Academic journal article Business: Theory and Practice

Intention to Purchase Products under Volume Discount Scheme: A Conceptual Model and Research Propositions

Academic journal article Business: Theory and Practice

Intention to Purchase Products under Volume Discount Scheme: A Conceptual Model and Research Propositions

Article excerpt

Introduction

In marketing research, sales promotion (SP) plays a vital role not only for the benefits of consumers but also for the manufacturers to increase their volume of business, and, simultaneously, nurture new consumers of the products. A large proportion of the marketing budget is spent on sales promotion. However, most of the SP activities fail and are unable to fulfil the retailers' goals (Grewal et al. 1998), due to the retailers' lack of knowledge concerning different types of promotion and the appropriate conditions for use. The inappropriate application of sales promotions may lead to a reduction in the likelihood of a brand and product being chosen (Campo, Yague 2007). Therefore, the retailers are interested in finding possible ways to predict the effectiveness of selected SPs to increase consumer intention on purchasing decisions (Laroche 2002).

There are different types of SP available in the market. While the research on price discount has been extensive (Neslin, Shoemaker 1989; Chang et al. 2011) and the crucial dimensions of price discount in several contexts have been studied, the research on non-price promotions (volume discount) is very limited (Carpenter, Moore 2008). Under the volume discount scheme (VDS), the retailer or manufacturer rewards those purchasing in bulk or by unit by providing a reduced price for each product or group of products, e.g. 5% (or more) extra, buy one (or more) shirt(s) and get one (or more) free, buy one and get one with 50% discount, and coupons that can be exchanged for an extra volume on repurchase. All over the world, the sales promotion under volume discount is commonly practiced as more and more consumers are becoming fond of purchasing products under volume discount. Jayaraman et al. (2013) showed that VDS is one of the most common sales promotion tactics at Business-to-Consumer (B-to-C) level in Malaysia.

A sales promotion that is effective for your competitors may not be effective for your brand or store and a promotion that works for a product, may not work for other products. Sinha and Smith (2000) found that volume discount is an effective way to promote storable products. However, contrary to Sinha and Smith (2000), Li et al. (2007) found that there is no relationship between the storability of products and the intention to purchase products under VDS. This is a real motivation for developing a conceptual framework to make it possible to test the direct and indirect relationship of factors (cause-effect) that influence VDS sales promotion.

From the consumers' point of view, SPs are more than just money-off. Raghubir and Corfman (1999) pointed out that consumers judge the quality of a product based on the depth of promotions. Further, Inman et al. (1990) and Raghubir (1998) remarked that, in general, SPs may mislead the consumers on the price image of the product as the product is sold at a lower price during the SP period. Therefore, it is essential to conceptualize the stimulus and situations that may create the real perception of quality and monetary savings when the product is promoted, especially under VDS.

1. Background on general framework of sales promotion

The majority of the research studies conducted before 2000 included the factor monetary savings while conceptualizing the framework, and claim that it is the only benefit of SP to the consumers (Chen et al. 1998). The asseverations of these studies raise a question: can monetary savings alone completely explain the consumer response behaviour to the SPs? If so, then everyday low price tactics should be successful in any store, brand, and on any products due to minimizing the search cost to the consumers. Nevertheless, previous studies have found that the everyday low price tactic cannot fully replace SP strategies (Hoch et al. 1994; Lal, Rao 1997). If not, what other consumer perceptions of the benefits of SPs affect consumer evaluation? Towards this, Chandon et al. …

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