Retail price discount depth and perceived quality uncertainty

Abstract

This study analyzes the impact of retail price discount depth on consumer perception of quality uncertainty and its implications. While the extant research finds a negative relationship between perceived mean quality (indicated by the mean of quality perception) and price discount, we suggest an inverted-U-shaped relationship between perceived quality uncertainty (indicated by the variance of quality perception) and price discount. The underlying mechanism for this phenomenon is that consumer attribution of price promotion varies by discount depth. Specifically, when provided with a moderate discount (compared with a low or high discount), consumers cannot ascertain whether the discount is related to product quality; thus, they perceive a higher level of quality uncertainty and correspondingly rely more on other cues, such as country of origin and product popularity information, to make inferences about quality. Those findings have implications for setting the depth of retail price discounts and providing product quality-related information in the context of price promotion.