development of knowledge and the nature of knowledge. The research philosophy adopted should contain important assumptions. These assumptions will underpin research strategy and methods to be chosen as a part of that strategy. The philosophy adopted should be influenced by practical considerations. The main influence is always likely to have a particular view of the relationship between knowledge and process by which it is developed. The basic assumption in the research question framed here is that the quality of the product will be unchanged, when there will be an appreciation or depreciation in price values. To find out whether the consumer will shift or switch over to another store, it has to be assumed that the product quality at all the stores is the same as it was before change in price. R. Wilson (1996) says that the success of any marketing project, whether it is conducted in an academic or practitioner environment, depends to a large extent on decisions made by the researcher at an early stage in the research process. Critical issues like overall purpose of research, identification of research questions to be addressed, use of theoretical framework, development of hypotheses, and choice of quantitative or qualitative approach should be resolved as soon as possible.

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Qualitative Research www.ipsos.com defines qualitative research as an exploratory study (to explore an unknown sector, identify the main dimensions of a problem, draw assumptions, understand motivations) or operational study based on in-depth analysis of interviewee responses (in a group or individually), typically in what's known as "focus groups." It most often deals with a restricted sample of individuals that does not necessarily need to be representative. It may be the preliminary phase of a quantitative study or stand alone research. And it is advised to select a qualitative method when most of these conditions apply: You have no existing research data on this topic. The most appropriate unit of measurement is not certain (Individuals?

Households? Organizations?)

The concept is assessed on a nominal scale, with no clear demarcation

points.

You are exploring the reasons why people do or believe something.

Quantitative Research Quantitative research is the systematic scientific investigation of quantitative properties and phenomenon and their relationships. Quantitative research is widely used in both the natural and social sciences, including physics, biology, psychology, sociology, geology, education, and journalism. The objective of quantitative research is to develop and employ mathematical models, theories and hypotheses pertaining to natural phenomena. The process of measurement is

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central to quantitative research because it provides the fundamental connection between empirical observation and mathematical expression of quantitative relationships. Quantitative method of research has been chosen because of the presence of the following features in the research and the research question. The research is more of a confirmatory rather than exploratory research. It is a frequently researched topic, and (numerical) data from earlier research is available.

Since a trend is being measured to find out the switch over cost and the reason for selection of a particular store (almost impossible with qualitative research).

The concept is being measured on an ordinal scale.

Comparison between Qualitative and Quantitative Research: With the growing acceptance of qualitative methods in education (Shulman, 1981), the debate has shifted to what their relationship to quantitative methods should be. At the extremes are two groups the purist and the pragmatists (Rossman & Wilson, 1985). They believe that the two method types are incompatible because they are based on paradigms that make different assumptions about the world and what constitutes valid research. Questionnaire: Mc Daniel C. & Gates R. (2001) define questionnaire as every form of survey research relies on the use of questionnaire. The questionnaire is the common thread for almost all data collection methods. It is a set of questions designed to generate the data necessary for accomplishing the objectives of the research project. It is a formalized schedule for collecting information from respondents. It provides

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standardization and uniformity in data gathering process. Questionnaire gives a customized opinion from the sample selected. When to use a questionnaire? There is no all-encompassing rule for when to use a questionnaire. The choice will be made based on a variety of factors including the type of information to be gathered and the available resources for the experiment. A questionnaire should be considered in the following circumstances. a. When resources and money are limited. A Questionnaire can be quite inexpensive to administer. Although preparation may be costly, any data collection scheme will have similar preparation expenses. The administration cost per person of a questionnaire can be as low as postage and a few photocopies. Time is also an important resource that questionnaires can maximize. If a questionnaire is self-administering, such as a e-mail questionnaire, potentially several thousand people could respond in a few days. It would be impossible to get a similar number of usability tests completed in the same short time. b. When it is necessary to protect the privacy of the participants. Questionnaires are easy to administer confidentially. Often confidentiality is the necessary to ensure participants will respond honestly if at all. Examples of such cases would include studies that need to ask embarrassing questions about private or personal behaviour. c. When corroborating other findings. In studies that have resources to pursue other data collection strategies, questionnaires can be a useful confirmation tools. More costly schemes may turn up interesting trends, but occasionally

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there will not be resources to run these other tests on large enough participant groups to make the results statistically significant. A follow-up large scale questionnaire may be necessary to corroborate these earlier results. There are other methods of secondary data collection as well like observation and interviews both structured and semi-structured. Questionnaires are usually not believed to be good for exploratory or other research that requires a large number of open-ended questions. Questionnaires can be therefore be used for descriptive or exploratory research. Descriptive research, such as that undertaken using attitude and opinion questionnaires and questionnaires of organisational practices, will enable to identify and describe the variability in different phenomena. In contrast explanatory or analytical research will enable to examine and explain relationship between variables, in particular causeand-effect relationships. These two purposes have different research design requirements (Gill and Johnson, 2002). Questionnaire was the chosen method of survey to find out the answer for the research question. According to the hypotheses going to individual customers was the best option to figure out whether they will change their brand preference or give away the brand loyalty due to change in price. The design of a questionnaire differs according to how it is administered. Selfadministered questionnaires are usually completed by the respondents. Responses to interviewer- administered questionnaires are recorded by the interviewer on the basis of each respondents answers. The choice of questionnaires is dependent by a variety of factors related to research question and research objectives. But to a great extent it is also dependent on:

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Characteristics of the respondents from whom data is to be collected, also known as the data sample.

Importance of reaching a particular person as respondent. Importance of respondents answer not being contaminated or distorted Size of sample required for analysis, taking into account the likely response rate, which was 100% in the research as interviews were conducted personally. Each respondent was approached and was requested to participate in the survey.

Types of question to be asked to get the desired information. Number of questions to be asked to get the desired data and answers.

Selection of interviewer- administered questionnaire ensured that respondent was whoever was wanted to be. This improved reliability of data. These interviews were conducted in city of London at Piccadilly Circus where the desired sample was available. People who are funny, who visit at these museums, theatres and cinema halls. 20 people were interviewed as a sample and included people from different age groups, different income levels and different sex. Each question was asked to them individually. Non-respondents were not recorded due to constraint to time and resources. Due to financial implications assistance was not taken from any organisation or individual for getting the responses and gathering the primary data through these questionnaires. The sample needs to be as representative and accurate as possible where it will be used to generalise about the total population. Interviewer Questionnaires are quite flexible in what they can measure, however they are not equally suited to measuring all types of data. Data can be classified in two ways, Subjective vs. Objective and Quantitative vs. Qualitative. The importance of well-

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defined objectives can not be over emphasized. A questionnaire that is written without a clear goal and purpose is inevitably going to overlook important issues and waste participants' time by asking useless questions. The questionnaire may lack a logical flow and thereby cause the participant to lose interest. Consequential, what useful data you may have collected could be further compromised. The problems of a poorly defined questionnaire do not end here, but continue on to the analysis stage. It is difficult to imagine identifying a problem and its cause, let alone its solution, from responses to broad and generalizing questions. In other words, how would it be possible to reach insightful conclusions if one didn't actually know what they had been looking for or planning to observe.

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Source: Mc Daniel C. & Gates R. Questionnaire Design, Marketing Research Essentials, (2001), 290

According to (www-static.cc.gatech.edu), when a questionnaire is administered, the researchers control over the environment will be somewhat limited. This is why questionnaires are inexpensive to administer. This loss of control means the validity of the result is more reliant on the honesty of the respondent. Consequently, it is more difficult to claim complete objectivity with questionnaire data then with results of a tightly controlled lab test. For example, if a group of participants are asked on a questionnaire how long it took them to learn a particular function on a piece of software, it is likely that they will be biased towards themselves and answer, on average, with a lower than actual time. A more objective usability test of the same function with a similar group of participants may return a significantly higher learning time. More elaborate questionnaire design or administration may provide slightly better objective data, but the cost of such a questionnaire can be much higher and offset their economic advantage. In general, questionnaires are better suited to gathering reliable subjective measures, such as user satisfaction, of the system or interface in question. Questions may be designed to gather either qualitative or quantitative data. By their very nature, quantitative questions are more exact then qualitative. For example, the word "easy" and "difficult" can mean radically different things to different people. Any question must be carefully crafted, but in particular questions that assess a qualitative measure must be phrased to avoid ambiguity. Qualitative questions may also require more thought on the part of the participant and may cause them to become bored with the questionnaire sooner. In general, it can be said that

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questionnaires can measure both qualitative and quantitative data well, but that qualitative questions require more care in design, administration, and interpretation. The basic process of survey research can be outlined as follows: 1 2 3 4 5 6 7 1. Defining research aims. 2. Identifying the population and sample 3. Deciding how to collect replies 4. Designing the questionnaire 5. Carrying out the survey 6. Analyse the data To design the questionnaire an important task was to define the population and sample to be interviewed or surveyed. The population is simply all the members of the group that you are interested in. A sample is a sub-set of the population that is usually chosen because to access all members of the population is prohibitive in time, money and other resources. 8 An important issue in choosing the sample relates to whether the members chosen are representative of the population. The sample chosen in the survey was based on the fact that representative sample needs to be taken from different stores. People going to a particular store can not be interviewed for the entire research. Sample population for this research consisted of people or consumers of different stores like Asda, Marks & Spencer, Sainsburys, Tesco and other stores. The target age-group were people who shop on regular basis, so people less than the age of 16 years were ruled out of the survey, since there buying decisions are based on their parents decision in most number of cases. Since our focus is on people who may or may not change there loyalty to a particular store due to price fluctuations, age group of less than 16 did not

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seem to hold that importance. Another question that was put in the questionnaire to determine the sample was income group. People belonging to different income groups have different choice and preferences. Selecting people from one income group would not have given the survey a realistic overview. People with different income levels have different mindset and needs. As he income level increases the needs and wants of a human being change. They have different preferences at different stages of their life. Satisfaction of one want leads to desire of something more superior and luxurious. 9 Dillman (2000) distinguishes between three types of data variable that can be collected through questionnaires: 1. opinion 2. behaviour 3. attribute These distinctions are important, as they will influence the way your questions are worded. Opinion variables record how respondents feel about something or what they think or believe is true or false. In contrast, data on behaviours and attributes record what respondents do and are. When recording what respondents do, thats called recording their behaviour. This differs from respondents opinion. Behavioural variables contain data on what people did in past, do now or will do. Attribute variables contain data about the respondents characteristics. Attributes are best thought of as things a respondent possesses. They are used to explore how opinions and behaviour differ between respondents. Attributes include characteristics such as age, gender, marital status, education occupation and income. The questionnaire designed for this particular research has two questions to determine the attributes of the respondents their age groups and their income group.

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10 The design of each question was based on the data which was to be collected. When designing individual questions researchers do one of the three things (Bourque and Clark, 1994). Clear wording of questions using validity of the questionnaire. Most types of questionnaire included a combination of open and close ended questions. Open questions (Dillman, 2000), allow the respondents to give answers in their own way (Fink, 2003). Closed questions, provide a number of alternative answers from which the respondent is instructed to choose. If these responses cannot be easily interpreted then these benefits are marginal (Foddy, 1994). The questions asked were all close ended questions because of a few reasons. Close ended questions are faster or quicker to answer, the respondents feel at ease because they dont have to think and write too much as they have options available. This comfort level of respondents with the questionnaire increases the response rate as people do not refrain from answering the questionnaire which is not the similar case in case of open ended questions. The options given were carefully chosen to make sure that all the possible answers to a particular question were present. 11 12

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CHAPTER 4

Research and Findings

After collecting the data through the means of questionnaire, it is very important to analyse that data other wise raw data is of no use if it can not be interpreted. There were a total of 100 questionnaires which were completed. The data was then entered in SPSS software which is renowned software of marketing research. Here are the findings of the research. Analyse of the data is done firstly as per their frequency.

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5 0

4 0

3 0

2 0

1 0

Count

0 >00 10 1 0 to 2 0 00 50 2 0 to 4 0 50 00 <00 40

Y u m n ly in o e is o r o th cm

For the sample there were 86% of the people surveyed were the ones who belonged to income group of less than 2500 a month. The people chosen for survey were young people infact 89% of them were less than the age of 40 years, out of which 53% were less than 25 years old. Consumers who will go on to become loyal to stores or they already are which might be mainly because of their family and friends.

73% of these people go for monthly shopping, what is interesting here is the fact that 27% of them dont have any specific buying time or period they shop whenever they need.

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People from different stores became a part of the survey. No store seems to have a dominating majority as far as number of its regular customers is concerned. Others stores included stores like Iceland, Morrisons, Waitrose etc. This gives reliable information, as there are representative samples from different stores. A cross tabulation between which income group prefers which store, shows that people who earn less than 1000 pounds a month, majority of them shop at Tesco.

On the other hand people above 4000 income level prefer Marks and Spencer or Waitrose, while the middle-income group prefers Sainsburys.

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40

30

20

10

Count

0 Asda M arks & Spencer Sainsbury's Tesco Others

W hich store do you shop at

Lets analyse the fact that how many participants had were loyal to a particular store, but the limitation here is that people have loyalty cards of more than one store sometimes.

It can be seen that only 45% of the people surveyed had store loyalty cards.

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Analysis was also done to know which stores have what rate of loyalty as far as loyalty cards are concerned. Majority of customers of Sainsburys and Marks & Spencer had loyalty cards followed by Tesco. The companies should take advantage of this and they should think more towards retaining them. When analysing the reason for store preference, for majority of them important factor was the geographical location of the store. This was surprising as price or quality were supposed to be the most important determinants when selecting a store. There were only 10% people who chose or selected their store because of its brand name; probably these were the representative sample that cares for snob value.

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40

30

20

10

Count

0 Price Quality and service Geographical Locatio Brand Name Others

Why do you prefer the store you shop at

After finding out this information the next step was to get the answer for our research question. For that there were two direct questions put in the questionnaire. These questions asked the participants directly whether they will change there store preferences if there is a price hike in the store where they shop or if the competitor is offering products for cheaper rates. The assumption is that quality of the product is unaffected and there is only price change.

73% of people who participated were of the view that price is not the only thing that will make them change their shopping preferences at a particular store. For 36%

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people price is still a very important factor when it comes to changing their store patronage.
40

30

20

10

Count

0 yes No Can't Say 4

Wouls a change in price affect your store prefrence

When asked how much price change or fluctuation would make them give away their store patronage. 37% of the people accepted that a change of 10 to 30 pounds per

40

30

20

10

Count

0 <10/person/month 30 to 50/person/mont dont know 10 to 30/person/mont

How much as a sample value in Pounds would effect your store prefrence

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per head per month, will most probably make them change their preferences. But 30% of people were still unsure about changing there store preferences. To answer the main question of the research analysis was done to figure out the reasons due to which people selected their stores and compared it to whether they will change their stores if there was a price change. People who said that there preference of store was due to price factor and geographical location, they were the ones who were more willing to change there store because of a price change.

This validates the collected data as well, since people who selected there store because of price, are most likely to change their store preference if there is a change in the prices, quality and service being the same. Investigations were made further to find out what kind of price change would lead to a shift in customer store preference.

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People who said that they are ready to change the store if there is a price change, majority of them were the ones who will change there shopping preferences if there is a change between 10 to 30 per person per month. On the other hand people who said, that they will not be changing there store preferences because of price also agreed that at a certain price level they will not patronise to the same store. There were also a lot of people who were unsure about both changing their store preferences and the price levels at which they will be changing there selected store.

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CHAPTER - 5

Conclusion

Since marketing is more focused on ultimate consumers, the dissertation topic was also chosen keeping the retail and consumer market in focus. Price is the most discussed and researched topic today in retail industry. Most of the retailers worldwide are trying to reduce their cost of production and the better part is that they are not shying away from passing on this benefit to the customers. Since the world has become a global village today, it has become easier for these stores to contact suppliers from throughout the world and use the absolute cost advantage by outsourcing the product manufacturing and processing elsewhere. The revolutionary change and improvements in the supply chain management system through out the world has also helped the retailers in reducing costs. By passing on these benefits to ultimate consumers the stores are trying to lure more and more customers towards them. They want to make sure that the competitors customer switches over to them and there own customers remain loyal to them. Loyalty cards are just a way probably to acknowledge the customer for shopping regularly at the same store. But it can also be considered as a marketing gimmick, as these loyalty cards are given from the first day you shop at a store, card holders are given coupons and are offered special discounts.

It is important to understand that it is not easy to make a customer loyal towards a product or a store. There are a lot of reasons which contribute in making a consumer select a product or service or a store in this case. The literature review already mentions the different factors which effects a consumers ultimate buying decision.

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Its because at different stages of life, year, day people have different needs, wants and desires. If you become loyal to a product or a store it basically implies that the product caters to all that you need pertaining to the same area, in the remaining stages of your life. This is very difficult but not impossible. Another important question is how to make customers loyal and more importantly how to make sure that they dont switch over to a rival. The concept of value, cost & satisfaction are crucial in the final product choice, the several alternatives of the customer constitute his product choice set, the additional needs associated with the product is called the need set. Customer rank the products from need satisfying to the last need satisfying value is the consumers estimate of the products overall capacity to satisfy his or her needs. The company probably needs to forecast the retail change well and accurately in advance, because the changing patterns if known or anticipated can reap rich dividends for the organisation in terms of customer loyalty, revenues, profits, goodwill etc. The crux of marketing strategies of these companies is low and affordable prices. Thats what they have been targeting on even when they know that there are other factors as well which influence the buying decision of a consumer. Rather than just focusing on winning the price war with the competitor, the company should try and focus on areas that are also important for an individual to make his or her buying preferences. Because the way prices are being slashed, they will reach a stage when they can not be brought down any further. All the retailers will have to make sure that they are not suffering from marketing-myopia (short sightedness). Otherwise rather than making new customers they might loose out on the existing customers.

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The objectives of this dissertation were achieved through means of the research conducted. The research shows that price is an important factor for a customer to make his or her buying decision but there are other factors also which comes into play. It also talks about store loyalty, even though a lot of customers have loyalty cards of different stores they do not necessarily patronise to a particular store. Given a change in a few factors customers would change there loyalty, however it seems that consumers who become loyal to a store because of snob value are more likely to stay back for a longer period of time. This research has brings out the point that price is not the most important factor which determines the reason for store preference; there are other factors which mean more to a particular person sometimes. But the high rate of people, who were not certain about them changing the store due to price change and how much price change, shows that there are lot of people who probably decide as per the situation which store is better for them. They want good-quality sometimes, sometimes are looking for a brand name, sometimes for a cheap and affordable product.

But lack of time and financial resources could not make this research work very detailed. A bigger sample at different retail stores themselves could have given a more accurate idea about store patronage of customers and there inclination towards changing the store due to change in price or any other factor for that matter.

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I am student at University of Wales Cardiff, doing my MBA dissertation on Relationship between Store Patronage and price sensitivity. This questionnaire has been formulated to investigate the same. If you could please answer the following questions. 1) Your age is: a) Between 16 to 25 years c) More than 40 years 2) Your monthly income is: a) Less than 1000 c) Between 2500 to 4000 3) How often do you shop? a) Weekly c) Monthly 4) Number of people you shop for? a) One b) 2 to 4 5) Which store do you shop at? a) Asda b) Between 25 to 40 years

b) Between 1000 to 2500 d) More than 4000 b) Fortnightly d) as needed c) More than 4______ b) Marks & Spencer

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c) Sainsburys d) Tesco e) Others (Please specify _______________) 6) For how long have you been shopping at the store specified above? a) Less than 1 year b) 1 to 3 years c) 3 to 5 years d) 5 years and above. 7) Do you have a loyalty card for the store you shop at? a) Yes b) No 8) Your monthly expenses for the shopping basket? a) Less than 50 b) 50 - 100 c) 100 150 d) 150 and above. 9) Why do you prefer the store you shop at? a) Price b) Geographical Location c) Quality and Service d) Brand Name e) Others_____ 10) Would a change in price affect your store preference? a) Yes b) No c) Cant say 11) How much as a sample value in would affect your store preference? a) Less than 10/person/month b) 10-30/person/month c) 30-50/person/month d) Dont know

Thanks for your time.

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