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  • Writer's pictureT. (Ned) Choungprayoon

Does One Plus One Always Equal Two?

Updated: Mar 9, 2023

Is it better for retailers to combine both price cuts and store flyer advertising at the same time, or should retailers use them in separate weeks? An interview with Wiebke Keller on her recent IJRM paper.



Imagine you are commuting back home looking forward to watching your favorite Netflix series, then you see a store flyer showing chips are on promotion, would you go to get the chips from that store so you could have them while watching the series? Would you get them if you didn’t see the flyer? Would you still get them if they were in the flyer, but not on discount?


Retailers usually use store flyers to draw customers’ attention and use price cuts to incentivize customers to buy. However, it is unclear to what extent this synergy between these two strategies is beneficial for retailers. In a forthcoming IJRM, entitled “Drivers of the synergy between price cuts and store flyer advertising at supermarkets and discounters,” Wiebke Keller, along with her co-authors, Kai Widdecke, Karen Gedenk and Barbara Deleersnyder, investigate the average synergy between price cuts and store flyer advertising and examine how this synergy differs across brands, categories and store formats.


“There is a lot of literature on advertising, there is a lot of literature on price promotion, but less about these two combined, and how they support each other” Wiebke Keller


Team synergy required for this project

“It was mostly during Covid time. The four of us never met in person as a team. It was always part of the team that met, and then one or few people Skyped/Zoomed in. Team synergy is clearly required for this project and it went smoothly because we know each other well.” Wiebke Keller

Disentangling the synergetic effect between price cuts and store flyer advertising across brands, categories and store formats, is a difficult task. Research on pricing research and research on advertising are not really synchronized. Studying them together starts from developing the research framework, selecting variables most relevant to the context, conducting statistical analyses and making sure the results are robust. The synergy among co-authors is key for the success of this project. The authors worked in parallel on the theoretical part and the analytical part, and then synchronized progress together.


“We had the question about the synergy effect between price and advertising quite a few years back before we worked on the data, thanks to Kai, one of the authors who persistently pursued the answer. Then, We had sub teams, some in charge of analytical parts, some in charge of theoretical parts. We also met frequently online, all four of us, to discuss each detail of the paper.” Wiebke Keller

Does one plus one always equal two?


For the synergetic effect on brand sales, the answer is “not always”. One plus one might sometimes be less than two for discount stores but it is usually more than two for supermarkets. In other words, for supermarkets, the effect of using price cuts and store flyer advertising together is larger than the sum of the effects when both tools are used separately for most cases. This is because discounters usually have smaller assortments, hence, consumers may not need the flyer to help them recognize the brands (on discount).


Then, what is required for more synergetic benefits between price cuts and store flyer advertising?


Brand and category characteristics are important drivers. Private labels benefit more from the synergy as well as brands with lower price premiums. Moreover, the synergetic effect is more beneficial for hedonic products or products with lower prices.


Want to cite this paper? Widdecke, Kai A., Wiebke IY Keller, Karen Gedenk, and Barbara Deleersnyder. "Drivers of the synergy between price cuts and store flyer advertising at supermarkets and discounters." International Journal of Research in Marketing (2022).


Read the full paper in open access here.


 

Meet Wiebke I.Y. Keller

 

Wiebke I.Y. Keller


Assistant Professor of Marketing at the University of Tübingen

What drives you to do the research / work you do?

To be always curious about what’s going on and to learn about things that we don’t fully understand. I love to dig into data and find anything that might help us to understand what we haven’t understood yet. I have a joy for an applied side in which whatever we find might directly help practitioners such as retailers and manufacturers to make better decisions.


Fun-fact about the author: If you were not an academic, what would you be?

I would choose a job that challenges me to think outside the box and look at things from different perspectives.


 

This article was written by

T. (Ned) Choungprayoon

Ph.D. Candidate at the Stockholm School of Economics (Sweden)



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