This study aims to explore the role of online sales promotions in creating a sustainable competitive advantage for Shell. Based on the literature review and the research objective 4 propositions were developed.
- Shell’s representation of the product online plays a key role in driving consumer attitude towards shopping online and the intention to buy.
- The consumer’s perception of enjoyable online experience has a positive impact on impulse purchases leading to increase in sales for Shell.
- The online virtual experience created by the Shell promotion will play a major role in creating a competitive advantage.
- The communication of trust and credibility by the online promotions of Shell reduces uncertainty and adds perceived value to the brand.
Based on the exploratory nature of the research objective depth interviews were used to provide insights into the consumer motives for engaging in the online promotional activity of Shell and how they perceive the information communicated and what are its effects on their decision making process. The information captured was measured using the analytical framework in order to validate the propositions.
All the 4 propositions were proved to be valid however the research faces limitations in terms of the sample size and the attributes covered. Therefore using this research as a base it the strategic role of online promotions and its potential for establishing a sustainable competetive advantage could be further explored with a larger sample to reach a conclusion.
1 .0 Introduction
Shell is a global organisation with a huge portfolio of businesses across domains. The firm has used the web as a platform to support its business through online marketing and promotions. In 2009 the shell retail department has been involved in Shell fuels campaign which highlights the quote “Get the most out of every drop” and the Shell retail team is interested in conducting a post implementation review of their retail promotions in 2009, as the retail team is interested in knowing, if their current retail promotion for the Shell fuels campaign 2009 is successful in meeting its promotional objectives, as it has been investing £40,000 to £48,000 on its retail promotions. The objective of the promotion chosen is to drive online traffic to the forefront and to influence trial through portal web traffic. The implementation task is outsourced to external agencies and therefore the Shell retail promotions manager Carolyn Thomas is interested to know the perception of adoption by the external customers. Moreover the retail department does not want to cheapen the Shell brand through their promotion. The promotion which is tested in this research would be the e-vouchering promotion used in the U.K. Bowman (1997) states that 80% of sales promotion does not work in the U.K. For example: It has been discussed in the academic research arena that coupon promotions are inefficient. Moreover research suggests that sales promotion is unlikely to attain sustainable competitive advantage; there are exceptions to the above argument example: Tesco, BA (Yeshin, 2006).However this is the case with sales promotions relative to the traditional shopping environment. The existing academic literature in online consumer behaviour suggests that, with technological advancements on the web, the online sales promotion has the potential to achieve a competitive advantage (Ref).Therefore the role of online sales promotions in obtaining a sustainable advantage is explored in the context of Shell. Furthermore the significance of the promotional activity is analysed through qualitative in-depth interviews which tries to capture the different dimensions of online consumer perceptions on sales promotions. This in turn is validated with reference to the literature review conducted in the context of this research objective.
2.0 Problem Definition:
Sales promotion in this context is defined as a planned and implemented marketing activity that enhances product or service appeal and changes consumer behaviour in return for an additional benefit for a purchase or participation (Yeshin, 2006).However existing research suggests that sales promotions can either enhance or destroy brand value, it depends on how the consumer perceives the promotion. Furthermore it is also concluded that the techniques such as coupon promotions offer little in terms of brand sustenance and leads to no lasting positive change in the value of post promotion sales and could also result in damaging the existing perception of consumers on the brand(Ref).However in the case of Shell this would depend on the strategic contribution of the promotional activity implemented by Shell.
Therefore it is important to research the strategic role of sales promotion and its impact on the brand image of Shell, as the brand destruction by a sales promotion of one product would have an impact on the overall brand which caters to a wider portfolio of products and services (Ref).
3.0 Research Objective and Process:
The Objective of this research is to explore the strategic role of sales promotion in engaging online consumers and its likelihood of obtaining a sustainable advantage within Shell.
The methodology chosen for this research is qualitative and would involve depth interviews because this research is exploratory and requires the understanding of consumer perceptions and their feelings towards the online promotions. The sample used for this research involves Shell mangers responsible for the implementation of the promotion as well as the potential online consumers for Shell.
This would benefit the Shell retail department in using the interactive elements of the web relative to online consumer’s perception on its promotion and reduce the risk of value destruction and potentially establish a sustainable advantage. This study would potentially give an understanding on the perceptions of their online consumers in the U.K which is one of their major markets. However this research does face limitations due to time constraints and access to resources ,this research would be considered as a pilot and could be explored in future with more detail for Shell’s other major markets such as Europe, US , Africa and Middle-East with the leverage of time and resources. Moreover the validity of this research could be enhanced with more samples in the U.K.
4.0 Literature Review
This section would literally look again at the existing academic literature on what has already been written about sales promotions and online consumer behaviour within the context of this research (Lee and Lings, 2008).The existing academic literature on sales promotions has concluded that, it’s less likely to achieve a sustainable advantage because it is often used by marketers as a short term measure to achieve sales targets (Ref). However there is a considerable amount of research happening in the area of online promotions which suggests that there is a potential for online promotions to establish a competitive advantage by taking advantage of the technological advancements on the web, such as the 3 dimensional and interactive features of the web, which could be used by marketers in creating perceived value to the brand and therefore contributing to the long term brand value (Ref). However there is limited research in the role of online sales promotions in establishing an online sustainable advantage because of the rapid technological developments. Therefore this research would contribute to the existing literature and also would attempt to answer Shell’s question on if their promotion is creating or destroying its brand value. The research propositions are developed based on the literature review and also would form the basis of an appropriate research methodology.
4.1 Conceptualization of Promotions:
Promotions have perhaps witnessed both dramatic growth and change over the years than any other area of marketing communications (Yeshin, 2006).Therefore it is important to review the different definitions relative to the changing nature of promotions (Table 1).
The institute of sales promotions(2004)
Describes, “A planned and implemented marketing activity that both enhances product or service appeal and changes customer behaviour positively in return for additional benefit for purchase or participation ”
Suggests that “a promotion is any incentive used by a manufacturer to induce the trade and/or consumer to buy a brand and encourage the sales force to aggressively sell it”
Kotler et al(1999)
Defines sales promotion as “Short-term incentives to encourage purchase or sale of a product or service”
Schultz, Robinson and Petrison(1992)
Provide a more strategic definition of sales promotion, they suggest that “Sales promotions are marketing and communication activities that change the price/value relationship of a product or service perceived by the target, thereby (1)generating immediate sales and (2)altering the long term brand value”
The Direct marketing association(1994)
Similarly argues that “Sales promotion activities that communicate distinctive brand attributes and contribute to the brand development and reinforcement of brand value are consumer franchise building promotions”
Writing in marketing suggests:” Sales promotion conducts an interactive relationship with its audience. It invites participation, invites consumers to enter ,to apply, to collect”
Table 1: Sales promotion definitions
Therefore the above contradictions in the definitions, leads to a confusion in the role and purpose of sales promotions, and therefore it’s been argued seriously in the academic arena, and concluded that the techniques offer-little in the way of brand sustenance, and leads to no lasting positive change in the value of post promotion sales, and as a consequence could result in damage to the existing brand perceptions (Ehrenberg et al, 1991; Ehrenberg, 1994; Jones, 1990; Yeshin, 2006).
However this would depend on the strategic contribution of the promotional activity implemented by Shell (Ref).Moreover it’s been pointed by Gupta et al (1997) that empirical research in the area of sales promotions has been focusing on the short term effects of sales promotions and therefore it’s been used by most marketers as a tactical tool. In support Peattie and Peattie (1997) argue that the bundling of all the different types of promotions for the purpose of research and study gives a very limited view of the potential achievements of sales promotions and also has encouraged a negative perception on the impacts that promotions can potentially have on the brand. Furthermore in the following paper Peattie et al (1997) argues that most of these preconceptions are caused because of the tendency to view sales promotions as only price based and exclude the promotional activities that add value to the brand. This point is reiterated that the tendency of most researchers in this area has been to generalize sales promotions under money off and coupon promotions (Peattie, 2002). Moreover it has been argued that much of the research on sales promotions has been conducted considering the short term effects of sales promotions and has rarely conducted any research on the more long term contribution of sales promotions such as the communication oriented impact of sales promotion on consumers (Peattie,2002).This implies that in order to make sense and obtain reliable results it is necessary to disaggregate the different sales promotional techniques into their individual components(Yeashin,2006).
Therefore in this research the long term contribution of Shell’s E-vouchering promotion is evaluated. Moreover it is argued that generalising all the promotions to achieve the same goals irrespective of their individual execution would imply incorrect results (Yeashin, 2006).Furthermore it is also pointed out by various authors that in order to focus on the long term impacts of sales promotions a more strategic focus is required and is illustrated by the following quotes
‘Sales promotions have come a long way from the time when it was ‘simply a short term inducement to increase sales’ (Robinson and Hauri, 1995).
‘Promotions are no longer simply short-term initiatives to lift sales, they are increasingly being used to reinforce brand values’ (Gay, 1997)
The above definitions suggest the need for a long -term focus and the strategic application of sales promotions considering broader dimensions of the potential impacts of sales promotions (Yeshin, 2006).Therefore it is important to explore the broader strategic dimensions of Shell’s sales promotions in order to reach a credible conclusion on its contribution to the Shell brand.
4.2Strategic dimension of sales Promotions:
Research suggests that more often sales promotion is considered as a short term-tactical tool (Yeshin, 2006).Although sales promotion is widely used to fulfil a variety of short-term objectives it often fails to recognize the strategic contribution on the long term, and it could often result in destroying the image or value of the brand (Yeshin, 2006). In order to evaluate its long term benefits it is critical to analyse the contributions of Shell’s online sales promotion in reinforcing its brand image, enhancing customer loyalty and developing strong relationships with its consumers because this can strengthen its brand position(Ref). Therefore it is important to explore the role of strategy within Shell’s online sales promotion and its contribution to the long-term effectiveness of the brand.
4.2.1Role of strategy:
The strategy should provide a framework to measure and research on the type of sales promotion implemented (Head, 1998; Yeshin, 2006). Although it is suggested that sales promotions should be considered in line with the overall brand building process (Yeshin, 2006). An alternative definition by Schultz et al (1992) provides a more strategic focus on the on the consideration of the sales promotion activity.
“Sales promotions are marketing and communications activities that change the price/value relationship of a product/service perceived by the target, therefore by generating immediate sales and altering long term brand value”
The above definition is considered important because it recognizes the need for generating short term sales volume and also promotes the need to consider the long term issues related to the brand (Schultz et al, 1992; Yeshin, 2006).Therefore based on this definition the strategic significance of Shell’s promotions in engaging online consumers should be evaluated because this definition gives a base for evaluating the promotions of Shell by recognising the short term objective of generating sales volume whilst appreciating the long term issues relative to its brand (Schultz et al,1992).For this reason it is required to explore the impact of sales promotions and its implications to the Shell brand. In order to understand its significance to the Shell brand it is important to identify the strategic use of sales promotions (Yeshin,2006).This would benefit Shell in communicating consistent overall brand image whilst helping each individual promotion achieve its objectives by creating increased awareness(Yeshin,2006).
It has been pointed that the reduction in product differentiation is one of the reasons for the increased usage of sales promotions(Yeshin,2006).Furthermore various studies suggest that similarities between brands can cause reduction in brand loyalty and is a consequence of increased usage of price oriented promotions(Ehrenberg,1993;Mela et al,1997). However there are various promotions that have demonstrated the potential to enhance the brand and generate loyalty in the long-term. For example: The frequent flyer schemes by airlines, Levis Flat Eric and Pepperami Fanimal(Yeshin,2006).Therefore as Lisa Campbell(1996)work in Promotions and incentives journal suggests ‘It’s not the tool we should be blaming but the users’.
This implies that the sales promotion tool used by Shell is not to be blamed but the way in which it is applied. Therefore it is required to review the literature on the strategic application of sales promotions and its potential benefits.
4.2.2The Strategic Application of Sales promotions:
Davies (1992) and O’Malley (1993) provide a contrasting view which suggests that sales promotions that are consistent with the overall marketing communications plan can enhance long term brand value and therefore could be considered strategically valuable.Similarily its been argued that sales promotions offering a rebate or discount are likely to cheapen the brand(Aaker,1991).However there are ways to apply promotions strategically and enhance the brand equity rather than destroying it(Aaker,1991). Furthermore the brand equity can be reinforced by strengthening its brand awareness and associations (Yeshin,2006).However based on the research conducted by Peattie et al (1997) it is concluded that sales promotions have the potential to:
1.Improve brand awareness.
2.Stimulate product trial.
3.Act as a communications channel between a company and its customers.
Based on the research by Peattie et al (1997) the strategic application of Shells sales promotion is identified to stimulate product trial and act as communication channel between Shell and it consumers. However its contribution to the brand depends on how the consumer perceives the promotion.
Furthermore the potential reasons behind using sales promotions needs to be identified in order to understand the reason underpinning Shells Online promotions (Yeshin, 2006).
Lee (2002) suggests four reasons for using sales promotions:
1. Reaction to competitor’s promotions
2. Inertia: This is what the firm always did
3. Meeting short term-sales objectives
4. Meeting long-term objectives
However research suggests that most sales promotions fall in the first 3 categories mainly for price based promotions (Lee, 2002).Moreover in most cases it is not used strategically but used as a panic measure. Furthermore it is suggested that sales promotions should be used at a higher level where it is integrated with main strategy (Lee, 2002).Therefore the usage of Shell’s online promotions and its relationship with the overall strategy needs to be explored. In order to understand this relationship within the context of this research it is important to identify the type of sales promotion strategy used by Shell.
4.2.3Type of strategies:
As sales promotion can reflect both push and pull strategies it is important to distinguish between the types of strategies that could be potentially used by Shell (Yeshin, 2006).The push strategy motivates distribution channels and encourages them to promote the product or service to the consumer, whereas the pull strategy is targeted directly towards end users to purchase products or services from the distribution channel (Yeshin, 2006). Based on the above definitions and Shells promotional objective its promotional strategy is identified as a Pull strategy.
These definitions of strategy are derived based on its intention to achieve results or goals for the firm(Craig,1983).Therefore in this case Shell’s choice of Pull strategy is based on its intention to drive online traffic to the forefront and increase the number of trials through its web portal. However there are multiple objectives for a firm at the corporate level and this leads to the design of different strategies to achieve different objectives at the expense of others (Craig, 1983; Shendel and Patton, 1978).Therefore this research tries to focus on the chosen sales promotion and its objective and does not consider the impacts of other objectives and strategies of the firm.
Furthermore many research scholars have suggested that sales promotion is unlikely to attain sustainable competitive advantage (Yeshin, 2006).However there are exceptions to the above argument example: Tesco club card, BA Air miles (Yeshin, 2006).
Therefore the sustainability of Shell’s online promotions is not ruled out and therefore needs to be explored. Moreover it is important to adopt a strategic approach rather than a tactical approach, which has been the focus in most cases (Yeshin, 2006).
In order to evaluate the effectiveness and sustainability of Shell’s retail promotions, it is necessary to consider the potential impacts of sales promotion on the consumer.
Raghubir et al (2004) argues that promotions may have three forms of impact on the consumer
1. Economic: The monetary benefits derived from the type of the promotional offer and its potential decrease in transaction time that lead to a simplified purchase decision.
2. Informational: It is about communicating the information about a brand which is unknown to the consumer.
3. Emotional: The feelings or emotions that are aroused as consequence of the exposure to the promotion.
Therefore the impact of Shells online promotions in the above three forms would be explored in order to evaluate its contribution t
5.0 Measuring the effectiveness of promotions
Although sales promotion is argued to be a marketing technique which is beneficial in the short-term. It is important to measure its long term-effectiveness in order to analyse the strategic significance of the activity. As cook (1995) argues it is important to consider the objective of the promotion before evaluation of the promotion in order to choose the best approach. Therefore in this case the post implementation review is done and its long-term effectiveness is considered.
Based on the literature review and Yeshin (2006) suggestion the following factors could be used to measure the long term effectiveness of sales promotions:
1. Does the promotional concept fit well with the brand and expected consumer perceptions?
2. Is the promotion perceived to be credible by the consumers?
3. Are there any constraints for the consumer to overcome in responding to the promotion?
4. Is the recommended promotion most likely to achieve the desired objectives?
5. Is the promotion perceived as a value addition in satisfying consumer needs?
In order to explore the long-term effectiveness and its contribution to obtain an online competitive advantage for Shell the existing literature on competitive advantage is explored relative to Shell’s online promotions.
6.0 Competitive Advantage:
The information revolution has given firms new ways to outperform their rivals and therefore allows the firm to create a competitive advantage(Ref).This conceptualisation of competitive advantage is important because it is relative to the research objective which explores how the information presented by the sales promotion could contribute to the overall brand.
The research by Porter and Miller suggest that it is hard to underestimate the strategic significance of the latest developments in information technology. It demonstrates that Information technology has been transforming the nature of products, processes, companies, industries and even competition itself (Porter and Miller,1985).Although it has been treated as a support service it is suggested that organisations should understand that on a broader perspective, as Information technology could create sustainable competitive advantage (Porter and miller,1985).Therefore with ongoing developments on the web, the strategic significance of Shell’s online promotions needs to be explored in order to identify its potential in obtaining an online competitive advantage.
Information technology should be perceived as medium that can process the information created by businesses and use them through the various technologies that are linked in order to create a competitive advantage (Ref).Therefore it is relevant to discuss the reasons that underpin the strategic significance of Information technology and its impacts on business in order to understand how it could be used to create an online competitive advantage for Shell (Ref).
Research suggests that information technology changes the way in which products and services are created and the information provided in order to create value to the consumers (Ref).In the case of Shell the value created is determined by the amount the consumers are willing to pay for their product or service (Ref).Therefore the Shell retail promotions could be considered profitable if the value it creates through the implementation of its promotion exceeds the cost of performing the promotional activity(Ref).This implies that Shell should either perform the promotional activity at a lesser cost or should create perceived value that leads to a premium price(Ref).
6.1Sustainable Competitive Advantage:
The online environment is changing the existing roles of competition and strategy because there is a pressure on the average profitability of the industry which is created by the internet (Porter, 1991).Therefore with competition from firms such as B.P, ESSO and Total it is important for Shell to set itself apart from the others (Ref). This could be possible only by achieving a sustainable competitive advantage (Ref).However this could be achieved either by operational effectiveness or strategic positioning(Ref).In the case of operational effectiveness it is required for Shell to do things better than competitors where as in the case of strategic positioning Shell has to do things differently from competitors there by offering something unique to customers(Ref).However the improvement of operational efficiency using the internet does not provide a competitive advantage because the best practise established by Shell can be imitated by its competitors(Ref).Moreover it is argued that competitive advantage tends to be short-lived in the online environment because competitor can easily monitor and offer a similar offer or service(Chaffey et.al., 2000:134).Therefore it becomes difficult to sustain the operational advantage. Hence strategic positioning is considered more important in this case where strategic positioning should involve a series of tailored activities to develop a product or service appeal that would offer a unique value perception (Ref). Moreover the online environment can be used to draw long lasting customer relationships (Ref).The interactive nature of the online environment can be used to build relationships (Ref). This is supported by Gronroos(1994). Buttle (1996:1) statement “Enduring relationships with customers cannot be duplicated by competitors, and therefore provide a unique and sustainable competitive advantage”.
Therefore in order to explore the contribution of interactive online environment in building relationships with the consumer it is required to conceptualise the online consumer behaviour and the factors influencing them.
7.0Online consumer Behaviour:
The strategic role of sales promotions in engaging online consumers is explored. Therefore based on the research objective it is important to have a significant understanding on online consumer behaviour and factors influencing them. Research suggests that more than 20% of consumers across several countries are buying products online using the internet and more than 50% of internet user’s in the U.S buy products and services online (Kim et al, 2009). In the U.K around 40% of internet users buy products and services online (Kim et al, 2009).
Although it could be argued that there is no difference between online and traditional consumers (Constantinides, 2004). The new addition is building trust or confidence and is suggested to have a significant influence on online buying process (Ref).Therefore the factors influencing online consumer behaviour needs to be discussed based on the existing literature in order to understand their implications to the online promotions of Shell.
7.1Factors Influencing consumer Behaviour:
Based on the previous academic research it is inferred that there are controllable and uncontrollable factors which influence consumer behaviour (Constantinides, 2004). The interaction of controllable and uncontrollable factors determines online decision making process just as in traditional markets (Constantinides, 2004).However in this research the factors that are under the control of the E-marketer would be explored. The existing research on online consumer behaviour indicates a set of controllable factors influencing consumer behaviour (Ref)
* The functional attributes of the website such as interactivity and usability.
* The psychological elements intended in lowering the level of consumer’s uncertainty by the communication of Trust and credibility of the website.
There has been considerable amount of research on the components of web experience. However there has been minimal attention in their integration. Therefore this research attempts to explore the contribution of these elements in obtaining a competitive advantage. Based on the research objective the online consumer behaviour is conceptualised.
7.2Conceptualisation of Online Consumer behaviour:
The online consumer behaviour is the key theme around which this research is based. Therefore it is imperative to introduce the online consumer considered in this research. Based on previous academic research the online consumer is considered to be a computer user and a shopper (Koufaris, 2002).The online consumer’s could be classified as potential customers and repeat customers as they posses different amount of information and use different criteria to make a purchase decision (Kim et al, 2009).Although it is suggested that different promotional strategies should be used to create initial sales and to generate repeat sales (Ref). This leads to less clarity on the differences in decision making by the two groups of consumers. However the research by Kim et al (2009) shows that the value perception of the transactions made online are strongly influenced by the non-monetary factors like perceived risk factor than by monetary factors like perceived price for potential consumers, in contrast the repeat customers are strongly influenced by monetary factors than non-monetary factors(Ref). Therefore it is suggested that the promotion needs to be customised for the two different groups. But the extent of customisation and its influence on the consumers need to be tested and validated in the case of Shell (Zhang, 2009).
This leads to a proposition where it is important to understand and measure online consumer behaviour. A multidisciplinary approach needs to be taken as it is important to consider Information systems, marketing and physiological perspectives to do a comprehensive analysis on online consumer behaviour (Straub and Watson 2001). There have been various attempts from academics in building models around online consumer behaviour. The key attributes identified from the research are on converting web surfers into web consumers and, reasons for not shopping online. It is interesting to see transaction cost theory being applied to understand the impact of I.T on market structure and consumer behaviour (Malone et al. 1987).Based on the frame work it is inferred that if buyer search costs are substantial it could influence consumer behaviour (Bakos 1997).However it is important to see how effective it is in the context of online consumers. It is argued that online consumers cannot depend on all 5 senses to make purchase decisions as they are limited to product or services represented through photographs and text descriptions (Koufaris, 2002).However research shows that the representation of the product online and the web experience play a key role in driving consumer attitude towards shopping online and
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