Out of Stock (OOS)
As discussed at the beginning of this chapter, consumers cannot evaluate the effectiveness of distribution systems unless the product is unavailable on the retailer’s shelves, or out of stock (OOS). The OOS literature discusses a range of consumer responses to an OOS item.
In an OOS situation, consumers either postpone their purchase, switch from the OOS item to a product available in the same store, or leave the store to search for the OOS item in another store. A consumer switching to an available item at the same store represents a gain for the retailer and perhaps indicates the power of store loyalty (Kucuk 2004, 2008). Some store-loyal consumers even fail to recognize the OOS situation and pick an available alternative for their own convenience. However, this might not be the case for brand-loyal consumers. A consumer choosing to leave the store and look for the OOS item elsewhere, is the manufacturer’s gain and might indicate the strength of consumer brand loyalty towards the item (Kucuk 2004, 2008). In some cases, brand-loyal consumers prefer to postpone purchasing the OOS item until it is available or pick a different size of the same OOS item (known as size switching). The algorithm in Fig. 5.6 illustrates these types of consumer reaction to OOS items.
Although the degree of brand and store loyalty might play active roles in influencing consumers’ decisions in the OOS situation, some situational factors are actually under retailers’ control. Retailers can try to influence the consumer’s decisions by increasing the effectiveness of in-store merchandising of available alternatives (e.g., in-store advertisements, price promotions, big shelf space, etc.), especially for items that are constantly out of stock. The OOS situation is a big test of the consumer’s brand and store loyalty for especially frequently purchased and convenience items (Kucuk 2004).
On the other hand, brand and store loyalty might not be that strong in respect of impulse buys and some specific frequently purchased items. If the market is of a fixed size (thus is not changing or is dynamic) and brand loyalty is very small or non-existent, product availability (distribution) and in-store merchandising might contribute to changing consumers’ preferences at the point of purchase. Furthermore, not every consumer feels loyal to a specific brand and store; they may make daily shopping decisions based on “top-of-mind awareness” (TOMA) towards brands for especially frequently purchased items. TOMA defines a basic consumer brand awareness indicating the first choice or the first known brand name in a particular category in the consumer’s mind. Whether or not the consumer has previously purchased the brand, every consumer can identify a couple of brand names from the relevant category. TOMA is generally created by media advertising and word of mouth. Thus, although some consumers enter retail stores with some level of TOMA regarding a set of brands, not every TOMA created in consumers’ minds necessarily leads to a purchase decision.
Fig. 5.6 Algorithm for consumer behaviors in OOS situation
Note: Dotted lines indicate consumer’s behavioral responses to the OOS item as also discussed in OOS literature Source: Kucuk (2011)
In this context, the goal of the retailer is to either carry products which have high TOMA or break the strength of TOMA in store and direct consumers to other available products. The strength of TOMA can be reduced with a tool recently conceptualized as push-based brand awareness (PBA). PBA has been defined as “available brand’s ability to create consumer awareness with the support of retailer’s in-store merchandising efforts in the situation of the consistent unavailability (OOS) of the searched item at the same retail store/setting over time” (Kucuk 2011). Thus, while TOMA is mostly created by promotion tools before the consumer enters the retail store, PBA relies solely on the retailer’s in-store merchandising effectiveness. PBA can also be formularized as the combination of consumer awareness of consistently available items (known as availability awareness or AA) and the amount of in-store merchandising support [PBA = AA x In-store Merchandising]. AA is used as an indicator of the ability of distribution and/or product availability to create consumer brand awareness for items experiencing consistent OOS (Kucuk 2008). Two important factors therefore determine PBA’s success: the level of in-store merchandising support given to the available brand; and the duration of OOS for the item being sought, which directly affects AA. These functional relationships are illustrated in Fig. 5.7. If retailers successfully manage and control the duration of OOS (DurOOS) and in-store merchandising efforts (IsM), the brand awareness level created by PBA in the retail store may push higher TOMA levels down. Figure 5.7 illustrates how AA and PBA can shape a convex curve sloping upward to the right as discussed in previous empirical studies in this section. If a brand is frequently in an OOS situation, the amount of TOMA (TOMAa) created by previous exposure and AAa might eventually decrease as consumers are exposed to availability of other brands in the same store (AAb). In this situation, AAb might reach higher levels over time when brand b is widely available in the market, and OOS continues (indicated by a thick
Fig. 5.7 Push-based brand awareness Source: Kucuk (2011) gray arrow pointing toward the right). If brand b also receives effective instore merchandising by a retailer (indicated with a thick gray arrow pointing left), brand b reaches higher awareness levels earlier than expected (PBAb). This is indicated with dotted lines in Fig. 5.7. The point where AAa and AAb as well as PBAa and PBAb intersect is where brand awareness levels reach equilibrium, conceptualized as a brand awareness break-even point (also indicated with an arrow in Fig. 5.7). At the awareness break-even point, consumer brand awareness might be further triggered by active implicit memory created during previous and frequent OOS occasions.
If a brand passes brand awareness the break-even point, the consumer’s AA and PBA towards the available brands increase more rapidly. At some point, the consumer ceases to search for a previously preferred item, and TOMA of the available brand takes over, eventually entering the consumer’s awareness and consideration set. Thus, the consumer’s choice finally might be compromised in the store. With that, AA and PBA transform to TOMA, completing consumer preference modification in the retail store. This example indicates how powerful distribution can get to develop brand awareness and change consumer preferences, especially of frequently purchased products or impulse buys.