Price threshold and discount saturation point in Singapore
| Date | 01 June 2002 |
| Published date | 01 June 2002 |
| Pages | 147-159 |
| DOI | https://doi.org/10.1108/10610420210430042 |
| Author | Roger Marshall,Seow Bee Leng |
| Subject Matter | Marketing |
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.
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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Intention of advertised
discounts
Variation in discounting
practices
JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 11 NO. 3 2002, pp. 147-159, #MCB UP LIMITED, 1061-0421, DOI 10.1108/10610420210430042 147
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