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The main objective of this research is to investigate the impact of adopting this new LP design on various aspects of consumer purchase behavior and the retailer’s sales revenue. The authors utilize a unique data set provided by a European online grocery retailer that implemented the IBLP recently. They construct a joint model of store visit, shopping trip spending, and LP membership conversion decisions and conduct various policy simulations to quantify the IBLP’s impact on the store’s sales revenue.

They find that, after the retailer switched from a conventional LP to the IBLP, consumers became more responsive to reward point promotions than price discounts of the same monetary value, were no longer responsive to competitors’ reward point promotions, and exhibited stronger cumulative reward point effects. In addition, the new LP had a significantly different impact on “current” LP members and nonmembers (defined by their status right before the switch), resulting in decreased/increased total spending by the former/latter group under the retailer’s current promotion practice. Furthermore, it is critically important for retailers to offer sufficient promotions under the new LP to achieve its full potential or otherwise risk alienating their loyal customers. Finally, the IBLP reduced attrition among existing customers and helped attract more new customers, which contributed to most of the store’s sales revenue gain after the IBLP. Findings of this study provide valuable insights for retailers’ LP designs and promotion strategies and suggest new ways for manufacturers to improve promotion effectiveness through collaboration with retailers through innovative LP designs.

Biography
Jie Zhang is Associate Professor of Marketing and the Harvey Sanders Fellow of Retail Management at the Robert H. Smith School of Business at the University of Maryland.  She received her PhD in marketing from the Kellogg School of Management at Northwestern University. Her general research interest is to apply econometric and statistical models to study consumers’ purchase behavior and responses to various promotion programs in online stores and other retail contexts and to provide decision recommendations for improving retail management strategies. She has published articles in leading marketing and management journals such as Marketing Science, Journal of Marketing Research, and Management Science. Her research has twice been selected as a finalist for the Paul Green Award by the Journal of Marketing Research has won the Procter & Gamble Marketing Innovation Research Award and the MSI-ACR “Shopper Marketing” Research Proposal Competition, and has been sponsored by the Marketing Science Institute. She currently serves on the Editorial Review Board of Journal of Marketing and International Journal of Research in Marketing and has won the Outstanding Reviewer Award by the Journal of Marketing.

Els Breugelmans is Assistant Professor of Marketing at the Department of Business Studies at the Lessius University College, and a research fellow at the Faculty of Business and Economics, K.U. Leuven, Belgium. She received a master’s degree in Applied Economics in 2001 and a PhD in Economics from the University of Antwerp in 2005. Previously, she was an Assistant Professor of Marketing at Maastricht University, the Netherlands. Her research interests are centered on online and offline retailing, loyalty programs, and the modeling of consumer reactions toward retail practices (i.e., merchandising and marketing stimuli). Her work has been published in major outlets such as Journal of Retailing, Marketing Letters, and Journal of Management Information Systems.

Journal of Marketing Research, Volume 49, Number 1, February 2012
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