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An economic analysis of sales flyer advertising frequency by competing grocery manufactures and supermarkets

University of British Columbia

The advertising strategies of retailers competing for processed food and beverage product markets are studied by constructing a theoretical model and then testing the model's predictions using statistical analysis of primary data. The advertising decisions are jointly determined by the food manufacturers and food retailers. Categorical data consisting of yes-no advertising decisions for 22 processed food products was collected from the sales flyers of four major supermarket chains and was recorded in 2 X 2 contingency tables. The chi-square test for a 2 X 2 contingency table was then used to test the hypotheses concerning yes-no advertising decisions for a particular product in three pairs of competing supermarkets, and for different brands of a common product by two competing manufacturers within a particular supermarket. In the second category four scenarios were considered: (1) a chosen brand versus the private label, (2) a chosen brand versus any national brand other than the chosen brand, (3) any national brand versus the private label, and (4) the private label of one supermarket versus the private label of another supermarket. The results show overwhelming support for the hypothesis that food manufacturers and retailers are randomly choosing which products to promote and when to promote them. For the within-store analyses, the advertising strategies for national brands and private label products are independent in most cases. Results show that there is a negative correlation for those few cases that are statistically dependent, apparently that the food companies are choosing to advertise different brands in a given period to avoid intensive competition. However, in the supermarket selling a large volume of products with private labels, there is a positive correlation for those cases that are dependent. The retailer is evidently advertising both the national brand and the private label to promote the private label products as substitutes for the national brand products.

Text

2009-12-10

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http://hdl.handle.net/2429/16338

Agricultural Economics

University of British Columbia

UBCV

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