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Study finds effective plans for discounts on groceries Most aggressive shoppers get 76 percent of savings

For some, supermarket shopping is a mission. Compare the circulars, note the discounts, and hatch a plan for hitting the stores.

The payoff depends on the method shoppers use. But even customers who stroll into a store without any plan can still wind up saving a lot of money, according to a new study.

Debu Talukdar, associate professor of marketing at the University at Buffalo's School of Management, and two other researchers studied the strategies shoppers use for bargain hunting or "cherry picking" at supermarkets, and the savings generated by each method.

Some shoppers use no strategy, simply taking advantage of discounts they come across. These "incidental" shoppers still captured 54 percent of the potential savings in the marketplace, the study found.

That surprisingly high success rate is a benefit of living in a competitive marketplace, where rival chains use promotional items to woo or keep shoppers, he said. (Under the terms of the study, Talukdar said he could not reveal the names of the two chains that were researched.)

Among shoppers who actually plan their outings, two strategies are typical, Talukdar said. One involves staying basically loyal to one store, but altering to the timing of purchases there -- that is, waiting for a week when items are discounted to maximize savings.

Shoppers using this method, formally known as a "temporal price search," obtained 68 percent of the potential savings, Talukdar said. Of the four categories researched, these shoppers contributed most to the stores' total profits, making it worthwhile for a chain to offer periodic promotions to keep them coming, he said.

Another type of strategy involves making trips across different stores to hunt down the best prices on items at a given time. These "spatial price search" customers might have less loyalty than the shoppers who use no strategy or the "temporal price" shoppers. Still, they might buy most of their "non-deal" items at their preferred store and then pick up low-priced items at its competitors.

Shoppers using this "spatial" approach obtained 66 percent of the potential marketplace savings, the study found.

The most sophisticated approach involves combining the temporal and spatial strategies. These customers actively switch between two stores and shift the timing of their purchases, to grab the best deals across stores and over time. These "spatio-temporal" shoppers obtained 76 percent of the possible savings, the study said.

Talukdar said he and the other researchers in the study were curious about just how much of a dent "extreme cherry pickers" made in stores' profits. Such shoppers visit a store almost exclusively for promotional items. Their average "trip basket size" was $13.60, compared to $33.34 for all households, the study said.

It turns out the impact of "extreme cherry pickers" was minimal. They accounted for just 1.2 percent of all grocery store customers and reduced food retailers' profits by less than 1 percent, Talukdar said.

"There is bleeding [to retailers' profits], but the bleeding is not as high as was speculated," he said.

Even so, supermarkets compete in an industry known for its razor-thin margins, so successful promotions are important to their overall profits. Stores have become more sophisticated about what to promote, thanks in part to computer technology that allows them to track results.

DemandTec, which works with a number of supermarket chains and other retailers, provides software to supermarkets that helps plan and analyze the success of promotions.

Its software takes into account factors such as product price, advertising, the in-store display and what the competition is doing. That gives retailers much more to work with than simply knowing how many of an item sold when it was on the circular's front page, said Marc Dietz, vice president of product marketing for California-based DemandTec.

Promotional items, if successful, can "pull through" sales of related, full-priced items, which cuts down on cherry picking, Dietz said. Using "affinity analysis," a food retailer can identify which items might sell well together, if one of them is discounted.

An obvious example, he said, is using a special on hot dogs around the Fourth of July, to stimulate sales of buns, condiments and baked beans.

Dietz said all of this analysis and computer modeling of promotions benefits shoppers, too. "Retailers realize they can't be everything to everybody," he said, so the stores will develop promotions that are most relevant to their customer base.

Computer models also help ensure that when a supermarket does decide to launch a promotion in the store, it will carry enough of that item to prevent eager customers from running into "out of stock" signs.

Buffalo Niagara is known for its bargain-minded shoppers. A few years ago, a Scarborough Research study said 46 percent of Buffalo shoppers used grocery coupons at least once a week, which tied for the highest percentage in the nation.

A household's supermarket bill adds up over the course of a year. But Talukdar said many consumers might devote more effort to comparison shopping for a big-ticket purchase, such as a flat-screen TV, where the one-time savings is visibly large, versus the incremental savings from supermarket excursions.

Some supermarket bargain hunters are driven by more than a financial incentive.

"It is not just saving money," Talukdar said. "For many of them, it is the thrill."

These "market mavens," he said, feel a psychological lift from finding deals and spreading the news. They are eager to share this kind of information, unlike a hot stock tip or a good fishing spot that people tend to protect.

Talukdar teamed with K. Sudhir, a marketing professor at the Yale University School of Management, and Dinesh Gauri, assistant professor of marketing at Syracuse University's Whitman School of Business. The study, which was based on data collected in 2003 and 2004, is scheduled to be published in the Journal of Marketing Research in February.


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