The Effect of Price Reduction on Consumer’s Buying Behavior in the U.S. Differentiated Yogurt Market

Abstract

Although price reduction is an interesting topic in marketing literature and has studied in numerous papers, less attention is paid to its effect on consumer behavior. This paper analyzes the effect of the price promotion on consumer’s behavior in terms of the percentage of buying and the brand loyalty in the U.S. differentiated yogurt market. This paper tries to answer the following questions. Is the choice of high preferred brands sensitive to the price promotion of less preferred brands? Are there loyal consumers in the yogurt market? How sensitive is the consumer loyalty of high preferred brands to the price promotion of less preferred brands? Results show that a unit increase in the frequency of price reduction of less popular brands will decrease the consumer’s choice of high popular brands significantly. Switching across brands is very common and there are less loyal consumers in the yogurt market where main brands have collectively only 12% loyal consumers. Loyalty of high popular brands is also sensitive to the price promotion of less popular brands as a unit increase in the frequency of price reduction for less preferred brands will decreases the share of households who are loyal to high popular brands of General Mills and Danone.