Consumer Promotion Essay

I expect this report to fulfill the requirements of my internship program (BBA 449) at Unilever Bangladesh Limited. I have put in my best efforts to make this report a success. However, I am sure that this report could have been a more superior one, if it had not been my first time to conduct such a relational study. However this has obviously been a great source of learning for me to conduct similar research studies in future. I would like to express my sincere gratitude to you for your guidance and suggestions in preparing the report. I will be happy to provide any further explanation regarding this research report if necessary. Thanking You. Sincerely yours, Muhammad Mashfiq Huq ID# 0131001 Acknowledgements In preparing this report a considerable amount of thinking and informational inputs from various sources were involved. I express my sincere gratitude to everyone who contributed towards making this research report possible. Major contributions were received from officials at Unilever Bangladesh Limited and Independent University, Bangladesh. First of all I would like to thank the authorities of Unilever Bangladesh Limited to give me the prized opportunity to do my internship at their prestigious organization. The experience and knowledge gained at Unilever Bangladesh Limited helped me immensely to address and understand all the elements related to my report, which I otherwise would not have understood so well. I would like to specially thank my supervisor at Unilever Bangladesh Limited, Mr Rajeeb Bhattacharjee, Product Group Manager for Wheel, for his absolute support, co-operation and encouragement that he extended to me from the very first day. In spite of having a very busy schedule, he made sure in every way that I acquire the best possible exposure and knowledge during my tenure as an intern under him. My sincere gratitude goes to my internship supervisor Mr. Muzahid Akbar, for encouraging me at the very first place, to undertake such a relational study to fulfill my internship requirements. He gave all the time and attention, which I needed to complete my research and compile my report in as much orderly way as possible. Last but not the least I would like to thank the respondents of my survey, for sparing the time to fill out the questionnaires. This research would not have been possible without their valuable inputs. Correlation matrix of the study variables 3. Stepwise regression on Product Quality Perceptions 4. Stepwise regression on Brand Loyalty 13 15 16 17 Executive Summary This paper is directed towards exploring the relationship between consumer promotion, price perception, product quality perceptions and brand loyalty in the detergent market of Bangladesh. Through sizeable literature review and discussions it is known that there is considerable correlation that exists among the study variables mentioned above. The data sampling was conducted on the customers of different brands of detergents. A structured questionnaire was used to find out the views of people regarding consumer promotion in detergent brands, price perceptions about the promoted brands of detergent, product quality perceptions about those brands and also to find out about brand loyalty in the detergent markets. A correlation analysis and a stepwise regression analysis were run on the collected data to analytically explore the relations and their extent. It was found that consumer promotion is positively correlated with the product quality perceptions and brand loyalty of those brands. Meaning that if a person views the consumer promotion positively, then his/ her perception of the product quality about a promoting brand will be proportionately high. It also means that the chances of the same person being brand loyal towards that brand would also be high. There is a positive correlation of price perception with perceived quality and brand loyalty. According to this, if the perceived prices of the promoted brands are fair then it would have positive effects on product quality perception and brand loyalty of that brand. It has also been found that product quality perceptions about promoted brands are positively correlated with brand loyalty of those brands. Overall consumer promotions are expected to give positive results with the people who have positive views about consumer promotion and who can be influenced by promotional efforts. So while deciding about consumer promotion it should be thought in advance that who is the consumer promotion activity aimed at. This way wastage of large amounts of money can be avoided by spending on ineffective consumer promotion activity. Every effort should be given to make the consumers think that the prices of the promoted brand are fair, even when there is no promotional activity is undertaken. Though there is a tendency in the detergent market to provide frequent promotional offers, yet the perceived quality should in no way go down because there is a good possibility that the brand loyalty would also go down. Introduction Bangladesh has a detergent market of about 8. 8 billion taka of which Unilever occupies a share of 30% making it the market leader. The major competitor brands in the detergent market for Unilever are Keya, Chaka and Tibet. To fight this steep competition the above mentioned companies constantly run consumer promotion in hope to sell more than the respective competitors. Although this strategy worked well at first but with the passage of time, the intense consumer promotions have done little to prevent Unilever from loosing shares to its competitors. In 2004, Wheel, Unilever’s largest detergent brand ran about nine consumer promotions where as in 2005 it ran no consumer promotions at all. Consumer promotion over all is a very expensive affair. Unilever has the largest brands of detergent and so the cost of providing a consumer promotion offer is also large by the same proportion. Besides the competitor brands are known to involve in some unfair practices. They pay a very low wage rate to their labours so overhead costs are low, they under invoice their imported raw materials so that they can evade import taxes and other duties, so they save a lot of money in the process. They can then utilize this money for consumer promotion and other competitive activities that can earn them a higher share of the market. Therefore it is imperative that consumer promotions and other dependant elements have to be studied, to make sure that if a consumer promotion activity is implemented it is a highly effective one. This way, precious monetary resources have the minimum chances of being wasted. To understand the competition in the detergent market better price perceptions and product quality perceptions about the brands of detergent on promotion are also considered being worth studying. To look at market share issues, the brand loyalty element should also be explored. Statement of the Problem There are many companies that are operating to serve the detergent markets; as a result the competition has heightened. Consumer promotions are being heavily used in the detergent markets to increase sales of each available brand. Consumer promotions, when implemented use up a lot monetary resources. Failure to implement the consumer promotion activity effectively may result in major loss of money. Purpose of the Study The purpose of this research is to explore the relationship between consumer promotions, price perceptions with product quality perceptions and brand loyalty in the detergent market of Bangladesh. Research Timeline 2005 2005 2005 2005 2005 October November November 20 November 28 December 6 Research proposal writing and literature rivew Data collection (surveys etc. ) Data analysis and interpretation Draft submission of research report Submission of research report Limitations There are vast amounts of information and write-ups relating to the topics of this research that are present in the internet and various other sources, but it was not possible to gain access to many such information. So missing out some important aspect of the discussed topics can be a possibility. There is a major time constraint in doing the research work and preparing the report, a much larger pool of information could have been dealt with if there was more time to analyze them. A minimal sample size will be used for this research; if a larger sample was taken into consideration the research would have been more accurate. The survey will be conducted in Dhaka city which could be a possible reason for the people’s mind set to be similar and survey results not being very different from each other, the results could be different if people from outside metropolitan cities were brought under consideration. Review of Literature Consumer Promotion Sales promotions as we know is a very important component of marketing promotion. Consumer promotion (e. g. coupons, samples, contests, sweepstakes, and price packs) is a part of sales promotion that is targeted towards the final buyers of consumer products (Kotler and Armstrong, 2002). There can be various types of consumer sales promotion some are incentive based while others are communicative in nature (Kotler et al. , 1999; Tellis, 1998). The incentive based promotions can be price – oriented promotion or non price-oriented promotion. According to Britannica (article 21279) advertising presents a reason to buy a product but consumer promotion offers a short-term incentive to purchase. Consumer promotions often attract brand switchers (those who are not loyal to a specific brand) who are looking primarily for low price and good value. Thus, especially in markets where products are highly similar, consumer promotions can cause a short-term increase in sales. Abraham and Lodish (1987) stated that many consumer goods categories sold 90% of their volume on special deals which is a result of consumer promotion. Consumer promotion is thought to be a tool that helps manufacturers and retailers to achieve their objectives of generating sales (Alvarez and Casielles, 2004). They also stated that the influence of sales promotions on the consumer will also depend on the consumer’s characteristics Price Perceptions According to Schiffman and Kanuk (2004) price perception is about how customers see a product’s price, as high, low or fair. They also stated that perception of price unfairness affect consumers’ perceptions of value and ultimately their willingness to buy a product. According to Moore et al. (2003) years of research concerned with price show both positive and negative perceptions serve as marketplace cues. Several studies have also portrayed the role of price perceptions as an attribute to success (Jiang and Rosenbloom, 2004). When the price perceptions are high this is a sign of positive quality, prestige and status (Moore et al. , 2003). The concept of reference price is related to price perceptions. Schiffman and Kanuk (2004) stated that reference price is the price the consumers use as a basis for comparison in judging another price. It is through reference price that the price perception of a brand of product is formed. When the consumer plans to buy a product, he or she will judge prices comparatively with the reference prices in order to determine whether the price is acceptable or not (Alvarez and Casielles, 2004). They also stated that, a result of consumers’ comparison between the prices and the reference price, potential losses and gains emerge. The consumer perceives a gain when the reference price is higher than the observed price. If the observed price is higher than the reference price, the consumer experiences a loss. Product Quality Perceptions Product quality perceptions represent consumer judgment about the superiority of a product, which the user-based approaches think is essential in describing quality (Forker et al. , 1996). Bundles of attributes together represent a certain level of quality, which therefore provide utility to the customer (Snoj et al. , 2004). The benefits are measured through a perceived level of quality (level of working superiority), a bundle of attributes in comparison with the consumer’s expectations. Schiffman and Kanuk (2004) stated consumers often judge the quality of a product on the basis of a variety of informational cues that they associate with the product. They also stated that the cues can either be intrinsic or extrinsic. Intrinsic cues are related to the physical characteristics of the product itself, like size, colour, flavour, aroma etc. The extrinsic cues on the other hand are related to elements that are put together with the actual product like packaging, pricing, advertising etc. The perceived quality of products and services is central to the theory that strong brands add value to consumers’ purchase evaluations (Low and Lamb, 2000). Brand Loyalty Brand loyalty is the ultimate desired outcome of consumer learning (Schiffman and Kanuk, 2004). According to Rawly and Dawes (1999) brand loyalty is the likelihood of positive attitudes and behaviours of consumers towards a particular brand, this could amount to repeat purchase and positive word of mouth. They also stated that a loyal customer base is an asset for a company and it reduces the need for seeking new customers. It is also a known fact that retaining current customers requires less money and effort than getting new ones. The strongest measure of brand value is the loyalty a company produces among customers (Aaker, 1996). According to Quester and Lim (2003) brand loyalty is known to have two components, namely attitudinal loyalty and behavioural loyalty. Behavioural loyalty is related to consistent purchase behaviour of a specific brand; it is the consumer’s overt purchase behaviour (Dikempe et al. , 1997) while attitudinal loyalty refers to a highly favourable attitude towards a particular brand. Rowley and Dawes (1999) stated that to understand brand loyalty better the following components of attitude model should be considered: 1. Cognitive component – associated with a â€Å"rational† decision making based on informational determinants. 2. Affective component – associated with emotions and feelings about the product or service. 3. Conative components – associated with a behavioral disposition. Relation between consumer promotion and product quality perceptions A primary reason for consumer promotion is to give an impression of greater quality and appeal to the potential customers (Alvarez and Casielles, 2004). Sales promotion influence the relative weighting of the utility factors and extends the perceived quality (Groth and Dye, 1999). Sales promotions can offer many benefits, the most obvious being monetary savings, and also motivation to perceive higher quality, convenience, value (Quock and Uncles, 2005). The way a consumer promotion is framed is likely to effect consumers’ perceptions of price, quality, value, and purchase intentions (Munger and Grewal, 2001). Ong (1997) on the other hand stated that there is a danger of unfavorable consumer perception as a result of consumer promotion activity like bonus packs etc. Consumers tend to think that at the normal price or offering they over pay for a given level of quality, so their quality perception is affected. Relationship between price perception and product quality perceptions The more quality a product possesses the more utility it contains and the more its price should be in the market (Sjolander, 1992). According to Sjolander (1992) it is very much expected that there is a very strong positive relation between perceived price and perceived quality. Perceived quality explains a considerable portion of the variance in the price the consumers are willing to pay for different brands (Low and Lamb, 2000). Unfavorable price perceptions may have a direct effect on customer intention to switch to a different brand, because the consumers might think that the price does not match quality (Jiang and Rosenbloom, 2004). Companies sometimes attempt to appeal to uninformed consumers by using high prices from start as a signal of high quality, with the belief that if they perceive the price of their products to be high then they automatically perceive the product quality to be high as well (Kalita et al. , 2004). Relationship between consumer promotion and brand loyalty According to Alvarez and Casielles (2004) promotions can have, as an effect, the consumer acquiring a brand that he or she would not otherwise try. They also stated that categories of products whose buyers are very loyal, consumer promotion activity like coupons etc that reward the loyalty could have a bigger effect. Srinivasan and Anderson (1998) acknowledged that many times sales promotions are used by new entrants to break consumers’ brand loyalty toward established brands. In the short run, established brands may be able to ignore sales promotions from new brands without serious loss of sales. Over the longer run, however, unless proper defensive and counter-offensive strategies are developed and implemented, established brands can gradually lose their loyal customer base. Dawes (2004) on the other hand stated that repeat buying rates that buying a brand on promotion decreases the likelihood of a subsequent purchase of that brand. Relationship between price perception and brand loyalty Alvarez and Casielles (2004) stated that when the consumer perceives a loss, the utility that the provides (brand) will diminish, and with it the likelihood of purchase will also go down. If, in contrast, the consumer perceives a gain, he or she will be more inclined to purchase the brand. Price perceptions are expected play an increased role in determining both post-purchase satisfaction and brand loyalty (Jiang and Rosenbloom, 2004). According to representative research higher perceived prices leads to expectation of higher perceived quality and value, in turn lead to higher levels of satisfaction of customers, greater levels of customer loyalty and retention and to a greater success of organizations (Snoj et al. , 2004). Relationship between quality perception and brand loyalty According to Ruyter and Wetzels (1997) the perceived quality is often viewed as a pre-requisite for loyalty and that perceived quality contributes positively to increase loyalty. They also stated that the influence of quality on preference loyalty generally varies per industry. Boulding et al. (1993) found positive relationships between quality and repurchase intentions and willingness to recommend to others. Because product quality perceptions influence value, efforts of marketers have focused on improving product quality in order to enhance perceptions of value, and consequently purchase intentions leading to loyalty (Grewal and Munger, 2001). The loyal customers, who gave indication that they would return, will be the internal level for managers to improve their quality in order to increase customer loyalty (Bowen and Chen, 2001). Research Question The following questions have to be addressed for the study: 1. Is there any significant relationship between consumer promotion and product quality perception in the detergent market of Bangladesh? 2. Is there any significant relationship between price perception and product quality perception in the detergent market of Bangladesh? 3. Is there any significant relationship between consumer promotion and brand loyalty in the detergent market of Bangladesh? 4. Is there any significant relationship between price perception and brand loyalty in the detergent market of Bangladesh? 5. Is there any significant relationship between product quality perception and brand loyalty in the detergent market of Bangladesh? Hypothesis The hypothesis that can be derived from the research questions are: 1. There is significant relationship between consumer promotion and product quality perception in the detergent market of Bangladesh. 2. There is significant relationship between price perception and product quality perception in the detergent market of Bangladesh. There is significant relationship between consumer promotion and brand loyalty in the detergent market of Bangladesh. . There is significant relationship between price perception and brand loyalty in the detergent market of Bangladesh. 5. There is significant relationship between product quality perception and brand loyalty in the detergent market of Bangladesh. Development of Conceptual Framework †¢ Consumer Promotion †¢ Price Perception †¢ Product Quality Perception Figure 1 . Model 1: Conceptual Framework of research variables †¢ Consumer Promotion †¢ Price Perception †¢ Product Quality Perception †¢ Brand Loyalty Figure 2. Model 2: Conceptual Framework of research variables Methodology Research design The illustrations of the conceptual framework model 1 and 2 (Figure 1 and 2) above gives a visual idea of the relationship and structure that exists among the study variables. The main purpose of the research is to assess the existing correlation among the variables. This research is about exploring and understanding the relationship that exists between consumer promotion, price perception with product quality perceptions and brand loyalty in the detergent market of Bangladesh. Here in the first model (figure 1) the independent variables are assigned to be consumer promotions and price perceptions. The dependant variable on the other hand is product quality perception. In the second model (figure 2) the independent variables are consumer promotions, price perceptions and product quality perceptions, in this case the dependant variable is brand loyalty. So the researcher is attempting to find out, if any changes in the independent variable have a changing effect on the dependant ones as well, thereby proving that a relationship exists. The researcher also tried to find out the degree to which a change in the dependant variables has an impact on the independent ones, in other words the degree of relation is also explored here. Therefore the correlation study was chosen for this research. Sampling method The required data for this research was collected from the regular customers of detergents. There was no particular sample frame available for this research so convenience sampling was used, as it is also the cheapest and the easiest methods of sampling. The sample frame for this research consisted of shoppers (mainly house wives) at different shopping centres and stores etc, and also the parents of school children were included. In the shopping centres the researcher surveyed the people who seemed to be the most appropriate respondent for this kind of survey. The parents of kindergarten students, who spend time waiting for their kids outside the schools, were also surveyed, because they usually have a lot of time to spare and can give valuable inputs. Due to time constraints the survey was conducted in Dhaka city only. Over all there were about a 104 people who participated in the survey. Survey instrument A structured questionnaire was used to collect data. The questionnaire consists of different parts to gather information on the different variables under considerations. The questionnaire is the best instrument for the survey in this case because, for a correlation study the sample sizes have to be very large as it is quantitative in nature, so surveying so many people with personal interviews or observations would be next to impossible. With questionnaires, no responses of the respondents can be missed out. It gives more time to the respondents to think and then give the answers. And it is a quicker and cheaper way to conduct the survey. Questionnaires can be conducted in any environment, with minimum influence of the outside environment. Questionnaires also have the advantage of keeping the personal details of the respondents confidential. A sample of the questionnaire has been attached in the appendix.