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Executive Summary
Given the strong competition in local markets, retailers in the United States and Europe are increasingly turning to effective aisle and display management strategies to grow their revenues. These strategies involve placements of product categories in aisles and displays within each store to facilitate greater sales affinity (demand attraction) between categories to improve the store’s share of the customer wallet. In this article, the authors investigate the effects of aisle and display placements on the sales affinities between categories. They develop a spatial model of brand sales that allows for asymmetric store-specific affinity effects between two or more categories, while controlling for the effects of traditional merchandising and marketing-mix variables, such as price, feature, and display. They estimate the model on aggregate store-level data for regular cola and regular potato chip categories for a major retail chain, using hierarchical Bayesian methods. They also show the usefulness and extension potential of their model through simulation of aisle placements of a third category.

The results show that aisle and display placements have significant and sizeable asymmetric effects on cross-category sales affinities. In particular, the authors find that overall sales increases that can be achieved by optimizing aisle placements are comparable to those that can be achieved through significant changes in marketing-mix variables in the form of price cuts or increased display or feature activity. The asymmetric effects imply that retail managers can effectively use one category as a driver to increase cross-category sales. Retail managers can also use the detailed store-level model and insights to develop customized aisle and display management strategies for their individual stores. Furthermore, because the model also identifies marketing-mix effects at the individual store level, managers can identify stores that are more prone to aisle placement–induced affinities than to marketing-mix effects.

Biography
Ram Bezawada is Assistant Professor of Marketing in the School of Management at the State University of New York at Buffalo. He holds a PhD in Management (with a Marketing concentration) and an MS in Statistics from Purdue University. His research interests include retailing, new products, and branding. In the future, he intends to pursue research related to the marketing of lifestyle products, such as wine branding.

S. Balachander is Associate Professor of Management at Purdue University’s Krannert School of Management. He has a PhD in Industrial Administration from Carnegie Mellon University. His research interests are in competitive marketing strategy, pricing, and market signaling. His research has been published in Journal of Marketing, Management Science, Marketing Science, Journal of Consumer Research, Review of Marketing Science, and Marketing Letters.

P.K. Kannan is Harvey Sanders Associate Professor of Marketing and the Director for the Center for Excellence in Service in the Robert H. Smith School of Business at the University of Maryland. His research stream focuses on new product/service development and pricing, spatial models, retailing, customer relationship management, and customer loyalty. He has a PhD in Management from Purdue University. He has published articles in Marketing Science, Management Science, and Journal of Marketing Research. He is the winner of the John Little Best Paper Award (2008) for best paper in marketing and the INFORMS Society for Marketing Science Practice Prize Award (2007). He serves on the editorial boards of Marketing Science, Journal of Marketing, Journal of the Academy of Marketing Science, and Journal of Service Research. He has served as the chair for the American Marketing Association special interest group on Marketing Research.

Venkatesh Shankar is Professor of Marketing, Coleman Chair in Marketing, and the marketing doctoral program director in the Mays Business School at Texas A&M University. His research interests include branding, competitive strategy, innovation, e-business, international marketing, and retailing. He has a PhD in Marketing from the Kellogg School at Northwestern University. His research has been published in Journal of Marketing Research, Marketing Science, Management Science, Strategic Management Journal, and Journal of Marketing. He is a winner of the Clarke Award for outstanding direct marketing educator, the IBM Faculty Partnership Award, the Green Award for the best article in Journal of Marketing Research, and the Lehmann Award for the best dissertation-based article in an AMA journal. He is coeditor of Journal of Interactive Marketing and is or has been on the editorial boards of Marketing Science, Management Science, and Journal of Marketing. He is an academic trustee of the Marketing Science Institute and past president of the American Marketing Association’s Marketing Strategy special interest group.

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