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Topics: Marketing, Price, Pricing Pages: 27 (6690 words) Published: April 5, 2013
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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 pricing decisions. This work actually has far wider significance than merely aiding Singapore retailers with their price strategies, as not only is the (US) work to date on this topic already old, but within the USA itself (let alone Europe and Asia) discounting practices also vary widely from region to region. Hence, it is of real importance to see if the findings in the previous work, conducted in specific US locations, hold true elsewhere. Generally, it is our expectation that they do not.

Studies by Della Bitta and Monroe (1980) and Gupta and Cooper (1992) suggest a price threshold level of 15 percent and a saturation point for price discounts of 20 to 30 percent in the USA (that is, a 15 percent price reduction is sufficient to trigger a (purchase intention) reaction, and discounts over 30 percent are largely wasted). However, as mentioned, retailers in Singapore commonly advertise price reductions of up to 70 percent in a sale. This raises the questions of whether consumers in the USA and Singapore have different perceptions concerning price increases and decreases; it also makes one wonder whether the Singapore retailers have ``got it wrong'' by providing such high promotional price discounts.

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JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 11 NO. 3 2002, pp. 147-159, # MCB UP LIMITED, 1061-0421, DOI 10.1108/10610420210430042

147

Involvement of psychology

General background to price discounts
Price is a salient attribute for nearly all consumers in virtually every product category. Understanding consumer perception towards price has received increasing attention in recent years due to the involvement of human psychology in the purchasing decision process. That is, noticing ± and reacting to ± a price reduction is not merely a physical phenomenon, but...

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