Price promotions are pervasive in grocery markets. A household can respond to price promotions by effectively cherry-picking through (1) spatial price search across stores and (2) temporal price search across time. However, extant research has analyzed these two dimensions of price search only separately and therefore underestimates both the consumer response to price promotions and the impact of promotions on retail profit. In this article, the authors introduce an integrated analysis of spatial and temporal price search. They seek answers to three questions: First, what are the predictors of household decisions to perform either spatial or temporal price search? Second, how effective are the temporal, spatial, and spatiotemporal price search strategies in obtaining lower prices? and Third, what is the impact of alternative price search strategies on retailer profit? The authors use a unique data collection approach that combines household surveys with observed purchase data to address these questions. Their key results are as follows: Geography (the spatial configuration of store and household locations) and opportunity costs are useful predictors of a household's price search pattern. Households that claim to search spatiotemporally avail approximately three-quarters of the available savings on average. Households that search only temporally save about the same as those that search only spatially. The negative effect of cherry-picking on retailer profits is not as high as is typically believed.
ACNielsen (2006), “Promoted Volume: Are You Driving Purchases or Renting Consumers?” paper presented at the Consumer360 Conference, (May 16), (accessed June 2006), [available at http://www.consumer360.com/sessions.html].
BayeMichael R., MorganJohn, and ScholtenPatrick (2003), “The Value of Information in an Online Consumer Electronics Market,”Journal of Public Policy & Marketing, 22(Spring), 17–25.
4.
BeattySharon E., and SmithScott M. (1987), “External Search Effort: An Investigation Across Several Product Categories,”Journal of Consumer Research, 14(June), 83–95.
5.
BellDavid R., ChiangJeongwen, and PadmanabhanV. (1999), “The Decomposition of Promotional Response: An Empirical Generalization,”Marketing Science, 18(4), 504–526.
6.
BellDavid R., ChiangJeongwen, and LattinJames M. (1998), “Shopping Behavior and Consumer Preference for Store Price Format: Why ‘Large Basket’ Shoppers Prefer EDLP,”Marketing Science, 17(1), 66–88.
7.
BucklinRandolph E., and LattinJames M. (1992), “A Model of Product Category Competition Among Grocery Retailers,”Journal of Retailing, 68(3), 271–93.
8.
CarlsonJohn A., and GiesekeRobert J. (1983), “Price Search in a Product Market,”Journal of Consumer Research, 9(March), 357–65.
9.
ChanTat Y., SeetharamanP.B., and PadmanabhanV. (2005), “Modeling Locations and Pricing Decisions in the Gasoline Market: A Structural Approach,” working paper, Olin School of Business, Washington University, St. Louis.
10.
ChibSiddhartha, SeetharamanP.B., and StrijnevAndrei (2002), “Analysis of Multi-Category Purchase Incidence Decisions Using IRI Market Basket Data,”Advances in Econometrics, 16, 57–92.
11.
ConliskJohn, GerstnerEitan, and SobelJoel (1984), “Cyclic Pricing by a Durable Goods Monopolist,”Quarterly Journal of Economics, 99(3), 489–505.
DrezeXavier (1999), “Rehabilitating Cherry Picking,” working paper, Marshall School of Business, University of Southern California.
14.
FeickLinda F., and PriceLawrence L. (1987), “The Market Maven: A Diffuser of Marketplace Information,”Journal of Marketing, 51(January), 83–97.
15.
FoxEdward J., and HochStephen J. (2005), “Cherry-Picking,”Journal of Marketing, 69(January), 46–62.
16.
FoxEdward J., MontgomeryAlan L., and LodishLeonard M. (2004), “Consumer Shopping and Spending Across Retail Formats,”Journal of Business, 77(2), S25–S60.
17.
FoxEdward J., MontgomeryAlan L., and SempleJohn (2002), “Understanding Cherry-Pickers: How Retail Customers Split Their Shopping Baskets,” working paper, Cox School of Business, Southern Methodist University.
18.
HochStephen J., KimByung-Do, MontgomeryAlan, and RossiPeter E. (1995), “Determinants of Store-Level Price Elasticity,”Journal of Marketing Research, 32(February), 17–29.
19.
HuffL. David (1964), “Defining and Estimating a Trading Area,”Journal of Marketing, 28(July), 34–38.
20.
InmanJ. Jeffrey, ShankarVenkatesh, and FerraroRosellina (2004), “The Roles of Channel-Category Associations and Geodemographics in Channel Patronage,”Journal of Marketing, 68(April), 51–71.
21.
JacobsonRobert, and ObermillerCarl (1990), “The Formation of Expected Future Price: A Reference Price for Forward-Looking Consumers,”Journal of Consumer Research, 16(4), 420–32.
22.
LevyMichael, and WeitzBart A. (2004), Retailing Management.New York: McGraw-Hill/Richard D. Irwin.
23.
LittleJohn D.C., and ShapiroJeremy F. (1980), “Theory for Pricing Nonfeatured Products in Supermarkets,”Journal of Business, 53(3), 199–209.
24.
MaceSandrine, and NeslinScott A. (2004), “The Determinants of Pre- and Postpromotion Dips in Sales of Frequently Purchased Goods,”Journal of Marketing Research, 41(August), 339–50.
25.
ManchandaPuneet, AnsariAsim, and GuptaSunil (1999), “The ‘Shopping Basket’: A Model for Multicategory Purchase Incidence Decisions,”Marketing Science, 18(2), 95–114.
26.
MarmorsteinHoward, GrewalDhruv, and FisheRaymond P.H. (1992), “The Value of Time Spent in Price Comparison Shopping: Survey and Experimental Evidence,”Journal of Consumer Research, 19(June), 52–61.
27.
McWilliamsGary (2004), “Minding the Store: Analyzing Customers, Best Buy Decides Not All Are Welcome,”The Wall Street Journal (Eastern edition), (November 8), A1.
28.
MelaCarl F., JedidiKamel, and BowmanDouglas (1998), “The Long-Term Impact of Promotions on Consumer Stockpiling,”Journal of Marketing Research, 35(May), 250–62.
29.
MogelonskyMarcia (1994), “Please Don't Pick the Cherries,”Marketing Tools, (September–October), 10.
30.
NarasimhanChakravarthi, NeslinScott A., and SenSubrata K. (1996), “Promotional Elasticities and Category Characteristics,”Journal of Marketing, 60(April), 17–30.
31.
NeslinScott A., HendersonCaroline, and QuelchJohn (1985), “Consumer Promotions and the Acceleration of Product Purchases,”Marketing Science, 4(2), 147–65.
32.
NewmanW. Joseph (1977), “Consumer External Search: Amount and Determinants,” in Consumer and Industrial Buying Behavior, WoodsideArch, ShethJagdish, and BennettPeter, eds. New York: Elsevier, 79–84.
33.
Popkowski-LeszczycPeter T.L., SinhaAshish, and TimmermansHarry J.P. (2000), “Consumer Store Choice Dynamics: An Analysis of the Competitive Market Structure for Grocery Stores,”Journal of Retailing, 76(3), 323–44.
34.
PutrevuSanjay, and RatchfordBrian T. (1997), “A Model of Search Behavior with an Application to Grocery Shopping,”Journal of Retailing, 73(4), 463–86.
35.
RatchfordBrian T., and SrinivasanNarasimhan (1993), “An Empirical Investigation of Returns to Search,”Marketing Science, 12(1), 73–87.
36.
SobelJoel (1984), “The Timing of Sales,”Review of Economic Studies, 51(3), 353–68.
37.
SunBaohong, NeslinScott A., and SrinivasanKannan (2003), “Measuring the Impact of Promotions on Brand Switching When Consumers Are Forward Looking,”Journal of Marketing Research, 40(November), 389–405.
38.
ThomadsenRaphael (2005), “The Effect of Ownership Structure on Prices in Geographically Differentiated Industries,”Rand Journal of Economics, 36(4), 908–929.
39.
UrbanyJoel E., DicksonPeter E., and KalapurakalRosemary (1996), “Price Search in the Retail Grocery Market,”Journal of Marketing, 60(April), 91–104.
40.
UrbanyJoel E., DicksonPeter E., and SawyerAlan G. (2000), “Insights into Cross- and Within-Store Price Search: Retailer Estimates vs. Consumer Self-Reports,”Journal of Retailing, 76(2), 243–58.
41.
VarianHal R. (1980), “A Model of Sales,”American Economic Review, 70(4), 651–59.
