Grocery Spending

Because it's the winter break, I actually have a bit of time to read articles that are not directly related to my current research project.  Here's one I read tonight - a field study in a grocery store - that was pretty interesting:

Grocery store customers were asked to list the items they planned to purchase, the quantity of each, the total amount of money they intended to spend, and their estimated cost for each item.  By subtracting the sum of the estimated costs for the planned purchases from the total amount of money, the researchers estimated the "slack" in their budget - i.e., the room in their mental budget for unplanned purchases (forgotten needs and impulse purchases).  Participants did their grocery shopping as usual, but they used a hand-held scanner gun on each item as they put it in their cart.  By knowing the order in which items were selected, the researchers could then examine purchases of items before and after the participant's "slack" was spent.  The researchers labeled an item as on promotion if its current price was at least 10% lower than it was the previous week.  They calculated the savings on purchases by subtracting the current purchase price from the prior purchase price. 

They wanted to find out how savings (through promotions) on unplanned and planned products before and after the "slack" had been spent affected spending on unplanned and planned purchases.

Savings on planned purchases:

Before the slack was spent (early in the shopping trip), savings on planned purchases led to more purchasing of planned products, but the nature of this effect depended on the participant's income.  Lower income shoppers tended to switch to a higher-priced brand on another planned product that offset the savings on the other product.  Higher income shoppers tended to stockpile (i.e., purchase more of) the sale item, thus spending more money overall on planned purchases.  However, savings on planned purchases did not affect the purchase of unplanned products.

After the slack was spent (late in the shopping trip), each $1 of savings on planned purchases was associated with a $10 increase in spending on unplanned purchases.  It appears that participants viewed this unexpected savings as a windfall and thus spent more money. 

Savings on unplanned purchases:

Before the slack was spent, savings on unplanned purchases did not affect unplanned spending.

After the slack was spent, each $1 of savings on unplanned purchases was associated with a $6 increase in spending on unplanned purchases.

So a smart grocery store owner will offer price promotions on planned purchases (e.g., yogurt, bottled water, eggs, milk) so that you will spend more money on unplanned purchases (e.g., ice cream, candy bars, cookies).  And if you spend money on unplanned purchases that are on promotion, you will spend even more money on other unplanned purchases.

A smart shopper will not use the fact that cat food was on sale to justify purchasing buy-one-get-one-free gallons of Blue Bell ice cream, which justifies the purchase of King Sized Reese's Peanut Butter Cups in the check-out lane.

Stilley, Inman, & Wakefield (2010). Spending on the fly: Mental budgets, promotions, and spending behavior. Journal of Marketing.