Spending on the Fly: Mental Budgets, Promotions, and Spending Behavior

Recent research has suggested that consumers have in-store slack for grocery trips - that is, they leave room in their mental budgets to make unplanned purchases. Drawing on this work, this article examines how the impact of promotions depends on whether the shopper still has in-store slack remaining in his or her mental budget. Specifically, the authors evaluate how the effect of promotional savings for both planned and unplanned items on spending varies as a function of whether the item is purchased before or after the shopper's in-store slack is depleted. In addition, they examine how these relationships vary depending on income. To achieve these goals, the authors conducted a field study in which respondents used a handheld scanner to record the order of purchases. The results suggest that savings on planned items lead to stockpiling by higher-income shoppers when the savings occur before the in-store slack has been depleted but lead to increased purchase of unplanned items when they occur after in-store slack is depleted. The results also show that promotions on unplanned grocery items generate incremental spending at the basket level, which increases with income but only when the item is purchased after the in-store slack is exceeded. The authors discuss implications for shopper marketing strategies. [PUBLICATION ABSTRACT]