Dunnhumby-Datalogix Study Upends Assumptions On Price Sensitivity

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DunnhumbyartMarketers should broaden their view of the price-sensitivity spectrum or risk missing out on valuable consumer behaviors that impact their media buys, one study suggests.

According to “Using Advertising to Engage the Price Sensitive Consumer,” a report published by dunnhumby, brands could be making a mistake by failing to dig deeper when it comes to surfacing pricing promotions, coupons or other value-driven messaging to varying segments of their consumer base. Instead, brands should deliver targeted pricing promotions to price-sensitive purchasers.

Dunnhumby worked with Datalogix and TiVo Research and Analytics (TRA) to run the price-sensitivity analysis; the analysis linked in-store shopper data with household viewing data, all of which remained anonymized, the company said.

“Datalogix is our main source for the online analysis section and different studies can be different scale, but we have close to 20 million matched records with Datalogix, so when we run a campaign and do the analysis, depending on how long the campaign ran and the number of impressions, we could be looking at several hundred thousand households,” commented Justin Petty, VP of global partnerships & media at dunnhumby.

For the TV portion of the analysis, the data is derived from anywhere between 50,000 to 150,000 households, Petty added.

One of the key takeaways posed by the analysis was the lack of correlation between demographics and price sensitivity. “When you think about how media is bought, if you’re going after moms who are 25 to 45 years of age, it spans the spectrum of price sensitivity,” he said. “Looking at the results and seeing how different they are for price-sensitive segments is really kind of surprising.”

For instance, dunnhumby found that there was about zero uplift in sales for the “least price-sensitive” households, as opposed to “very price-sensitive” households, which showed astounding uplift in the upwards of 19%.

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However, as Petty pointed out, price sensitivity is not always all-encompassing, meaning that when brand marketers evaluate their consumer base for price-sensitivity, they need to pay attention to product-level preferences. The 19.1% uplift in sales for very-price sensitive shoppers represented broad-appeal products, such as a well-known soft drink from a major category supplier.

When it comes to convenience products, which represent more frequent purchases, there was a 23.3% sales uplift among least-price sensitive customers as opposed to the meager 1.5% uptick from very price-sensitive consumers.

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“For a particular brand, it’s very important to understand, ‘Are my brand buyers price sensitive or not price sensitive?’ and of my loyal brand buyers, how do they look vs. my ‘switchers’ and what are the differences there?” Petty said. “I may be price sensitive in coffee and only buy what’s on sale in the coffee aisle, but when I go to macaroni and cheese, I may always buy Kraft.” If a brand consistently pushes value-based promotions to a brand-loyal consumer, it may have an adverse effect.

It’s also vital to incorporate a knowledge of the media mix into price-sensitivity intel. For instance, TV and in-store promotions used in conjunction with one another appealed more to the everyday shopper in search of value. The very price-sensitive consumers showed signs of responding more effectively to TV placements alone. Very price-sensitive shoppers also responded strongly to direct-response mailers.

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