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Data Representation and Algorithms in Computer Science, Lecture notes of Marketing

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SPECI

PROMOTIONAL

PROGRAMS

FOR

I

Their Effects on Sales

of Apples and Other (^) Fruit

MARKETING RESEARCH REPORT NO. 446

Market Development Research Division Agricultural Marketing^ Service U. S. Department of Agriculture

^ss&ismtsgssfm&Sf&fm^^m-^:- ;

SPECIAL PROMOTIONAL (^) PROGRAMS FOR (^) APPLES

Their Effects on Sales (^) of Apples and Other (^) Fruits

By Peter L. Henderson, (^) Sidney E. Brown, and James (^) F. Hind agricultural (^) economists Market (^) Development Research (^) Division Agricultural Marketing (^) Service

SUMMARY

Controlled experiments in 72 food supermarkets (^) in 6 midwestern (^) cities in- dicated that advertising and (^) promotion sponsored by the Washington (^) State Apple Commission, using two specific themes, (^) were associated (^) with substantial in- creases in sales of all (^) apples handled by the stores, as (^) well as of Washington apples

.

Compared with periods of no promotion, (^) sales of Washington- grown apples per store in a 4- week period were (^32) percent higher for the "apple use" promo- tional theme (emphasizing (^) use of the fruit in salads, pies, (^) and other dishes), and 21 percent greater (^) for the "health" promotional (^) theme.

Sales of all apples (from Washington and other (^) areas) were 20 percent greater when the apple- use theme was used than (^) when there was no promotion, and 9 percent^ greater^ for^ the^ health^ theme.

Advertising based on either theme for a 4-week test period did not affect sales (^) of apples in the succeeding k- week period.

There appeared to be a slight increase in sales of oranges when either theme was employed for apples. Sales (^) of grapefruit remained relatively stable when the "use" (^) theme was featured for apples, but showed a large increase when apple (^) promotion stressed the health theme. Use of the health theme for apples seemed to add emphasis to the "Fresh for Health" promotional materials fur- nished by another organization and featuring grapefruit. Banana sales were slightly lower for both the apple-use and health themes.

Changes in sales of apples, oranges, grapefruit, and bananas were signifi- cantly related (^) to changes (^) in some but not all of the practices employed by stores in merchandising and promoting these^ fruits,^ such^ as^ amount^ of^ display area, newspaper advertising, and prices.

Sales of apples from Washington State and from other^ areas^ were^ signifi- cantly affected by changes in the respective price of each;^ however,^ prices^ of apples from one area did not affect sales of those from other areas.^ Changes in amount of display space for either^ Washington^ apples^ or^ apples^ from^ other areas affected the sales of both. Varying the^ display^ space^ for^ grapefruit^ was the only in- store merchandising practice used with other^ fruits^ which^ signifi- cantly influenced sales of apples.

Practices directly employed^ "by^ the^ stores^ in^ merchandising^ apples^ did^ not have a measurable effect, adverse or^ beneficial,^ on^ sales^ of^ bananas,^ grape- fruit, and oranges. The amount^ of^ display^ space^ devoted^ to^ grapefruit^ was^ di- rectly or positively related to grapefruit^ sales^ and^ in^ addition^ inversely^ re- lated to sales of apples and oranges.^ Similarly,^ the^ display^ space^ devoted^ to bananas was directly related to banana^ sales^ and^ inversely related^ to^ orange sales. These findings indicate that^ grapefruit^ competes^ with^ apples,^ oranges, and bananas, and bananas compete^ with^ oranges^ for^ display^ space^ and^ sales.

OBJECTIVES

In recent years, agricultural producer^ organizations^ in^ the^ most^ important commercial apple producing areas have provided^ increasing^ support^ to^ various State, regional, and national promotional programs^ for^ fresh^ apples. Similar activities are being carried on by producers of other^ fruits^ and other farm products. In (^1958) > promotional expenditures for such activities totaled about $67 million^ with^ about^ $20 million^ spent^ on^ fruit^ and^ fruit^ products^ (2). l/

The purpose of these programs is to move a greater volume of products at the existing market price, or move a given volume at a higher market price. To be sure of achieving this purpose, there is a need to appraise the effectiveness of (^) present programs and evaluate alternative promotional techniques as an (^) aid in planning future programs.

This study was conducted to compare the effects of two promotional themes for Washington apples with the effects (^) of no promotion (^) on the sales of apples and other selected fruits. (^) A secondary (^) objective was to develop improved re- search techniques for evaluating the effectiveness (^) of promotional programs.

PROCEDURE

Six midwestern (^) cities in which (^) the Washington (^) State (^) Apple Commission and similar organizations (^) had not (^) previously (^) conducted extensive (^) promotional pro- grams (^) for apples (^) were selected (^) for the test. (^) The cities (^) were selected (^) in pairs on the basis of (^) comparability (^) of such factors (^) as sources (^) of supply (^) for apples and (^) competing (^) fruits, size (^) of city, location (^) of city, (^) major economic (^) character- istics, (^) and limited (^) overlapping (^) of local (^) newspaper (^) and television (^) advertising facilities (^) between (^) cities. (^) The cities were (^) Cedar (^) Rapids and (^) Davenport, Iowa: Joplin (^) and Springfield, (^) Mo.; (^) Lincoln, (^) Neb.; and (^) Topeka, Kan.

In each (^) city a panel (^) of 12 representative (^) self-service (^) food stores (^) was se- lected for (^) testing the (^) effectiveness (^) of the (^) promotional (^) themes. The (^) panel stores in each (^) city (^) represented different (^) retail (^) organizations (chains, (^) volun- tary chains, (^) and nonaffiliated (^) independents), (^) different (^) geographical (^) areas of the city, (^) and different (^) sizes. (^) Trade sources (^) estimated (^) that the (^) panel stores in each city (^) accounted (^) for approximately (^50) to (^80) percent of (^) retail food sales.

1/ Underscored^ numbers in (^) parentheses (^) refer (^) to items (^) in the Literature Cited, (^) page 10

.

weighted average price^ for^ each^ fruit^ did^ not^ vary^ significantly^ between^ periods of the no-advertising treatment^ and^ the^ treatments^ using^ either^ of^ the^ promo- tional themes. In addition,^ data^ were^ obtained^ weekly^ for^ total^ store^ sales, sales of produce, number^ of^ customers,^ and^ square^ inches^ of^ space^ in^ newspaper advertisements devoted to^ all^ apples,^ Washington^ State^ apples,^ and^ other selected fruits.

Analyses of variance^ and^ covariance^ were^ used^ in^ conjunction^ with^ appro- priate statistical^ tests^ to^ determine^ the^ overall^ effects^ of^ the^ treatments and nonquantitative^ factors^ (time,^ city,^ and^ stores)^ on^ sales^ of^ apples (Washington and^ other),^ bananas,^ grapefruit,^ and^ oranges.^ Multiple^ regression analyses were used to measure the^ sales^ effects^ of^ certain^ merchandising^ prac- tices. A detailed discussion of^ these^ analytical^ procedures^ is^ given^ in^ the appendix.

Table 1.—Double change-over^ experimental^ design^ used^ in^ apple^ advertising

study, 72 supermarkets in^6 midwestern^ cities,^ January^19 to^ May^ 9, 1959 ' Cedar

' ' Rapids, Iowa

: Four-week : periods

Joplin, Mo.

: Topeka, : Kans.

Springfield, : Mo.

: Lincoln, : Nebr.

Davenport, : Iowa

Jan. 19-Feb. Ik : l/A B C^ A^ B^ C

Feb. l6-Mar.^ Ik^ :^ B^ C^ A^ C^ A^ B

Mar. l6-Apr. 11 : C A B B C^ A

Apr. 13-May 9 : C A B B C^ A

1/ Letters^ designate^ advertising^ and^ promotional^ themes^ used^ in^ study: health; B, apple-usej C, no^ advertising^ and^ promotion^ (^ control)

A,

FINDINGS

Effects of Specific Apple Advertising Themes on Apple Sales k/

Washington State apples .—Sales of Washington State apples during Ij-week

periods of (^) advertising using the apple-use theme averaged almost 32 percent higher per store than sales during comparable periods of no advertising (table (^) 2). For the health theme, average sales per store per ij—week period were 21 percent (^) greater than in periods of no advertising.

kj (^) In comparing (^) sales differences between treatments (promotional themes and no promotion) (^) for the fruits studied, it was assumed that differences in prices and (^) merchandising practices employed by the stores for (^) each treatment were associated with the presence or (^) absence of advertising for apples and were part of the treatment. However, (^) differences in price and other merchandising practices between treatments were (^) not significant (see (^) appendix). A separate analysis of the effect of these factors (^) is given in the following section of this report. 6

Statistical tests indicated the increased sales significant at^ the^ 0.05 probability^ level^ -while^ the theme was^ significant^ at^ the^ 0.10^ probability^ level the odds are only 5 and^10 in^100 that^ increases^ of to sampling^ errors^ or^ chance^ variations.^ Since^ the eluded that the increases were due to the influence motion using^ the^ two^ themes.

for the^ use^ theme^ were gain in sales for the health (table 2). In other words, such magnitude could be due odds are so low, it is con- of the^ advertising^ and^ pro-

Sales of Washington State apples^ per^ store^ per^ 4-^ week^ period^ were^ almost 9 percent^ greater^ for the^ apple-^ use^ theme^ than^ for^ the^ health^ theme^ (table^ 2). However, this difference was not^ large^ enough^ to^ be^ statistically^ significant at an acceptable^ probability^ level.^ On the basis^ of^ the^ results^ under^ analysis, we cannot^ conclude^ that^ the^ apple-use^ theme^ was^ any^ more^ effective^ in^ increas- ing sales of Washington^ State^ apples^ than^ the^ health^ theme.

Table 2.^ —Sales of apples from Washington State and other areas, without promo-

tion and with promotion based on 2 themes, 72 supermarkets (^) in 6 midwestern cities, 4- week periods from January 19 to (^) May (^) 9, 1959 l/

Average (^) sales per store per 4-week period Source of apples With no pro- motion

TTTEh- : apple- : use : theme

With health theme

Difference (^) in sales between

Fo promotion and

Apple- use

:

theme (^) :

Health theme

Apple- use theme (^) and health theme

Lb. Lb. (^) Lb. Lb. Pet. Lb. Pet. Lb. Pet.

Washington State.

Other (^) areas (Mid- western and East- ern States (^) and Canada).....

Total or average.

3,124 4,117 3,784 993 31.8 66o^ 21.2 333 8.

2,227 2,322 2,026 95 4.3 -201 -9.1 295 1^.

5,351 6,439^ 5,810^ 1,088^ 20.1^459 8.6^629 10.

l/ All sales data are adjusted for variations among treatments (^) (no promotion, apple- use theme, (^) and health theme) which might (^) be attributed to differences in number of (^) customers and purchasing power per customer.

Sales of Washington apples in any period were not significantly affected by the presence or absence of advertising in the preceding 4- week period.

All apples.^ —When^ sales^ of^ apples^ from^ Washington^ State^ and^ from^ other^ areas (Midwestern and Eastern States, and Canada) were combined,^ sales^ per^ store^ per 4-week period were 20 percent higher for the use^ theme^ than^ for^ periods^ of^ no advertising. The increase was statistically significant at the^ 0.01 probability level. Sales for the health theme were about 9 percent greater,^ and^ significant at the 0.10 level (table (^) 2).

?able 3 •--Sales of oranges, (^) grapefruit and bananas without apple (^) promotion and with apple^ promotion based on 2 themes, 72 supermarkets in 6 mi dwe (^) stern cities, 4-week periods from January 19 to May (^) 9, 1959 l/

Fruit

Average sales per store per 4-week period With no : With apple- :With health promotion (^) : use theme (^) : theme

Difference in (^) sales between (^) no promotion and- Apple-use : Health theme theme :

Oranges

Grapefruit

Bananas

Total

Pounds

5,

5,

5,9^

16,

Pounds

5,

5A

5,

16,

Pounds

5,

5,

5,

17,

percent (^) Percent

3-0 h.

-2.2 (^) 13-

-1.8 (^) -3-

  • (^) .4 4.

l/ All sales^ data^ were^ adjusted^ for^ variations^ among^ treatments^ (no^ promotion, apple-use theme, and health theme) which^ might be attributed to differences^ in number of customers and purchasing power per customer. Sales data were further adjusted for the effects of prices, display space, and other significant mer- chandising and promotional practices employed by stores (see tables 4 through (^) 9)

Effects of Selected Merchandising and^ Promotional Practices Employed by Stores

Analysis of the supplemental data on merchandising and promotional^ prac- tices employed by stores in selling^ apples,^ bananas,^ grapefruit,^ and^ oranges revealed that changes in some but^ not.^ all^ practices^ were^ related^ to^ changes^ in sales of these fruits. The practices significantly^ related^ to^ sales^ of^ each fruit studied were established (table 4) and the weekly^ store^ average^ and^ range of variation for each^ practice^ were^ ascertained^ (tables^5 and^ 6).

Sales of each fruit were primarily^ affected^ by^ the^ merchandising^ and^ pro- motional practices used directly with it, such^ as^ price,^ special^ displays, amount of display space,^ and^ newspaper^ advertising^ (table^ 4).^ The^ major^ excep- tion to this generalization was^ the^ amount^ of^ display^ space^ devoted^ to^ each fruit, which affected the fruit displayed^ and^ also^ had^ varying^ influences^ on other fruits^ (table^ 4). Variation^ in^ the^ amount^ of^ display^ space^ used^ for grapefruit affected all^ fruit^ except^ bananas.^ Grapefruit^ sales^ varied^ directly with the amount of space^ in^ grapefruit^ displays,^ while^ sales^ of^ apples^ and oranges varied inversely with^ the^ amount^ of^ space^ contained^ in^ grapefruit^ dis- plays (tables (^) 7, 8, 10, and 11). The^ amount^ of^ space^ in^ banana^ displays^ affect- ed the^ sales^ of^ bananas^ and^ oranges.^ Banana^ sales^ increased^ and^ orange^ sales decreased when the^ size^ of^ banana^ displays^ were^ increased.^ Similarly,^ a^ de- crease in banana sales^ and^ an^ increase^ in^ orange^ sales^ were^ associated^ with^ a decrease in the amount of^ space^ used^ for^ banana^ displays^ (tables^9 and^ 11).^ In a like manner, the sales of^ apples^ from^ a^ specific^ area^ varied^ directly^ with^ an

increase or decrease in the^ amount^ of^ display^ space^ devoted^ to^ them^ and^ varied inversely with an increase or decrease^ in^ the^ amount^ of^ display^ space^ used^ for apples from other areas (tables 7 and.^ 8).

These analyses showed that price^ and^ amount^ of^ display^ space^ devoted^ to each fruit exerted the most influence^ on^ sales.^ The^ relationship^ to^ sales^ for each fruit was direct for the amount^ of^ display^ space^ and^ inverse^ for^ price (tables (^) 7, 8, 9, 10, and 11). The variation^ in^ sales^ of^ each^ fruit^ from^ week to week was also generally related^ directly^ to^ the^ week-torweek^ variation^ in amount of newspaper advertising space^ devoted^ to^ each^ fruit^ by^ retailers:^ how- ever, the variation in the amount of newspaper advertisement space for (^) eastern and midwestern apples and grapefruit was not sufficient to detect (^) statistically significant relationships.

Sales of each fruit studied were significantly related to the volume of produce sales and the relationships were direct (tables^ J, 8, 9, 10, and 11). Produce sales reflect the combined effects of promotional and merchandising practices employed by stores on the sales of individual products and the in- fluence (^) of such practices in drawing additional customers into the stores. Thus, (^) findings pertaining to practices affecting sales of the fruits studied become more significant (^) in view of their relation to sales of all produce.

LITERATURE CITED

(1) Cochran,^ W.^ G., Autrey,^ K. M. , and Cannon, (^) C. Y. 19^1 (^) o A Double (^) Change-Over Design for Dairy Cattle (^) Feeding Experiments. Jour. Dairy Sci., vol. 2k, (^) pp. 937-951.

(2) Frye,^ R.^ E.,^ and^ Grubbs,^ V.^ D. i960. Promotion of Farm Products (^) by Agricultural Groups. (^) U. S. Dept. Agr., Mktg. Res. (^) Rpt. No. (^) 380, (^27) pp.

(3) Henderson,^ P.^ L.

  1. Application of the (^) Double Change-Over (^) Design to Measure Carryover Effects of (^) Treatments in Controlled (^) Experiments. Cornell Univ., Methods of (^) Research in Marketing, (^) Paper (^) No. 3.
  2. Marketing^ Services (^) Affecting Apple (^) Sales. Cornell Univ., (^) Ph.D. thesis.

(5)

1955 o Merchandising Apples. Va. Hort. Soc, Fruit 42(5): 34-36.

(6)

  1. The^ Effect^ of Advertising (^) and Point (^) of Sales Aids (^) on Apples.
Va. Hort. Soc, Fruit 42(6): 30-34.

(7) Hochstim,^ E.^ S. 3.958o (^) Homemakers (^) Appraise Citrus (^) Products, (^) Avocados, Dates, and Raisins, U. S. Dept. (^) Agr., Mktg. (^) Res. Rpt. (^) No. 243.

10

(increases or decreases) such^ as^ those^ obtained^ between^ treatments^ as^ a^ result of experimental^ errors,^ if^ in^ fact^ the^ true^ differences^ "between^ treatments^ had "been zero. A difference^ in^ sales^ between^ two^ treatments^ is^ considered^ to^ be statistically significant^ with^ a^ high^ degree^ of^ confidence^ if^ the^ probability is 0.10 or less^ (0.05, 0.01,^ 0.005)^ that^ the^ difference^ is^ due^ to^ sampling error or chance^ variation.^ That^ is,^ if^ the^ odds^ that^ the^ sales^ differences were due to^ chance^ are^ low,^ (10^ in^ 100,^5 in^100 ),^ it^ is^ concluded^ that^ the differences are due to the influence^ of^ the^ treatments.^ The^ researcher^ may^ use a probability^ level^ of^ a^ greater^ magnitude^ (for^ example^ 0.20)^ in^ testing^ differ- ences between treatments; however,^ less^ confidence^ is^ placed^ in^ the^ inferences or conclusions^ drawn^ from^ such^ a^ test.^ For^ example,^ if^ the^ difference^ in^ sales between two^ treatments^ is^ found^ to^ be^ significant^ at^ the^ 0.01^ probability^ level, the odds are 99 to 1 that the difference^ in^ sales^ is^ due^ to^ the^ difference^ in the effects^ of^ the^ treatment;^ but^ if^ the^ difference^ in^ sales^ is^ significant^ at the 0.10 probability level, the^ odds^ are^9 to^1 (90 to^ 10)^ that^ the^ difference is due to^ the^ treatment^ effects,^ and^ at^ the^ 0.20^ probability^ level,^ the^ odds are only k^ to^1 (80 to^ 20).^ Thus,^ the^ findings^ of^ significance^ at^ the^ 0.10, 0.20, and^ higher^ probability^ levels^ should^ be^ used^ with^ greater^ reservation than when^ the^ 0.01^ or^ 0.05^ level^ is^ attained.

Multiple regression^ analysis^ .—Multiple^ regression^ analyses^ were^ made^ of supplementary data (prices,^ display^ space,^ newspaper^ advertisement^ space,^ and produce sales) to determine the^ influence^ of^ specific^ factors^ on^ sales^ of Washington State apples, apples^ from^ other^ areas,^ oranges,^ grapefruit,^ and^ ba- nanas, and to adjust the sales data if^ necessary.^ The^ supplementary^ data^ used are hereafter referred to as quantitative^ factors.

Data for these quantitative factors^ were^ tabulated^ for^ each^ city^ by^ weeks and plotted on scatter diagrams against sales of^ each^ fruit.^ Thus,^ a^ general indication was obtained of the factors related to volume^ of^ sales^ of^ each^ fruit. Factors which had no apparent relation to sales were^ eliminated.^ A multiple covariance technique was used to adjust the sales variations for each^ fruit^ and the selected quantitative factors for the effects of differences in cities^ and time periods. Corrections were made by this technique only for the nonquanti- tative factors of cities and time periods which were fixed or balanced by the design of the experiment. (^) It was not possible to measure the direct effects on sales of such nonquantitative factors as variety, size, and quality of fruits, size of pricing unit, type of display (prepackaged, bulk, or combination), and packaging material. It is necessary to use other research techniques such as controlled experiments to evaluate the sales (^) effectiveness of such factors. (^) A multiple regression analysis was made of the (^) adjusted data to identify and quan- tify the net effects of the factors significantly (^) affecting sales (^) of Washington apples and selected other fruits. (^) The multiple regression analysis was repeated until only those factors affecting sales (^) remained which were statistically sig- nificant at the (^) 0.05 probability level. (^) The practical significance of a factor was also a criterion for retaining (^) it in repeated analysis; that is, the magni- tude of a change in sales associated with (^) a unit change in the factor. (^) 6/

6/ The model for the complete analysis was (^) programed on the IBM 650 elec- tronic (^) data-processing computer. Details of this program (^) are outlined in No. 06.2002.8, parts (^) 1, k, (^) 6, and 8 of the library (^) series of programs at the Institute of Statistics, University of North (^) Carolina, Raleigh, (^) N. C.

12

Method of^ weighting^ prices.^ --The prices observed (^) during the first and last part of each week for each variety (^) and size of apples and other (^) selected fruits were weighted in relation to the estimated (^) volume of sales made during (^) each part of^ the^ week.^ Weighting factors of 0.2 were applied to (^) the prices observed during the first part of each week and 0.8 for prices (^) observed during the last part of each week for each variety (^) and size of fruit observed and displayed separately in the stores, (^) j/ The weighted price obtained for each (^) variety and size in this manner was then applied to the total pounds of the variety (^) or size of fruits sold for the week. The total values (^) obtained for apples (^) from speci- fied areas and other fruits were then divided by (^) the total pounds sold (^) during the week to arrive at an average weekly (^) price for each fruit. The following example illustrates the computation of the average weighted weekly price of Washington State apples^ for^ a store with two displays of apples from this^ area. The price of apples from other areas and the price of other fruits were weighted in a similar manner.

Price-weighting formula Cents per pound

Step I—time of week:

Price per pound of Winesap apples,^ Tuesday,^ l8^^ times^ 0.2. Price per^ pound^ of^ Winesap^ apples,^ Friday,^ % times^ 0.8.. Total, rounded.^ ...... o ...^ o

Price of Red Delicious apples,^ Tuesday,^ 21^ times^ 0.2. Price of Red Delicious^ apples,^ Friday,^ 19^ times^ 0.8., Total, rounded .......^ °

Step II—pounds^ of^ Washington^ apples^ sold: Step (^) I, $.156 times weekly^ sales^ of^ Winesap^ apples, 2,200 pounds^ equals^ $343. Weighted price^ for^ Red^ Delicious^ apples^ obtained^ in Step I, $.194 times^ weekly^ sales^ of^ Red^ Delicious apples, 1,000 pounds equals^ $194. Final weighted^ price^ equals^ total^ weekly^ value^ of Washington State apple sales,^ $537.20, divided^ by total weekly^ sales^ in^ pounds,^ 3>200o^ <>

o o • e • •^ 16.

7/ The^ weighting^ factors^ of^ 0.2^ for^ the^ first^3 <lays^ of^ the^ week^ and^ 0. for the last 3 days^ of^ the^ week^ were^ based^ upon^ findings^ of^ previous^ research and estimates of leaders in the^ trade.

13

Table 5.^ —Prices, display space, (^) and newspaper (^) advertisement space (^) for fruit, and sales of all produce, (^72) supermarkets (^) in 6 midwestern (^) cities, January 19 to May (^) 9, 1959

Factor

Price: : Washington State apples..

:

Other apples : Oranges : Grapefruit : Bananas :

Display space: : Washington State apples..

:

Other apples : Oranges : Grapefruit : Bananas :

Weekly average per store

Ct./lh.

Sq. ft.

9 5 -percent^ range of variations (^) 1/

cWlb.

Sq. ft.

Newspaper advertisement space: Washington State apples Oranges Grapefruit Bananas

Produce sales

Sq. in.

Dol.

1,

Sq. in.

  • (^) 24.
  • (^) 35.
  • (^) 27.

Pol.

50 -^ 3,

i/ Approximately^95 percent^ of the^ observations^ fall^ within^ specified^ limits of range. A lower^ limit of zero^ means that^ the^ factor^ was^ not^ observed^ to be present for a particular store during a particular week.

15

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