Characterising the deal-proneness of consumers by analysis of price sensitivity and brand loyalty: an analysis in the retail environment

Abstract

This study characterises the ‘deal-proneness’ of consumers by analysis of the consumer-level characteristics of price sensitivity and brand loyalty. The study first develops a multinomial logistic (MNL) latent class model suitable for use with universal product code (UPC) point-of-sale (hypermarket) scanner data. The model is then used to assess the deal-proneness of consumers with respect to monetary promotions (price reductions) and non-monetary promotions (store flyers). The results show that almost 47% of consumers can be considered deal-prone, in that both kinds of sales promotions have a significant effect on their choice behaviour. The findings provide important insights for retail management in seeking to optimise the results obtained from promotional budgets.