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Do price elasticities vary by market channel?
This question can be answered by
an analysis of data across different
market channels for products of
various categories. The analysed
channels included: Hypermarkets
(>2500m2), Supermarkets
(2500>=400m2), Convenience
(<400m2), Petrol Stations, and
major categories such as instant
soups, detergents, auto dish wash,
air care, confectionery, carbs,
snacks, laundry detergents, dairy,
shampoo, tobacco and water.
The measured elasticities confirmed
that consumers are less price
sensitive when their purchase is
impulsive/need driven. Very similar
trends were also observed for
promotional price elasticities.
Overall, the analyses indicated
that a brand’s price elasticity was
found to be lower in Impulse than
in Planned Purchase channels and
elasticities tend to be similar in
Hyper- and Supermarkets.
In comparison to Hypermarkets/
Supermarkets, a brand’s elasticity is
often significantly lower in Impulse
Purchase channels. This lowering
of price sensitivity was even more
pronounced in Impulse Channels,
where purchases are likely to be
more need-driven (ie in Petrol Stations).
This helps define the broad
guidelines for regular price and
promotional price strategies across
channels.
Hypermarkets & Supermarkets
Shelf price position is critical. The
available time and a wide product
range increase consumers’ price
sensitivity. Shoppers’ promotional
responsiveness is higher than in
other channels due to the longer
length of time spent in the store.
They are more likely to look for
price deals and private transport
will facilitate bulk purchases.
Convenience Stores
Consumers are less price-focused
and purchases are need-driven
(for instance, a top-up purchase
of necessities). A competitive
regular price strategy within the
available range is still relevant.
Promotions are generally less
efficient and therefore need to
be well-presented and attractive.
Large volume offers will be
less suited to the Convenience
shopper.
Petrol Stations
Product availability is more
important than price point as
consumers’ purchase is impulse-
driven. A lack of range will also
reduce price-consciousness.
Promotions would only work on
pure impulse purchase
categories, ie soft drinks and
confectionery, and need to be
very attractive and well located.
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