124 Int. J. Value Chain Management, Vol. 7, No. 2, 2014

Copyright 2014 Inderscience Enterprises Ltd.

Value-based promotion a consumer retention tool in electronics goods market

Gemini V. Joy* Anna University, Chennai 600 025, Tamilnadu, India E-mail: geminivjoy@gmail.com *Corresponding author

P.S. James T.A Pai Management Institute (TAPMI), P.O. Box 9, 80 Badagubettu, Manipal-576 104, Karnataka, India E-mail: james@tapmi.edu.in

N. Senthil Kumar Department of Management Studies, Anna University, Chennai, 600-025, India E-mail: sen.nsk76@gmail.com

Abstract: The marketing world is spinning around different types of value for money strategies. All the sales promotion tools are assuring the customer about an incomparable deal. What more the customers are getting is always pacifying the consumer during his purchasing efforts. Value for money-based sales promotion is one of the most significant strategies that can be adopted by the mobile handset marketer. The present study had taken four value-based sales promotion tools such as product bundling offer, exchange offer, free after sales service for limited period and Take one get one free offer. The study also analysed the impact of the said factors in consumer electronics segment among consumers of different demographic profiles. It also tested the influence of the four factors in value perception of customers.

Keywords: customer value; customer perceptions; customer evaluations; sales promotion.

Reference to this paper should be made as follows: Joy, G.V., James, P.S. and Senthil Kumar, N. (2014) Value-based promotion a consumer retention tool in electronics goods market, Int. J. Value Chain Management, Vol. 7, No. 2, pp.124133.

Biographical notes: Gemini V. Joy is a doctoral student of Anna University, Chennai. Her research interest is in the area of brand equity and is zealous in studying about customer-based brand equity of mobile phone users. After her graduation in psychology and post-graduation in MBA she has been fervent in studying about marketing. She takes classes for enthusiastic students about marketing matrices and brand management. A prolific researcher, she has also

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multidisciplinary ideas and has published papers in HR and KM as well and has many international conference presentations to her credit.

P.S. James is a Professor of T.A Pai Management Studies, Manipal. After serving Indian Army and getting a graduate degree from Defense Services Staff College, he completed his MBA programme from UBS, Chandigarh and Israel Asper School of Management of University of Manitoba, Canada. He also took a Masters degree in Psychology from Madras University and completed his PhD from Devi Ahiliya University, Indore. After a noble career as the Founder Dean of Saintgits Institute of Management he is now serving T.A. Pai Management Institute as a Faculty. An ardent researcher, he has published in leading journals and has more than 40 papers to his credit. His interests are in application of motivational language theory propounded by Sullivan, exploring multiple intelligence and kinesthetic intelligence in India.

N. Senthil Kumar is currently serving the Department of Management Studies, Anna University, Chennai as an Associate Professor. He has a total academic experience of 14 years. After his Bachelors in Mechanical Engineering and post graduate degree in MBA (Operations and Marketing Management) he has also secured a PhD in the area of Management. Being a PhD guide he has guided many students towards academic excellence. His research papers (nearly 20 of them) and case studies have been published in leading management journals across the world. His expertise includes service quality, supply chain optimisation, and application of sophisticated operations research techniques in the services sector.

1 Introduction

Electronics goods market is witnessing changes, modifications and cut throat competitions. All the segments from mobile handsets to the most complicated or advanced computer systems are competing for a reasonable market share. Markets are fragmented on the basis of heterogeneous hair thin customer cluster groups to homogenous unanimous demands from all. Marketers are confused about how they can create a place in the mind of consumers. The recession phase of 2013 also had its devastating effect electronic goods market due to cost cutting plans on life style products by the customers. To breathe life into this inactive market, the marketer can try out some of the value for money promotional strategies.

Value can be generated through the interaction of some individuals/institutions which can give a mutual support. Marketing functions (packaging, selling promotion etc.) are continuously working towards value creation process. Decisions on pricing by the marketers are ruled by value oriented strategies such as the product assortments, free of cost services, discounts, take one get one free etc. The gap between inactive customer and active marketer is fixed by value-based marketing strategies. It made two unrelated lines to intersect on a common point (Alderson and Martin, 1965; Burt, 1992). The top ranked item in exchange of goods and services between buyer and seller is evaluated on the basis of value received by buyer from seller. Value in exchange is only one type of value. According to Mittal and Sheth (2001), the value

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definition given by the firms is expanded through performance and personalisation value and value for money. Lusch and Vargo (2006) describe the alteration from value in exchange to value in use. After understanding the importance of focusing on value offers, marketers around the globe started tailoring strategies accordingly. Value-based sales promotion is trigger the consumer to receive an incentive for the purchases they are doing in the market.

2 Survey of literature

Pricing decisions must start with customer value. In any purchase situation, the customer is buying some benefits in exchange of a price for the received benefit to the seller (Gale, 1994). Value-based pricing is depended upon customers perception of value rather than the sellers cost-based pricing. Hence the marketers who believe in value-based marketing sets price before their marketing programme to satisfy and retain their market. Analysis of consumer needs and value perceptions followed by setting of price to match the value perceptions of customers are value-based pricing.

Right mix of product/service and quality at a reasonable price is good value pricing strategy. This might call the attention of marketers to less expensive models of established brand name products. Wal-Mart introduced EDLP every day low pricing, a good value pricing strategy to the marketing world. This involves charging low price every day in a constant manner. Along with the above said strategy, electronic markets also witnessed the justification strategies adopted by the high prices companies. For their high priced commodities, the said companies introduced value-added features to differentiate their product models. The biggest question need to be answered by the firms is how to offer customers products and services with perceived value. Creating a different customer experience in addition to value pricing and value added features may be the proper response for this but the competitive advantage of modern enterprises lies in their ability to create desirable customer experiences continuously. Many corporates are taking innovative approaches to create customer experiences.

Value can be defined as the consumers general evaluation of the usability of a product based on cognitive processing of what benefil received and how much the customer invested for that (Zeithaml, 1988; Monroe, 1990). It includes social benefits received by a customer firm in B-to-B context in exchange for the price paid (Anderson et al., 1993). We can also explain customer value as a cognitive bonding between a customer and a producer (Butz and Goodstein, 1996).

Customer - value and customer satisfaction goes shoulder to shoulder because of the involvement of processes such as assessment and judgment about products, and both give a special importance for usage situation (e.g., Clemons and Woodruff, 1992; Spreng et al., 1996; Westbrook and Reilly, 1983). Overall satisfaction is the customers feelings in response to evaluations of one or more use experiences with a product but what exactly, do customers evaluate about use experiences? The customer value hierarchy helps to answer this question. When the customer received a stimulus for evaluation, he connects himself to some notions, learned from past and present experiences, about what value he desires for. The customer value hierarchy suggests that desired value is composed of preference for specific and measurable dimensions the dimensions/features, its performances, and consequences connect to goals for use

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situations. Expected value, in turn, routes customers when they form evaluation-based perceptions of how good or poor a product has performed in the required situation. In other word, the buyers assess their experiences on the features offered, product performance, consistency and reliability in performances and consequences constructed in their desired value hierarchies. Assessed value will be stored and formed as the overall satisfaction / feelings towards the brand (Churchill and Surprenant, 1982), or they may compare perceived value to experienced value and (Clemons and Woodruff, 1992; Woodruff et al., 1991). As per the version given by value hierarchy, different kinds of overall satisfaction feelings may arise (Clemons and Woodruff, 1992). The purchasers expected value hierarchy contributed to satisfaction feelings at each level in the hierarchy. Thus customers may experience more or less satisfied with product features and performances, use consequences, and even goals and purpose they want to achieve.

In brief customers may view and experience value in different manners at the time of purchase than pre-purchase or post purchase situations (Gardial et al., 1994). Gale (1994) described customer value as the adjustment of price in relation to the perceived quality of the market. Customers have expectations which usually act as a frame of reference for them to measure the performance of a firm (Robledo, 2001).

Linking perceived benefits and perceived sacrifice is perceived customer value (Ravald and Grnroos, 1996). Failure in keeping the promises expected from sellers by the buyers will create gaps. These gaps between the expected and perceived value will give adverse effects on retention of customers (Wikner, 2007). Price, quality, brand Image, company image and service quality are having a major role in customers perceptions of value (Naumann, 1995).

Figure 1 Research hypothesis

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3 Research questions

Based on the literature survey, the following questions focused on value perceptions of consumers regarding value-based sales promotion strategies had formulated and tested for the study:

1 Is there a significant perceptual difference exist between male and female consumers of electronic goods market regarding product bundling offers, exchange offers, free after sales service and take one get one free offers?

2 Is there a significant perceptual disparity exist among consumers of different marital status regarding product bundling offers, exchange offers, free after sales service and Take one get one free offers of electronic goods market?

3 Do product bundling offer, exchange offer, free after sales service for limited period and take one get one free offer have an influence on customer perception of value?

4 Methodology of the study

The study is conducted among the consumers of different demographic profiles in Kerala, which is having one of the highest densities of electronic goods users in India. The sample for the survey is drawn from different gender groups and marital status. Table 1 Consumer profile

Marital status Gender

Married Unmarried Male 105 34 Female 86 32

The statistical tools such as regression, ANOVA and t-test are used for testing the hypothesised relationships regarding the influence of Product bundling offer, exchange offer, Free after sales service for limited period and Take one get one free offer on positive customer perception of value on consumer electronics purchase decision and perceptual variation among different respondents of different demographical backgrounds.

5 Relevance of the study

Durable goods market is demanding high investment for majority of its product categories. In addition to the above said factor, it also has a wide number of players, who offer great varieties of products through innovative marketing techniques. Among all the strategies, the consumers are giving importance to value-based sales promotions. The large investment product markets make the consumers to think wisely and direct their investments on commodities which give an additional value for normal payments. The area of the conducted study is comparatively new in its connection with value addition in promotional offers. Also the study is providing attitudinal and behavioural evidences on

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how the consumers are reacting to value-based promotions by the consumer electronics marketers.

6 Empirical results and discussion

Ha1 There is a significant difference exists between consumers of different demographic profiles regarding their perception on product bundling offer.

Table 2 Perception of Consumers from different demographic background to product bundling offers in consumer electronic market

Parameter Group variable Individual variables Mean t Sig. Male 3.26 Gender

Female 3.02 1.387 .652

Married 3.62

Product bundling offer

Marital status Unmarried 3.11

2.124 *.021

Notes: Table value: 1.96 *p .05 and t-value (1.387) < 1.96 in the case of gender categories and t-value (2.124) > 1.96 and p-values (.021) < .05 in the case of marital status, Ha1 is partially accepted. The result shown no perceptual disparity among consumers from different gender categories and regarding the perception of respondents from different marital status there exist a mean about product bundling offer. Married consumers given more positive perception towards the offer than unmarried. Table 3 Perception on exchange offers in electronics market

Parameter Group variable Individual variables Mean t Sig. Male 4.38 Gender

Female 4.03 .978 .325

Married 4.57

Exchange offer

Marital status Unmarried 3.11

2.546 *.004

Notes: Table value: 1.96 *p .05 and t-value (.978) < 1.96 in the case of gender categories and t-value (2.546) > 1.96 and p-values (.004) < .05 in the case of marital status, testing on hypothesis given a mixed result. Unmarried consumers slightly neutral in their opinion about exchange offers than the married consumers.

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Table 4 Perception on limited period free after-sales service offer in electronics market

Parameter Group variable Individual variables Mean t Sig.

Male 4.01 Gender

Female 3.98

2.721 *.000

Married 4.29

Free after-sales service offer for limited period

Marital status

Unmarried 4.06

2.344 *.018

Notes: Table value: 1.96 *p 1.96 and p-values (.017) < .05 in the case of marital status, Ha4 is partially accepted. Eventhough the consumers of different gender category shown similar evaluation, consumers of different marital status exhibited a perceptual disparity regarding their opinion about Take one get one free offer. Married consumers shown more favourable tendency towards the offer than unmarried.

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7 Standardised estimates of the hypothesised relationships using regression analysis

Multiple regression analysis is applied for testing the influence of certain variables on positive customer perception of value in electronics goods market. The linear regression model thus developed is:

7.1 Model 1

Ha5 Product bundling offer, exchange offer, free after sales service for limited period and take one get one free offer have an influence on positive customer perception of value in electronics goods market.

Y b c d f= + + + + + where

Y positive customer perception of value to money

constant

b product bundling offer

coefficient of product bundling offer

c exchange offer

coefficient exchange offer

d free after sales service for limited period

coefficient of free after sales service for limited period

f take one get one free offer

coefficient of take one get one free offer

sampling error. Table 6 Regression model output for positive customer perception of value

Predictors Standardised beta coefficients t Sig. Product bundling offer .626 7.013 *.000 Exchange offer .548 5.432 *.012 Free after sales service for limited period .430 4.876 *.002 Take one get one free .383 4.321 *.024

: .728* .05Dependent Variable positive customer perception of value R square = < Since R square value is .728, 72% variability in positive customer perception of value is explained by the independent variables taken for the study.

As per the output displayed by Table 6, the variable, Product bundling offer ( = .626; t = 7.013) and exchange offer ( = .548; t = 5.432) influence positive customer perception of value to money in electronics goods market and with high significance where the other variables, free after sales service for limited period ( = .430; t = 4.876)

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and take one get one free ( = .383; t = 4.321) influence it with a less significance. Hence the overall model is significant with the selected variables and Ha6 is supported. Henceforth we can say that the selected variables: product bundling offer, exchange offer, free after sales service for limited period offer and take one get one free have a remarkable place in value creation of electronics goods purchases.

8 Major results and implications of the study

The selected area of the study is comparatively less explored one in regard to segment, i.e., electronics goods and combination of selected variables (demographic variables and value-based sales promotion strategies). Electronics goods manufacturers undoubtedly view sales promotion tools as a measure to shore up sales, the study is adding knowledge to the specialised segments of marketing such as consumer behaviour and promotion management. It is also assisting marketers to gain knowledge about the impact of offers as value to customer perception and its intensity across various consumer demographic profiles.

The study related to preference for a promotional offer during purchase decision making of electronics goods among different gender categories of Kerala market shown a favourable perception. When applied it in different offers categories such as Product bundling offer, Exchange offer, Free after sales service for limited period and Take one get one free offer. But regarding respondents from different marital status given mixed results, i.e., the married shown more favourable responses towards the offers than unmarried customers. Hence we can conclude that experts, who are focusing on electronics goods purchasers, have to tailor different programmes for consumers of different demographic profiles.

9 Areas for future research

The conducted study has taken only very few variables of sales promotion tools for value addition to the customers. The general category of product segment did not given the impact of any specific categories such as TV, refrigerator, oven etc. Hence the future studies can consider the selected sales promotion strategies on selected durable goods categories and expand it with additional strategies and other product categories such as high involvement and low involvement goods.

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