Kikika

An executive summary for managers and executive readers can be found at the end of this article

Price threshold and discount saturation point in Singapore
Roger Marshall

Associate Professor, Nanyang Business School, Nanyang
Technological University, Singapore

Seow Bee Leng

Strategy Consultant, Accenture Consulting, Tokyo, Japan
Keywords Price discounts, Pricing strategy, Consumer behaviour
Abstract A study is reported, which investigated Singapore consumers ' price thresholds and saturation points for price discounts. The study shows that consumers discount the offered price discount, i.e. they lower the dollar gain value. This discounting of discounts increases significantly with the increase in advertised discounts. Very similar patterns of responses are obtained for products and services. The study also indicates that the saturation point for price discounts of 20 to 30 percent is found to be the same in
Singapore and the USA. However, a price threshold of less than 10 percent is found for Singapore consumers, compared to 15 percent in the USA. Frequent price promotions in Singapore may have lowered the products ' expected price and appear to lead consumers to defer purchases when regular prices are offered.

Intention of advertised discounts Variation in discounting practices Introduction
Advertised price discounts are commonly used to stimulate store patronage and purchase behavior by increasing the value of an offer via a price reduction. In Singapore it is common to find stores advertising 50, 60 or even
70 percent discounts on their products. Retailers in the ``Lion City ' ' clearly tend to believe that the larger the price discount promotion, the more attracted the consumers will be to respond. But do consumers actually respond in this way ± do they even believe these advertised discounts? Quite clearly, without knowing the answers to these questions, Singapore marketers cannot make effective promotional

References: Alba, J.W., Mela, C.F., Shimp, T.A. and Urbany, J.E. (1999), ``The effect of discount frequency and depth on consumer price judgments ' ', Journal of Consumer Research, Della Bitta, A.J. and Monroe, K.B. (1980), ``A multivariate analysis of the perception of value from retail price advertising ' ', Advances in Consumer Research, Vol Della Bitta, A.J., Monroe, K.B. and McGinnis, J.M. (1981), ``Consumer perceptions of comparative price advertisements ' ', Journal of Marketing Research, Vol Frankenberger, K.D. and Liu, R. (1994), ``Does consumer knowledge affect consumer responses to advertised reference price claims? ' ', Psychology & Marketing, Vol Grewal, D., Marmorstein, H. and Sharma, A. (1996), ``Communicating price information through semantic cues: the moderating effects of situation and discount size ' ', Journal of Grewal, D., Monroe, K.B. and Krishnan, R. (1998), ``The effects of price-comparison advertising on buyers ' perceptions of acquisition value, transaction value and behavioral Gupta, S. and Cooper, L.G. (1992), ``The discounting of discounts and promotion thresholds ' ', Journal of Consumer Research, Vol Kalwani, M.U. and Yim, C.K. (1992), ``Consumer price and promotion expectations: an experimental study ' ', Journal of Marketing Research, Vol Kalwani, M.U., Yim, C.K., Rinne, H.J. and Sugita, Y. (1990), ``A price expectations model of customer brand choice ' ', Journal of Marketing Research, Vol Kaufmann, J.P., Smith, N.C. and Ortmeyer, G.K. (1994), ``Deception in retailer high-low pricing: a rule of reason approach ' ', Journal of Retailing, Vol Lattin, J.M. and Bucklin, R.E. (1989), ``Reference effects of price and promotion on brand choice behavior ' ', Journal of Marketing Research, Vol Lichtenstein, D.R., Bloch, P.H. and Black, W.C. (1988), ``Correlates of price acceptability ' ', Journal of Consumer Research, Vol Marshall, R. and Na, W.B. (2000), ``How much is enough? A preliminary empirical study of the price tolerance zone in Singapore ' ', in Hoch, S.J Mazumdar, T. and Jun, S.Y. (1992), ``Effects of price uncertainty on consumer purchase budget and price threshold ' ', Marketing Letters, Vol Mobley, M.F., Bearden, W.O. and Teel, J.E. (1988), ``An investigation of individual responses to tensile price claims ' ', Journal of Consumer Research, Vol Raju, J.S., Srinivasan, V. and Lal, R. (1990), ``The effects of brand loyalty on competitive price promotional strategies ' ', Management Science, Vol Straits Times (1998), September 7. Urbany, J.E. and Dickson, P.R. (1991), ``Consumer normal price estimation: market versus personal standards ' ', Journal of Consumer Research, Vol Winer, R.S. (1986), ``A reference price model of brand choice for frequently purchased products ' ', Journal of Consumer Research, Vol Biswas, A. and Blair, E.A. (1991), ``Contextual effects of reference prices in retail advertisements ' ', Journal of Marketing, Vol Licata, J.W., Biswas, A. and Krishnan, B.C. (1998), ``Ambiguity and exaggeration in price promotion: perceptions of the elder and non-elder consumer ' ', The Journal of Consumer Mayhew, G.E. and Winer, R.S. (1992), ``An empirical analysis of internal and external reference price ' ', Journal of Consumer Research, Vol