Els Gijsbrechts, Katia Campo and Tom Goossens

In today's highly competitive retail environment, feature promotions play a crucial role in attracting customers to the store and influencing their in-store spending. The huge budgets spent on advertised promotions underscore their strategic importance, as does the abundant evidence on feature promotion effectiveness published in the academic marketing literature. However, despite indications that consumers do not react to individual promotions in isolation, little research has been done on how a store's overall promotional offer affects store traffic and sales.

This paper aims to shed more light on this issue, by examining how a 'bundle' of promotions, and the way it is communicated to potential customers, affects store performance. In doing so, we concentrate on retailer store flyers, one of the most important media to advertise promotions, and examine how changes in flyer composition affect store traffic and sales. In particular, we investigate how store flyer size, depth of promotional discounts, and the allocation of store flyer space to category and brand types, affect the store flyer's propensity to enhance store traffic and sales. Moreover, we analyze whether and to what extent store flyer effectiveness varies from store to store, and identify location-specific variables accounting for this variation.

Hypotheses on these effects are tested on data of a large Hi-Lo supermarket chain, offering a weekly store flyer. The outcomes of the analysis not only improve our understanding of how advertised promotions influence store traffic and sales as a whole, they also lead to guidelines for retailers concerning the composition of their weekly store flyers. We show that retailers primarily interested in boosting store traffic and sales can improve flyer effectiveness by adjusting its content: flyers offering deeper discounts, and with a larger share of food and private label promotions, generate substantially stronger traffic and sales effects. In addition, retailers should strive to build an element of surprise in the flyer's cover page, by featuring products that constitute a 'treat' or a break away from normal (competitive) practice. Increasing store flyer size does not appear to produce strong traffic or sales effects, which, however, could be due to a saturation effect. From a profit perspective, our results suggest that the profitability of more or less extensive store flyers, and of alternative flyer contents, crucially depends on the feature promotion allowances received from manufacturers. Indeed, while more extensive store flyers do not increase store sales value, they generate additional income in the form of advertising fees from manufacturers whose products are featured in the flyer. Moreover, advertising more private labels means foregoing revenues from featuring national brands. Retailers should carefully balance these foregone fees against improved store performance from featuring their own store brands.

The direction of the effect of store flyer size, discount size, share of food promotions and share of private label promotions is consistent across stores. Yet, the magnitude of the effect varies considerably between individual retail outlets. Closer examination of these differences demonstrates that flyer effectiveness depends on location characteristics such as socio-demographics of the trading area's inhabitants, store size and competition. Flyers with deeper discounts and more emphasis on food and private labels generate strong responses among the 'money-poor, time-rich', who tend to be more alert to store flyers in general. At the same time, such flyers also have a more profound effect on store choice and spending decisions of time-constrained large basket shoppers, for whom promotions may act as a cue to facilitate the buying decision. Optimal store flyer composition is also related to store size: smaller stores benefit more from allocating a larger share of flyer promotions to food or private label items, or from placing produce or fish/meat on the cover page, than larger stores. Finally, the positive impact of discount size, the share of flyer space allocated to food items, and specialties on the cover page is slightly more profound in areas with more intense competition. The use of private label deals, in contrast, is more effective in areas where the supermarket holds a stronger competitive position. Retailers may use these insights to make store flyers more available in locations with higher propensities to react. Also, selectively adapting the content of the flyer to local response patterns may secure the attention of deal-prone consumers, while avoiding unnecessary subsidies to others.