| Abstract: |
The effect of variety on consumer choice has been studied extensively, with
some stream of literature showing the positive effects on choice and others
arguing that too many alternatives may result in negative consequences (i.e.,
choice deferral or no purchase at all), often referred to as choice overload.
In a field experiment with a major chocolate brand conducted at a German
retail chain, we test for variety during a price and display promotion.
Participating stores either include the full variety of products on the
display or a reduced selection (low variety). Contrary to the literature on
choice overload, we find a significantly positive effect of the display
promotion on unit sales, which is stronger for stores with high variety.
Further findings show a stronger promotion uplift for less popular products in
stores with high variety on the display. This suggests that more variety may
increase consumers’ willingness to try new products, when the financial risk
is low. We also test for the effect of product distribution on displays by
analysing the number of facings. Additionally, we introduce an approach to
determine an optimal space allocation of products on the display. Our findings
suggest that an even distribution results in the highest profits for the
retailer. We contribute to the literature on variety for consumer choices by
offering insights from actual purchases with store-level scanner data of
display promotions. |