Extreme price shoppers for groceries - those who actively drain retail profits - account for a surprisingly small share of the market and are not having a significant effect on profits, according to a study by researchers at the Yale School of Management and SUNY Buffalo which classifies the segment into four distinct behavioural groups.
This customer segment is usually thought to be a significant drain on retailer profits, the research report asserts. But in quantifying the effect these customers are having the researchers found that as few as 1% of the average grocery store's customers are extreme price shoppers, and that they reduce the retailer's profit by less than 0.2% on average.
Four key personalities
The study by K. Sudhir of Yale and Dinesh K. Gauri and Debabrata Talukdar of SUNY Buffalo used a new method to examine grocery shoppers' price searching strategies, their effectiveness in saving money, and their effect on retailer profits. The authors examined two key ways that consumers search for the lowest prices: across stores (spatial) and across time within the same store (temporal). The authors suggest that most previous research efforts have analysed these two dimensions separately, and therefore underestimated both consumer response to price promotions and the effect of promotions on retail profits.
With two dimensions of price search technique, consumers tend to fall into one of four 'personalities' or strategies: