Upc Scanner Pricing Systems: Is the Consumer Really Better Off?

Citation:

Ronald C. Goodstein, Jennifer Edson Escalas, and Harold H. Kassarjian (1993) ,"Upc Scanner Pricing Systems: Is the Consumer Really Better Off?", in NA - Advances in Consumer Research Volume 20, eds. Leigh McAlister and Michael L. Rothschild, Provo, UT : Association for Consumer Research, Pages: 478.

Advances in Consumer Research Volume 20, 1993      Page 478

UPC SCANNER PRICING SYSTEMS: IS THE CONSUMER REALLY BETTER OFF?

Ronald C. Goodstein, UCLA

Jennifer Edson Escalas, Duke University

Harold H. Kassarjian, UCLA

Today, 93% of mass merchandisers and 94% of supermarkets employ scanner systems (Chain Store Age Executive 1990). As promised by manufacturers in the early 1970's, scanners have numerous advantages: retailers enjoy both cost savings and improved inventory management; consumers spend less time in retail checkout lines; and academics examine marketing phenomena with rich data bases. The question remains, however, as to whether or not scanner systems "allow retailers to take unfair advantage of their customers" (Pommer, Berkowitz, and Walton 1980). Retail promotions (e.g., advertised price reductions and end-aisle displays) have a significant positive influence on consumer sales (Guadagni and Little 1983; Inman, McAlister and Hoyer 1990), yet consumers have very poor recall of the prices charged at the point of purchase (Dickson and Sawyer 1990; Zeithaml 1982). Based on this evidence, consumerists conclude that retail promotions are a ripe area for deception in stores employing scanner systems. Retail trade associations (e.g., National Association of Food Chains) assure customers that such abuses do not take place, but consumer distrust remains. In this study we empirically test and disturbingly, support consumers' concerns of retail deception.

Data were collected from three large chains of retail stores within one of California's large counties. Two of the firms are very large supermarket retailers, and the third firm is a leading discount department store. Five stores from each chain were randomly selected for inclusion in the study. Within each store, 30 items were purchased following a methodology based on random selection of ten advertised specials, ten items on end-aisle displays, and ten regularly-price, non-featured items. Purchases were made in each store on three dates: 1) the first day of the sale week as advertised in the local newspaper; 2) the middle of the sale week; and 3) on the last day of the sale week.

Based on the limitation that the study was based on examining 15 stores in one California county, the results indicate that scanner systems have resulted in significant numbers of overrings and underrings. Planned contrasts indicate that underring rates significantly exceed industry estimates. Further, the rate of overrings significantly exceeds the rate of underrings for advertised and end-aisle promotions. This fact indicates that error is not purely random, and is higher and in the retailers' favor for promotional items. Arguments that the correct charges are entered later in the sale week were not supported, the date of purchase had no effect on the number of misrings.

If this data base is representative of other retailers throughout the country, then several implications seem appropriate. For public policy makers, the implication of this study is that consumer deception is occurring at an alarming rate in stores employing scanner systems. This may explain the recent upsurge in legal proceedings against major grocers across the country (Bartholomew 1992). For retailers, lack of consumer trust and discounting of discounts (cf. Gupta and Cooper, forthcoming) may be well-deserved and policy changes could be examined to overcome these problems. For academics, the findings suggest that scanner-based research examining promotions must be re-examined, especially where results rely on dollar market shares. Our study indicates that reliance on dollar shares may bias promotional effects in an upward manner, and that unit shares may provide a more reliable estimate of promotional effects.

REFERENCES

Bartholomew, Doug (1992), "The Price Is Wrong," in INFORMATIONWEEK, September 14, 26-30.

Dickson, Peter R. and Alan G. Sawyer (1990). "The Price Knowledge and Search of Supermarket Shoppers," Journal of Marketing, 54 (July), 42-53.

"Electronic Retailing a Thing of the Past," Chain Store Age Executive, July 1990.

Guadagni, Peter M. and John D.C. Little (1983), "A Logit Model of Brand Choice Calibrated on Scanner Data," Marketing Science, 2 (Summer), 203-238.

Gupta, Sunil and Lee G. Cooper (forthcoming), "The Discounting of Discounts," Journal of Consumer Research.

Inman, J. Jeffrey, Leigh McAlister, and Wayne D. Hoyer (1990), "Promotion Signal: Proxy for a Price Cut?" Journal of Consumer Research, 17 (June), 74-81.

Pommer, Michael D., Eric N. Berkowitz, and John R. Walton (1980), "UPC Scanning: An Assessment of Shopper Response to Technological Change," Journal of Retailing, 56 (Summer), 25-44.

Zeithaml, Valerie A. (1982), "Consumer Response to In-Store Price Information Environments," Journal of Consumer Research, 8 (March), 357-369.

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