Extreme Price Shoppers Don't Hurt Profits

  • September 14, 2007
Everyone's seen them: They carry hundreds of coupons, buy in bulk, and challenge the checkout people on every third price. Retailers have always believed these "extreme price shoppers" cut into profits.

But a new study from the Yale School of Management and SUNY Buffalo has found that these super-cost-conscious consumers represent a much smaller segment of shoppers than many food marketers had previously believed. About 1% of grocery stores' customers fit into this category, and they reduce retailer's profit by less than 0.2 %.

In this research, the study's authors looked at four categories of shoppers: "Incidentals," who do not search for price promotions at all; "temporals," who are loyal to one store but time their purchases to price promotions; "spatials," who make regular weekly trips to more than one store to get the best prices, and "spatio-temporals," who make regular weekly trips to more than one store and focus on prices shifts within each store.

Simply being in the right place at the right time, researchers say, incidentals accessed 54% of potential savings. And spatio-temporal shoppers got the best deals, snagging 76% of the potential savings available. "Retailers should be reassured by our results on their use of promotions," the researchers say. "Price promotions serve an important role in retaining profitable store-loyal customers, while the negative impact through extreme cherry picking is minimal."

--Sarah Mahoney



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