THE IMPACT OF BUY 1 TAKE 1 AS A MARKETING STRATEGY TO THE CONSUMERS OF BACOOR CITY, CAVITESIMON, CINDY GRACE C.TACASON, HENDRIKS IVAN A. CHAPTER 1INTRODUCTION ABSTRACT Buy-one-get-one-free promotions are a common feature of retail food markets, but why are they so widespread? This study provides explanation on how this marketing strategy has impact to the random consumers of Bacoor City, Cavite. The study involved 100 respondents who are the random consumers in 4 barangays near in Bacoor.BACKGROUND OF THE STUDY A rich literature in sales promotions have shown that the short-term sales are positively affected in offering promotions (Blattberg and Neslin, 1995). “Buy One and Get One free” (BOGO) is a common form of volume discount promotion, used universally in the marketing industry by retailers, enticing consumers to buy their product through the offer of a free gift. The BOGO advertising has been widely publicized in countless supermarkets and outlets as means of promoting the products. BOGO scheme is one type of popular product volume discount nonmonetary sales promotions schemes in which the consumer gets two (or more) products of the same type for the price of one, or receiving a free product by purchasing some other product.
Promotions such as “buy one get one free,”, “buy two get one for free” and so on are frequently used to generate unplanned purchase (Inman et al., 2009). Marketers find BOGO scheme has an attractive element to pull customers attraction towards purchasing their products in a short time of period and also to capture the market for future business.
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When the word “Free” is noticeable in the product label or in the racks of super markets it usually catches the attention and the excitement of the consumers as the rewards for both the consumer and the retailers. The efficacy of free gifts is, however, in doubt, shoppers do not understand why retailers offer this kind of promotion when it is no more profitable for stores than a half-price sale. A study done in India has concluded that sales promotions like offering “free goodies” are not perceived favorable by consumers although this promotion is being widely promoted in India (Manalel et al., 2007). Simonson et al. (1994) endorsed Manalel et al. (2007) and stated that consumers who are not interested in purchasing the additional product may not avail the BOGO promotion scheme.
In Malaysia, BOGO scheme promotion is popularly used to attract local and foreign customers for the sales of their products. Malaysian consumes respond more for free samples and offering free samples have encouraged product trials (Ndubisi and Moi, 2006). Despite the growth in BOGO sales promotions and the concerns raised, there is a scarcity of literature devoted to the BOGO scheme in the market. Also, BOGO promotion scheme does not always achieve its objectives, such as increasing sales significantly (Gedenk et al.
, 2004). Therefore, the purpose of this study is to conduct an exploratory study to explore the drivers that influences the purchasing reflection towards BOGO scheme in the market. BOGO scheme can be enlightened as sale of products that have been offered ‘free gifts with purchase’ of the same/another product. Literature has revealed that advertising of BOGO scheme is a successful promotional technique as the additional product is provided free of charge with the purchase of original product. This has eventually, persuaded consumers to purchase the product and encouraging consumers to purchase additional as well. Many questions are raised in the business world on the purchasing behavior towards the BOGO scheme. Regardless of this unanswered question, BOGO scheme remains widely advertized and attracting many consumers globally to purchase through the scheme.
Many consumers have intention to purchase products with quality but with lowest price. If the perceived values of the product are greater than cost of the product, it is observed that consumers will purchase the product (Yee and Sidek, 2008). A large number of studies show that discount offers can have positive effects on consumer perceptions in terms of the value associated with the offer (Darke and Dahl, 2003; Inman et al., 1997; Urbany et al., 1988). Compeau and Grewal (1998) suggested that negative price-quality inferences are likely to moderate positive discount framing effects on deal value. This can occur in two ways. Discounts can lead to more negative consumer perceptions by undermining the perceived quality of the discounted item (Scott and Yalch, 1980; Tybout and Scott, 1983) and lowering the probability of future purchases (Dodson et al.
, 1978; Doob et al., 1969). Raghubir and Corfman (1999) stated that the quality inference of a product is most likely to matter when other companies in the industry do not promote. Free gift options such as BOGO scheme maintains quality perceptions and increase deal value. Thus, in order to overcome the problem that promotions undermine quality perceptions, free gift provides a feasible alternative.
In addition, consumers may infer that getting a discount does not result in a lower selling price as marketers raise the initial price of the item, holding the selling price remains constant. In this case, getting a discount does not result in a lower selling price, which means there is simply no way that negative price-quality inferences could undermine the perceptions of value (Darke and Chung, 2005). As a promotional tactic, advertising serves as the most important tool in generating product awareness and stipulation of the mind of a potential consumer to take ultimate purchase choices (Ayanwak et al.
, 2005). BOGO scheme can be used effectively to advertise and gain sales for new product launched in the market. Consumers may repeat the purchase of single brands or change between few brands due to the perceived quality of the products sold (Yee and Sidek, 2008). Researchers have initiated that promotions, particularly price promotions have negative effect on brand equity (Mela et al., 1997). BOGO scheme itself is value added scheme since it provides a free product when the original product is purchased.
Consumer purchase satisfaction is identified to contain a positive impact on market share and may be moderated by factors such as price sensitivity and perceived value (Magi, 2003). Consumer satisfaction is the post-purchase evaluation of a service offering (Oh, 2000). Marketers need to ensure that BOGO scheme is creating satisfaction among the consumers to make the scheme successful as a discount sales promotion and to create the repurchase interest from consumers. In this huge society, there are thousands if not, uncountable amount of supermarkets and small convenience stores in existence, trading products every day, yet, how are they supposed to earn a somewhat nice amount of cash with such giant rivalries around them? Obviously, human beings are able to constantly generate new working marketing strategies, several go outdated within months but few still apply as impressive even to date, introducing the Buy One Get One Free pricing strategy. You must be joking if you have never seen the “Buy One Get One Free” technique, it is effective all the time, why? Due to the fact that you receive something free, its value is oftentimes looked as a huge deal. The strategy is impressive simply because we all like free products, we don’t like paying for things, if something free has been offered right in front of us, why not take it for granted? This is the reality of us and no one can pretend it does not exist. Even if you carefully take a glance at it in a mathematical way, it’s pretty much only just a half-taken-off discount, but the psychological perception is way above that. Yet, you really should take note that the “BOGOF” delusion does not work as strong in all cases, because if you intentionally send off another copy of your good, you’re really saying: No one is buying my products, I’ll give you a discount and buy it for me please.
(pretty much a bribe) You wouldn’t want to do that. The obvious answer is that it will definitely lower your brand’s credibility, you will turn socially disliked since you are trying to upsurge your sales, and most crucially of all, your product may actually not be that “good-quality”. To defend for a clean company reputation, it’s about keeping your value up at a medium range, this is called image pricing, and your company will remain unhurt while your opposition rush selling their products. Of course, using prestige pricing (also called image pricing) only runs successfully for high-end and luxury based products, not cereals. Meaning, the BOGOF trick works effective only at average goods that are not extremely pricey. Due to the fact that a lot of people use this “Buy One Get One Free” tactic, people are beginning to realize they are actually getting tricked.
Since sometimes the “1” is usually priced higher than its original price to create the deal, so, a real effective way to prevent the customers from backing away is to take the strategy to a higher level like “Purchase 5 Now and Get 2 Free” Really, just simply be creative, play with math and by all means, always experiment and so you will know whether your target consumers like a certain pricing sneaky trick or if they ignore it. One of the biggest marketing ideas in recent years has been the concept of Buy One Get One. This can come in a variety of offers from buy one get one free to buy one get one 50% off. But no matter the variety, they all do one thing very well – they drive sales.
The most important part of writing effective ad copy is to have a compelling offer. And buy one get one, or BOGO for short, is compelling. Like many offers, it is the perception that is most important, not the reality. In fact, the reality is if you do a BOGO 50% off, it is the same as 25% off your entire purchase for the customer, but it feels like so much more.
I remember when the state of Texas implemented a sales tax holiday the first weekend in August for back to school supplies. It included anything a child needed for school. So in addition to pencils and paper it also included backpacks and clothes and shoes.
Any of the qualified items that a person bought this weekend (even if they may not use it for school) was tax-free. That first weekend, we did more business than any other weekend that year – yes, including Black Friday or Christmas weekend. We were definitely caught off guard. People came in the stores in droves and our staffing was for a 15% sales gain YOY, so we were not prepared. Thankfully, we got people in the store and had a terrific, fun weekend.
(Always fun when you are selling more than ever!) But the amazing part was the deal or offer. Each customer saved 8.25% (our sales tax rate) and that was it. We had no other deals or sales that weekend. They just saved 8.25% and the customer loved it! And we loved it even more as storeowners. The perception for the customer was that they were getting a big deal.
And that is what matters. BOGO is one of the best “perception” offers you can use. But the beauty of this offer is in its benefit to the retailer.
If you were to run 50% off everything in the store, you would have a lot of tickets with one item on them. That means your margins for the day would be hit hard. But if you did a BOGO, then your margins still take a hit, but not as dramatic. BOGO is designed to clear out and move inventory. Use it in that way. It is also a way to create cash flow. Use BOGO when you want to generate more cash. People have to buy more (higher $ per ticket) to get the offer, so you get more cash.
While this is only true if your BOGO is a % off the 2nd item; it does work. And since BOGO is a common offer for customers now, the psychology of the deal is often times the same – meaning BOGO free and BOGO 50% still make me as a customer feel like I got a great deal. Just like the sales tax holiday made the customer feel like they were getting the best deal. Let’s face it, I could run a 16.5% off everything in the store event (double the sales tax) and not even come close to the amount of sales we did during those sales tax holidays. One note on the “dark side” of BOGO. They are people who, if they cannot find a 2nd item, will not buy the first.
But these are a small % of your customers. So do not let them freak you out. Just know that it will happen and make sure that you have plenty of great 2nd items to choose from in your store. SIGNIFICANCE OF THE STUDY This study will help consumer’s awareness about this kind of pricing strategy. The researchers will find out and help consumers to recognize if they are really saving money or people are beginning to realize they are actually getting tricked. We all know that Filipinos think that this is the best way to save money. Buy 1 Take 1 is a great discount technique to use to appeal to consumers.
The research will be also helpful specially to the future entrepreneurs it helps boost sales and profits, it is a great tool that can help you get rid of your less desirable inventory quicker and maintain profitability at the same time. Once you’ve figured out what you’re selling, it is important to know whom you’re selling to. Buy 1 Take 1 can help you achieve one of the biggest retail goals, creating loyal customers. The future researchers will also benefit on this research.
SCOPE AND LIMITATION This study was conducted to determine the impact of Buy 1 Take 1 to the random consumers of four barangays in Bacoor, City Cavite. This study is conducted on sampling of household survey. The research will focus on the awareness and impact to the consumers.
This would be helpful to understand the relative strength and risk exposure to the entrepreneurs and marketers also. The study does not cover consumer’s perception towards this kind of marketing strategy.STATEMENT OF THE PROBLEMGENERAL PROBLEM The purpose of the study is to determine the impact and effectiveness of Buy 1 Take 1