High versus low online price discounts: effects on customers’ perception of risks

Abstract

Purpose – The purpose of this paper is to examine the signaling effects of high versus low price discounts by integrating extant literature on price discounts, perceived risks and purchase intentions for products sold online. The study examines the influence of price discounts on perceived risks, and the subsequent influence of these risk perceptions on online purchase intentions. Design/methodology/approach – This study used an experimental design. The manipulated factor was price discount (10, 30, 50, 70 and 90 per cent). Responses were collected via online surveys. Nonlinear regression analysis with the MEDCURVE macro was used for the analysis. Findings – The results show that the discount size increases customers’ perceived risks, and that these perceived risks mediate the relationship between price discount and purchase intentions. Practical implications – This study provides a better understanding of customers’ risk perceptions for online price discounts, which enables retailers to decide appropriate price discounts to attract customers. Originality/value – Most previous literature focusing on price discounts takes into consideration the presentation effect on consumers’ positive perceptions, while this study investigates the price discount effect on customers’ negative perceptions. In particular, this study examines the mediating effect of perceived risks on the relationship between price discount and purchase intention, which has not been investigated in previous studies.