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SALES PROMOTION AND ITS EFFECT ON BRANDSWITCHING BEHAVIOUR IN THE INDIAN FMCG MARKET

Ms. Rashmi*

ABSTRACTThe paper examines the effects produced by the various sales promotion exercises on thebuying behaviour of consumers of FMCG, stressing on ‘Brand Switching’ as a behaviouralconsequence. Like elsewhere in the world, the players in the Indian FMCG industry spenda significant chunk of their marketing budgets on sales promotions. FMCG products arepurchased regularly and universally by all consumers, and are conducive to the applicationof almost all sales promotion techniques. Sales promotion activities are understood toincentivize brand switching by reducing the switching costs for the consumers. In order toexamine this view, this paper includes gathering of primary data on the attitudes andopinions of consumers in the context of sales promotions. The study validates the existenceof a relationship between sales promotion and brand switching. The study also probes theeffect of demographic and socio-economic variables like age and income of the consumerson their inclination to switch brands. The paper also attempts to explore which salespromotion techniques were the most effective on Indian FMCG consumers.

Keywords: Sales promotion, Brand switching, FMCG trial, Promotional mix

INTRODUCTIONIn the face of emerging players and intensifying competition in the FMCG industry,

marketers have resorted to the use of sales promotion techniques. Sales promotion, as aconstituent of the promotional mix of a marketer, stimulates interest, trial and purchase of aproduct by the consumer. Some of the popular sales promotion techniques being used in theIndian FMCG market are coupons, price discounts, free samples, ‘Buy one get one free’,samples, bundling and lucky draws. Of the many reasons that lead to an increase in sales as aresult of sales promotion, brand switching is an important one. Brand switching refers to theprocess of choosing to switch from routine use of one product or brand to steady usage of adifferent but similar product.

Due to increasing competition, an FMCG manufacturer is hard-pressed to introduce aninnovation or a new variant every time its sales see a stagnation or decline. Differentiation of the

* Assistant Professor, Department of Management Studies, College of Vocational Studies, University of Delhi.

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FMCG product on the basis of its features and attributes is not possible each and every time.Sales promotion serves as an alternative; it increases the value of the brand in the minds of theconsumers and incentivizes the purchase of the brand. It is also suggested that the effect ofsales promotions is temporary and hampering to the long-term equity of the brand by underminingthe brand. Consumers tend to stock-up on the product being promoted, indulge in advancingtheir actual purchases, and switch between brands.

LITERATURE REVIEWFMCG products are low-involvement products, which are purchased frequently and with

minimal thought and effort. Since the financial, psychological, and social risks of FMCGpurchases are relatively low, it can be argued that consumers would tend not to be very selectiveabout the brand being purchased, and would be eager to receive incentives to switch brands. Onthe contrary, Howard and Sheth (1969) stated that frequently purchased product categories,especially low-priced categories, households are prone to routinize their brand purchases byrepeated use of the same brand over time. This would mean that the brand being used currentlyhas a higher probability of being chosen in the future, in comparison to other brands. Iwasakiand Havitz (1998) suggested that product involvement, particularly for high-involvement products,plays a critical role in establishing brand loyalty.

Komal Nagar (2009), by classifying consumers into segments of loyal and non-loyalconsumers, found that promotions play a vital role in brand switching, and provides an incentiveto switch to a different brand. She reported that free gifts, among the various forms ofconsumer sales promotions, have more influence on the brand switching behavior of consumers.

Gu-Shin Tung, Chiung-Ju Kuo and Yun-Ting Kuo (2011) showed that switching costs havea positive relationship with loyalty, while attractiveness of the alternative brand does not have asignificant negative relationship with consumer loyalty. Dodson et al (1978) state that couponsand price-off deals induce brand switching, but when these sales promotions are stopped,consumer loyalty is found reduced to levels below the acceptable levels if no such deals hadbeen offered. Kumar and Leone (1988), while investigating the effect of retail store pricepromotion, featuring and displays on brands, found that price promotions produced the largestamount of brand substitution.

Manalel et al (2007) studied the favourability of the consumer perception of two types ofsales promotion techniques, namely, cash discounts and free gifts. It was found that, in the longrun, consumers did not perceive sales promotions favourably.

Attributing the increase in sales due to sales promotion to various reasons, Gupta (1988)found that 84% of such sales increase is due to brand switching, while less than 14% of thesales increase can be attributed to acceleration of purchase in time. Stock-piling of the productduring sales promotion accounted for a negligible portion of the total sales increase.

Other than luring non-consumers with monetary incentives, sales promotions have alsobeen observed to provide non-monetary benefits. Sales promotions can provide consumers withan array of hedonic benefits such as value expression, entertainment, and exploration. Utilitarianbenefits such as product quality and shopping convenience were also found to result from salespromotions (Chandon, Wansink and Laurent, 2000).

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RESEARCH METHODOLOGY

MethodologyPrimary data were collected using a questionnaire. Consumers of products which are not

specific to any age, gender or income were targeted. The survey was conducted online andthrough personal interaction in and around Delhi, India. Sixty six responses, received across agegroups and income levels, were analyzed using SPSS. Cronbach Alpha was calculated todetermine the reliability of likert-scale questions. One way ANOVA and t-tests were used toevaluate the hypotheses.

QuestionnaireOf the eleven questions administered to each consumer, the first few questions gathered

demographic data about the responding consumers. These were followed by questions toascertain the current frequency of brand switching and its reasons. The third set of questionsgauge the awareness of consumers regarding various promotional techniques. Consumers canalso switch brands for reasons other than sales promotions, such as word-of-mouth,dissatisfaction from the currently used brand etc. The questionnaire attempts to find how likelyit is for consumers to switch their brands solely as a response to sales promotions.

A set of statements is given to the respondents to understand the relationship between salespromotion and brand switching behaviour. Additionally, questions also focus on the FMCGproducts that are more prone to the phenomenon of brand switching, and the sales promotiontechniques that are most impactful.

The following hypotheses were studied during the research:Hypothesis 1: Sales Promotion activities have no effect on the brand switching behaviour ofconsumers.H0: Sales Promotion has no effect on Brand SwitchingH1: Sales Promotion has an effect on Brand SwitchingHypothesis 2: Age does not affect brand switching behaviourH0: Age does not affect brand switchingH1: Age affects brand switchingHypothesis 3: Income of the consumer does not affect brand switchingH0: Income does not affect brand switchingH1: Income affects brand switching

AnalysisReliability and Validity: The questionnaire consisted of five likert-scale questions for

evaluation of the effect of sales promotion on brand switching. To ensure that these likert itemsreliably measure the same latent variable (Brand Switching due to sales promotion), a CronbachAlpha score was obtained (Table 1 and 2). A high score (0.892) reported a high degree ofconsistency, homogeneity and reliability.

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Table 1: Reliability Statistics

Cronbach’s Alpha Cronbach’s Alpha based N of itemson standardised items

.892 .903 5

Table 2: Item- Total Statistics

Scale Mean Scale Corrected Squared Cronbach’s if Item Variance if Item-Total Multiple Alpha ifDeleted Item Deleted Correlation Correlation Item Deleted

I will remain loyal regardless 13.39 11.596 .570 .391 .915of promotionsI would switch to a different brand 13.36 11.404 .882 .833 .840if it is on promotionI normally buy the brand which 13.41 11.138 .789 .696 .857is on promotionI prefer to wait for my favourite 13.38 11.470 .894 .843 .839brand to offer schemeI care more about deals, than 13.55 12.006 .635 .509 .892about the brand

Hypothesis 1:Null hypothesis: Sales Promotion has no effect on Brand Switching (µ<=3)Alternative hypothesis: Sales Promotion has an effect on Brand Switching (µ>3)

A t-test was done on the likert-scale questions at 95% level of confidence (5% significancelevel). Since the questions were so designed that a greater agreement with the questions meant ahigher proneness to switching, the mean with which the sample mean is to be compared hasbeen taken as ‘3’ (Likert-item: ‘neither agree nor disagree’). Thus, a sample mean greater than 3would indicate that the respondents would switch their brands for a promotional offer.

In tables 3, 4 and 5, the mean value for brand switching is 3.35, which is greater than thetest value of 3. The obtained significance for one-tail is less than the significance level of 0.05.The result is significant, and the alternative hypothesis that sales promotion affects brandswitching is accepted.

Hypothesis 2:Null hypothesis: Age does not affect brand switchingAlternative hypothesis: Age affects brand switching

To evaluate the hypothesis, the difference between the means of different age-groups withrespect to brand switching behaviour was determined with one way ANOVA, at a 95% confidenceinterval. The dependent variable was ‘Brand Switching’ represented by the composite variable.The independent variable was ‘Age’. Table 6 shows that the significance value of 0.083 obtainedare higher than the significance level of 0.05. This concludes that age is not a significant variablein the determination of brand switching behavior.

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Hypothesis 3:Null hypothesis: Income does not affect brand switchingAlternative hypothesis: Income affects brand switching

To evaluate the hypothesis, the difference between the means of different income-levels,with respect to brand switching behaviour was determined with one way ANOVA, at a 95%confidence interval. The dependent variable was ‘Brand Switching’ represented by the compositevariable. The independent variable was ‘Income Level’. Table 7 shows that the significancevalue of 0.598 obtained is higher than the significance level of 0.05. This concludes that incomeis not a significant variable in the determination of brand switching behaviour.

Table 3: One-Sample Statistics

N Mean Std. Deviation Std. Error Mean

Effect of sales promotion on brand switching 66 3.3545 .83743 .10308

Table 4: One-Sample Test

Test Value = 3

t df Sig. (2-tailed)Mean Difference 95% Confidence Intervalof the Difference

Lower Upper

Effect of sales promotion 3.440 65 .001 .35455 .1487 .5604on brand switching

Table 5

t df Sig (2-tailed) Sig. (One-tailed)

3.44 65 0.001 0.0005

Table 6: ANOVA (Age vs. Brand Switching): Effect of sales promotion on brand switching

Sum of Squares df Mean Square F Sig.

Between Groups 3.463 2 1.731 2.589 .083Within Groups 42.121 63 .669 Total 45.584 65

Table 7: ANOVA (Income vs. Brand Switching): Effect of sales promotion on brand switching

Sum of Squares df Mean Square F Sig.

Between Groups 1.350 2 .450 .631 .598Within Groups 44.234 62 .713 Total 45.584 65

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CONCLUSIONAmong the various reasons of brand switching, sales promotion activities were an important

reason, second only to consumer dissatisfaction with the previous brand. Further, certainpromotional activities were more influential than others, a result that can be utilized by marketersto focus on the more relevant promotional schemes. Similarly, some FMCG products such asdetergents were more prone to witness brand switching in the face of promotional activities.Marketers of such FMCG products need to put additional stress on establishing their brand’ssuperiority.

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