Regular Price Research Articles

EXPRESS: The Multitier Discount Effect

How can firms make their quantity discounts more attractive to consumers? This research proposes that, instead of providing only a quantity discount (e.g., regular price: $6.99 each; buy two: $5.59 each), offering it along with an additional tier of discount (e.g., buy one: $6.79 each) can increase the likelihood that consumers take the quantity discount. This “multitier discount effect” occurs because the inclusion of the additional discount tier can lead consumers to perceive the quantity discount price as lower. Through a series of studies involving different consumption contexts, product categories, price points and discount levels, this research demonstrates the multitier discount effect, its mechanism and key boundary conditions. Specifically, Study 1 shows that social media ads featuring multitier (vs. control) discounts can attract higher clickthrough rates. In a preregistered incentive-compatible setup, Study 2 demonstrates the multitier discount effect and the mediating role of perceived price difference. Studies 3-5 indicate that the price level of the additional discount tier, consumers’ prior purchase frequency, and their distrust of advertised original price can each moderate the multitier discount effect. These findings add to the theoretical literature and provide actionable managerial insights.

The effects and mechanism of discounting unit price

Purpose Supermarket promotions typically use a standard label, which displays the regular price, discounted price and discounted unit price. Visits to supermarkets across multiple countries found that none used a price label that also contains the regular (i.e. pre-discounted) unit price. This study aims to investigate the effectiveness of a dual unit-price label that includes the regular unit price as a reference price, and what underpins its efficacy in enhancing promotion attractiveness. Design/methodology/approach The authors executed four studies, supported by three supplemental studies. Study 1 established external validity through a natural instore experiment. Studies 2 and 3 tested the dual unit-price label with different pack sizes and assortment sizes, respectively. Finally, Study 4 tested the underpinning mechanism of the efficacy of the dual unit-price label. Findings In Study 1, daily sales records over four weeks showed that dual unit-price label promotions had larger sales volume than standard-label promotions. Study 2 showed a larger pack size, a heuristic cue for greater economy and increased preference for dual unit-price label promotions. Study 3 similarly found that the dual unit-price label was preferred more as cognitive load was increased by assortment size. Finally, Study 4 demonstrated the dual processing of the dual unit-price label, using a conscious preference measure (information provided) and an unconscious implicit attitude test. Research limitations/implications Unit-price research has mainly considered a cognitive process. The authors demonstrated the importance of considering a heuristic process. Practical implications Supermarkets can use this simple and yet effective tool to improve promotion effectiveness. Originality/value This study demonstrates that the dual unit-price label is a new and easy tool to enhance sales promotions, which academic research and managerial practice had never considered previously.

Categorising the Urban Poor: Undermined State Protection for Informal Settlers in the Philippines

This study examines how the state categorises and governs the urban poor in the Philippines, implementing different housing policies for citizens who can pay regular prices and the urban poor who cannot. Slum dwellers who cannot afford land are categorised as “underprivileged and homeless citizens” and receive state protection. Meanwhile, those considered able to afford land are classified as “professional squatters” and are subject to imprisonment and/or fines. Since the 2000s, the state protection has been via market-driven policies, which have proven insufficient as local governments and private developers relocate slum dwellers for high-end housing projects that force these dwellers to purchase relatively expensive socialised housing in suburbs with inadequate infrastructure or livelihood opportunities. This article reviews the inadequacy of state protection by examining the role of courts that might protect slum dwellers from the state’s market-driven policies. This analysis indicates that, based on the building materials of houses, the courts are likely to define slum dwellers as professional squatters. This is not necessarily an accurate reflection of their living standard, compared to income. Underprivileged and homeless citizens are easily relocated under market-driven policies, and if they resist in court, they are likely to be treated as professional squatters.

The prevalence and magnitude of price promotions in online alcohol retail outlets.

We examined the prevalence of price promotions (i.e., proportion of products on price promotion) and the magnitude of price promotions (i.e., size of the price discount compared to the regular price) among online alcohol retailers. In August 2023, we web-scraped product information for all alcoholic beverages available for sale in the online stores of two leading alcohol retailers in Sydney, Australia. Products were classified into five primary alcohol categories: wine, spirits, beer, cider and premix drinks. We considered three types of price promotion: temporary price discounts (e.g., 'was $5 now $4'), multi-buy discounts (e.g., buy one get one free) and 'any six' discounts (e.g., 5% off when purchased in a bundle of any six similar products). The prevalence and mean magnitude of price promotions were estimated overall and by product category and price promotion type. In total, data for 11,184 products were collected. Of these, 62% were the subject of at least one of the assessed forms of price promotion. The most frequently price-promoted category was wine (91% of products), followed by spirits (35%), premix drinks (30%), cider (28%) and beer (21%). Of all price promotions, 61% were 'any six' discounts, 31% were temporary price discounts, and 7% were multi-buy discounts. Across all price promotions, the mean magnitude of price discount relative to the regular price was 11% and ranged from less than 1% to 71%. Policymakers should consider restricting price promotions as part of a suite of strategies to reduce alcohol-related harms.

The emotional side of price: reference price as a decision maker in consumer purchase

PurposeThe objective of this study is to elucidate the influence of reference price on consumers' willingness to buy (WTB). Additionally, the study seeks to investigate the impacts of consumer perceived value (CPV): emotional, social, and monetary levels in relation to reference price and WTB. Furthermore, it aims to identify the moderating effect of product type, distinguishing between hedonic and utilitarian products.Design/methodology/approachData collection was conducted through an anonymous questionnaire survey using a web-based platform called Prolific. The sample consisted of 258 individuals. The study performed experimental studies to assess the connections among variables and used structural equation modeling as well as Hayes' PROCESS macro models 4 and 8.FindingsPresenting reference price alongside regular prices for products significantly enhances WTB. Furthermore, the mediating effect of the CPV exhibited a significant influence, particularly in the emotional and monetary dimensions but not although the social aspect. Additionally, the findings unveiled substantial variations in the mediating effect of CPV when examining hedonic versus utilitarian products.Research limitations/implicationsPresenting reference price alongside regular prices for products significantly enhances WTB. Furthermore, the mediating effect of the CPV exhibited a significant influence, particularly in the emotional and monetary dimensions but not although the social aspect. Additionally, the findings unveiled substantial variations in the mediating effect of CPV when examining hedonic versus utilitarian products.Originality/valueThe study contributes to the literature by integrating emotional values into pricing strategies. Furthermore, the findings provide insight for managers into establishing a consistent method for implementing price display advertisements on the basis of the product type within the retail industry.

Price discounts and cheapflation during the post-pandemic inflation surge

We study how within-store price variation changes with inflation, and whether households exploit it to attenuate the inflation burden. We use micro price data for food products sold by 91 large multi-channel retailers in ten countries between 2018 and 2024. Measuring unit prices within narrowly defined product categories, we analyze two key sources of variation in prices within a store: temporary price discounts and differences across similar products. Price changes associated with discounts grew at a much lower average rate than regular prices, helping to mitigate the inflation burden. By contrast, cheapflation – a faster rise in prices of cheaper goods relative to prices of more expensive varieties of the same good – exacerbated it. Using Canadian Homescan Panel Data, we estimate that spending on discounts reduced the change in the average unit price by 4.1 percentage points, but expenditure switching to cheaper brands raised it by 2.8 percentage points.

Crowding out and impoverishing effect of tobacco in Mexico

IntroductionTobacco is one of the world’s largest preventable causes of premature death, accounting for more than 8 million deaths and costing the global economy US$1.4 trillion each year. Smoking is...

Customer's response to dynamic pricing in utility energy Tariff quality and reliability with the time of use: An Empirical case study of household electricity customers in Indonesia

Time of Use (ToU) is one of the types of dynamic pricing strategies at which a pricing scheme employs a variable rate rather than a fixed one causing electricity tariffs over a particular consumption period to rise once in high consumer demand at peak times and to fall once the demand is low at off-peak times. Owing to the important factor of perceiving customers' response to the successful implementation of the ToU tariff scheme, this study examines the household electricity customers' response in Indonesia - especially residents of Java Island and Bali Island - to future implementation of this dynamic pricing strategy in utility energy tariff quality and reliability. Data on the behavior of the PLN customers need to be thoroughly gathered and then analyzed quantitatively for well-informed decisions on a set of variable rates based on peak/off-peak times of the day and the season to establish in a board of directors' room. Hence, survey work is conducted, and a questionnaire is carefully designed and developed in this study to help collect and analyze the data on consumer behavior. The results show that customers’ response exhibits a promising outcome. At the total number of 451 respondents, 63 % of the survey participants expect to opt into the ToU scheme and the reason for this is their sensitivity to a bargain price of the electricity rate. However, 37 % of the respondents find ToU burdensome to implement and very demanding, as a result they opt out of the ToU scheme. From the results of the survey, it can also be inferred household energy-related activities that customers are quite willing to shift are washing and ironing clothes where a shift in these activities would lead to potential savings in the electricity bills of 26 % off the regular price. From the use of the quantitative method in this study, the total potential daily load reduction of energy consumption with the ToU tariff scheme could reach 3,23 kW for each customer. The findings conclude that customers have presented an encouraging response to future implementation of ToU and express their thoughts ToU seems to bring potential benefits of saving electricity bills and looks as if it is fairly easy for customers to adapt to shifting their energy usage from peak times to off-peak times.

The Role of Shopee Live Discounts: Case Study of Online Seller of Kemaiu Shampoo in Driving Transactions

This research analyzes the role of discounts on the Shopee Live platform with a case study of online shampoo seller Kemaiu. Shopee Live, as an innovative feature of Shopee, allows direct interaction between sellers and potential consumers through live video broadcasts. Discounts are the main focus as a strategy to increase transactions. Using qualitative descriptive methods, this research involved interviews with Kemaiu owners and observations during live streaming on Shopee. The research results show that discounts, such as regular price cuts and vouchers, have a significant role in encouraging potential consumers' buying interest. Shopee Live has proven effective in increasing interactions and transactions. Even though competition is considered low, the existence of the TikTok Shop platform is considered a factor that can influence sales.

Informational Updates and the Derivative Pricing Kernel

It is common in financial markets for market makers to offer prices on derivative instruments even though they are uncertain about the underlying asset’s value. This paper studies the mathematical problem that arises as a result. Derivatives are priced in the risk-neutral framework, so as the market maker acquires more information about the underlying asset, the change of measure for transition to the risk-neutral framework (the pricing kernel) evolves. This evolution takes a precise form when the market maker is Bayesian. It is shown that Bayesian updates can be characterized as additional informational drift in the underlying asset’s stochastic process. With Bayesian updates, the change of measure needed for pricing derivatives is two-fold: the first change is from the prior probability measure to the posterior probability measure, and the second change is from the posterior probability measure to the risk-neutral measure. The relation between the regular pricing kernel and the pricing kernel under this two-fold change of measure is characterized.

ВЫБОР МЕТОДА ЦЕНООБРАЗОВАНИЯ В FMCG- СЕКТОРЕ РОЗНИЧНОЙ ТОРГОВЛИ В УСЛОВИЯХ ВЫСОКОЙ ИНФЛЯЦИИ

The article touches on methodological approaches to pricing in the FMCG retail sector. The main types of pricing strategies of trading companies are studied: competitive and differentiated prices. A step-by-step process for regular pricing within the competitive pricing strategy is presented. The role of demand elasticity in pricing is revealed. The tools for implementing the differentiated pricing strategy are provided. Recommendations on the optimal set of pricing methods, aimed at mitigating the negative effects of high inflation in retail trade, are given.

Soda Taxes and Marketing Conduct

Soda taxes are an increasingly popular policy tool that discourages purchases of sugar-sweetened beverages. This study analyzes how emphasis on marketing conduct elements and their effectiveness might change after soda tax introductions. Prior studies on the effect of soda taxes focus on price increases but neglect other relevant marketing conduct tools (i.e., promotional frequency, promotional discount depth, and feature promotion frequency). This study documents the changes to marketing conduct elements and their effectiveness due to the introduction of soda tax across more than 200 retail stores in five markets. Findings related to price changes are consistent with prior literature; in addition, the study reveals a substantial, hitherto overlooked decrease in promotional frequency (−2%), promotional depth (−12%), and feature promotion frequency (−14%) compared with matched control markets, exacerbating the tax's negative sales effect. Introducing a soda tax also considerably influences the marketing conduct's effectiveness, such that consumers become less sensitive to changes in regular price, feature promotions, and the depth of the promotional discount but respond more to the presence of promotions. Importantly, marketing conduct and effectiveness changes do not align (e.g., while consumers become more sensitive to promotion frequency, managers often reduce them), a relevant insight for policy making.

Pricing and sales-effort coordination facing free riding behaviors between a brick-and-mortar retailer and a platform store owned by the manufacturer

We study a two-channel supply chain with a brick-and-mortar (BM) retailer, a manufacturer, and an e-commerce platform (ECP) store owned by the manufacturer. Some customers may physically examine the product in the BM store before buying from the ECP store. The so-called free-riding or showrooming effect lowers the BM retailer’s desired level of sales effort. To coordinate the BM retailer’s sales effort decision, we design a price-match and bi-directional compensation contract. In one direction, the BM retailer matches the lower ECP price to consumers with the proof and then receives partial compensation from the manufacturer for each unit sold with price match; in the other direction, the BM retailer shares with the manufacturer the revenue of each product sold with regular price. This contract is easy to implement because similar to the widely adopted revenue sharing contract, it only requires the BM retailer to reveal the sales information to the manufacturer and the bi-directional compensation mechanism provides good protection for both parties. We develop an extended Hotelling model to examine the performance of the contact. We show that this contract can fully coordinate the supply chain with exogenous prices through an analytical study, and it can achieve Pareto improvement in the endogenous pricing scenario numerically.

DEPART: Decomposing prices using atheoretical regression trees

Regular prices and temporary discounts are important elements for retailers’ and brands’ pricing decisions. These two variables need to be considered separately because consumer sensitivities to their changes typically differ. Although the scope and richness of retail datasets have grown rapidly in recent years, most of them only record actual prices paid by customers and lack direct information about regular prices and discounts. A systematic review involving close to five hundred publications that investigated pricing variables using retail scanner data confirms this, as 63% of them only observed actual prices. To solve this missing data problem, these studies often adopted heuristics to decompose actual prices into regular prices and discount depths. However, there are many such heuristics and their accuracies have not been assessed. This research introduces DEPART, a new machine learning approach based on regression trees with a publicly available R package and benchmarks it against previously used heuristics in two different datasets. The results show that on average the proposed method outperforms previously used heuristics by 26.5% or more. Additional analyses illustrate the potential economic benefits of adopting DEPART to improve pricing decisions.

Retail pricing format and rigidity of regular prices

AbstractWe study the rigidity of regular and sale prices, and how it is affected by pricing formats (i.e. pricing strategies). We use data from three large Canadian stores with different pricing formats (Every‐Day‐Low‐Price, Hi‐Lo and Hybrid) that are located within a 1 km radius of each other. Our data contain both the actual transaction prices and actual regular prices as displayed on the store shelves. We combine these data with two ‘generated’ regular price series (filtered prices and reference prices) and study their rigidity. Regular price rigidity varies with store formats because different format stores treat sale prices differently, and consequently define regular prices differently. Correspondingly, the meanings of price cuts and sale prices vary across store formats. To interpret the findings, we consider the store pricing format distribution across the USA and Canada.

Optimal pricing and donation policy for fresh goods

This paper studies a socially responsible food-retailer’s operational planning problem for a continuously deteriorating inventory over two periods with the consideration of donation and quality-sensitive customers. Each year, millions of tonnes of food are wasted causing economic, environmental, and social misfortunes, while at the same time millions are undernourished. Besides expired items, edible foods are often deliberately disposed of to attract quality-sensitive consumers. We address this issue by presenting an optimization model that incorporates a retailer’s corporate social responsibility act, in the form of charitable donations, and makes use of the internet of things (IoT)-enabled condition tracking technologies to accurately estimate the effective (true) quality of the goods and its impacts on consumer demand. We formulate a quality-dependent newsvendor problem (QDNP) to determine the stocking quantity and the regular price of the goods at the beginning of the selling season, and the second-period price and donation policy at the end of the first period. The optimal donation policy at the end of the first period depends on the quality (time to expiration), on-hand inventory, and donation reward. Moreover, for a given inventory level, expected food waste is always greater in the absence of donations. QDNP outperforms the no-donation model, particularly when the uncertainty is high and/or the length of the second period is short. Interestingly, the two models react to an increase in uncertainty oppositely: QDNP orders more to alleviate future shortages, whereas, no-donation policy orders less to avoid future disposal costs at the end of the selling season.

Market demand of conventional and non-conventional fish species and price comparison between BFDC landing center and two popular fish markets, the Baharchora and Borobazar, in Cox’s Bazar, Bangladesh

The study of conventional (common commercial fish species which is consumed by people in Bangladesh like Seabass,Ribbon fish, Hilsha, Bombay ducketc.) and non-conventional (fish species which is consumed by people in Bangladesh like Milk shark, Stingrayetc.) fish species at BFDC landing center was conducted to know the current condition of fish, their market demand, prices and price difference between BFDC landing center and two popular fish market Baharchora and Borobazar. There were about 32 varietiesof conventional fish species and most common were Seabass,Ribbon fish, Hilsha,Bombay duck, Mackerel, Silver pomfret, Red snapper, etc. The average price for most demandable fish were Hilsha (TK. 600-1000 kg), Silver pomfret(TK. 550-900 kg), Seabass (TK.500- 650 kg),Bombay duck(TK. 100 kg), Ribbon fish (TK. 300 kg) which varied with size and season. There were about 20 species of non- conventional fish includingMilk shark, Stingray,Long Tung Sole,Mud spiny lobster, Mud crab etc. observed. Milk sharkand Dog shark was common at the landing center. Their average size and weight were 1-2 feet and 1-3 kg which were sold for TK. 120-140 kg. The regular price of Stingray was TK.180-220 kg at the landing center with average weight of 2-8 kg. Normally marketing channel of both fish was maintained by middle men. A large number of fish from the landing center was sold to them by auction. The landing center is the common place from where local fish seller collects fish and sell by for around 15-25% of the profit. Usually, unsold raw fishes were preserved in the freezer and rests were sold to dry fish processors mainly in Nazirartek. The study shows a variation of conventional and non-conventional fish species, their price, and market demand in Cox’s Bazar region.

The reference dependence roots of inaction inertia: A query theory account.

Inaction inertia is the tendency to forego an opportunity after missing a significantly better opportunity. We show that inaction inertia is rooted in reference dependence. This is consistent with prior work finding that smaller discounts are devalued and inertia is motivated by avoidance of loss. We further illuminate the process by showing that consumers treat the missed discount (rather than the regular price) as a reference point relative to which a smaller discount feels like a loss. Missing a significantly better deal causes people to focus first and foremost on thoughts critical of the current deal. Notably, consumers who miss a smaller discount also construe the second deal as a loss, even if they take it. This research integrates inaction inertia and reference dependence theory using query theory analysis to contextualize inaction inertia with biases such as loss aversion, anchoring, and the default effect.

Consumers’ behavioural responses to price promotions of organic products: an introspective pre-study and an online field experiment

PurposeWhile most marketing research on organic products refers to the premium price levels of organic products, little research exists on consumers’ behavioural responses to price promotions or discounts of organic products. The present study aims to fill this research gap.Design/methodology/approachTo develop alternative hypotheses about consumers’ behavioural responses to price promotions of organic fast-moving consumer good (FMCG) products, the authors used the researcher-introspection method in a pre-study. To test the hypotheses developed based on the pre-study, the authors conducted a field experiment on online advertising of an FMCG sold in drugstores. In the field experiment, the authors exposed consumers to an online ad featuring either a price promotion (−20%) or the regular price of the product. The ads also varied in terms of whether they contained explicit organic claims or not, and whether they included implicit organic cues or not.FindingsThe price promotion increased the clickthrough rate of the ad both when combined with an explicit organic claim and when combined with the implicit cue of green product pack. The results suggest that consumers do not have significant suspicions about price promotions of organic products, but rather presume that the price promotion of an organic FMCG product is a periodical promotional action, similar to the price promotions for conventional, non-organic products. Also, consumers seem to assume that the regular prices of organic FMCG products are so high that the retailer/manufacturer can well afford periodic price discounts.Research limitations/implicationsThe present research shifts the focus of organic marketing research from the premium price levels to the effectiveness of price promotions and discounts. Further, the present results contrast with certain earlier studies that have questioned the effectiveness of price promotions for organic products.Practical implicationsThe results have different implications for marketing managers of brands not yet providing organic product versions in the market, of brands producing non-organic products, which cannot easily be rendered organic, and of brands offering organic products in the market.Originality/valueThis is, to the best of the authors’ knowledge, the first empirical study and field experiment on price promotions of organic products, including explicit organic claims.

Dynamic pricing and inventory control of online retail of fresh agricultural products with forward purchase behavior

In this paper we formulate and analyze a novel model on a retailer’s inventory and pricing decisions for fresh agricultural products with consumers’ forward consuming behavior under online channel. We consider a dynamic stochastic setting, where every period consists of two stages, discounting pricing stage and regular sale stage. At the beginning of the period, the retailer decides how much new fresh agricultural products to order and sets discount price for leftover inventories from the previous period which will be disposed otherwise, and determines regular price for fresh products on the second stage, respectively. Since forward purchase consumers may buy the products during discount pricing stage, which may cannibalize future sales at regular price, the retailer needs to make a trade-off decision between regular price and discounting price. We bring forward a dynamic optimization model and use nonlinear programming method of Karush Kuhn Tucker condition to obtain the optimal dynamic strategy, which is comparatively analyzed to dominate the related static strategy. We also show that consumers forward buying behavior will negatively influence the retailer’s profit. When the price is set too low in regular or discounting sales, the profit will show an up-down trend if the inventory exceeds a certain threshold. Meanwhile, when fresh goods returns are allowed and resold in the secondary stage, the retailer’s profit will increase. We finally conduct numerical studies to further characterize the optimal policy, and to evaluate the loss of efficiency under static policies when compared to the optimal dynamic policy.