Low Expenditures or High Savings: What Drives Store Choice?

Existing literature on store choice assumes that price promotions increase a store’s attractiveness by lowering the basket price. In this paper we argue that price promotions, by creating hedonic and utilitarian shopping value, have a direct effect on utility above and beyond the effect that comes from lower basket prices. We apply a store choice model to temporal household-level data and show that anticipated savings, the total value of discounts that a consumer expects to obtain at a store, is an important driver of store choice. our results imply that a Hi-Lo strategy is preferred over an EDLP strategy.