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RETAIL STRATEGY
By our News Team | 2023
Placing goods that are not on promotion next to ones that are being discounted can have both positive and negative effects.
Researchers from four US universities – Connecticut, Texas A&M, Colorado at Boulder and Florida – have published a new Journal of Marketing article that examines whether price promotions on some products differentially impact demand for other products, depending on their relative locations within a display.
The study, forthcoming in the American Marketing Association’s peer-reviewed publication, is titled ‘The Negative and Positive Consequences of Placing Products Next to Promoted Products’.
Photo by Needpix.com
Consumers select from a variety of competing products in multi-product displays. Some products are discounted, while others in close proximity are regularly priced.
The key question is: Do price promotions on some products differentially impact demand for other products, depending on their relative locations within a display? This new study concludes that the answer is ‘yes’.
The researchers say that when the proximal items (i.e., those placed nearby) and distal items (i.e., those placed farther) are strong substitutes for the promoted item, we find that a price promotion decreases the sales of proximal products relative to distal products. This is known as a ‘negative proximity effect’.
However, when the proximal and distal items are weak substitutes for the promoted item, the promoted product increases the sales of proximal products relative to distal products. This is known as a ‘positive proximity effect’.
“In this case, the proximal product benefits from the increased attention by virtue of being close to the promoted product,” the researchers explain.
The research team found evidence for these sales patterns across eight studies.
Opportunities for marketing managers
Understanding how attention spills over to proximal products creates several opportunities for marketing managers.
Managers can take advantage of this to direct attention to full-priced higher margin brands. Taking this further, positive proximity effects may also occur for non-substitutes (e.g., refrigerated yogurt and refrigerated desserts).
You can read more about the study here.
She brings extensive experience as a senior agency executive and has a particular interest in sports sponsorship and passion-led marketing
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Dr. Kin Kariisa is an extraordinary force at the helm of Next Media Services, a conglomerate encompassing NBS TV, Nile Post, Sanyuka TV, Next Radio, Salam TV, Next Communication, Next Productions, and an array of other influential enterprises. His dynamic role as Chief Executive Officer exemplifies his unwavering commitment to shaping media, business, and community landscapes.
With an esteemed academic journey, Dr. Kariisa’s accolades include an Honorary PhD in exemplary community service from the United Graduate College inTexas, an MBA from United States International University in Nairobi, Kenya, a Master’s degree in Computer Engineering from Huazong University in China, and a Bachelor’s degree in Statistics from Makerere University.
Dr. Kariisa pursued PhD research in Computer Security and Identity Management at Security of Systems Group, Radboud University in Nijmegen, Netherlands. As a dynamic educator, he has shared his expertise as a lecturer of e-Government and Information Security at both Makerere University and Radboud University.
Dr Kin did his PhD research in Computer Security and Identity Management at Security of Systems Group, Radbond University in Nigmegen, Netherlands. He previously served as a lecturer of e-Government and Information Security at Makerere University in Kampala, Uganda and Radbond University in Netherlands.
Dr Kin did his postgraduate courses in Strategic Business Management, Strategic Leadership Communication and Strategies for Leading Successful Change Initiatives at Harvard University, Boston USA.