Quantity consumer goods pricing: has yesterday’s surcharge become today’s discount?
| DOI | https://doi.org/10.1108/JPBM-02-2016-1101 |
| Published date | 21 November 2016 |
| Date | 21 November 2016 |
| Pages | 721-728 |
| Author | Steve Dunphy |
| Subject Matter | Marketing,Product management,Brand management/equity |
Quantity consumer goods pricing: has
yesterday’s surcharge become
today’s discount?
Steve Dunphy
School of Business and Economics, Indiana University Northwest, Gary, Indiana, USA
Abstract
Purpose – This study aims to extend by way of replication an earlier study, “Blind man’s bluff: The ethics of quantity surcharges” (Gupta and
Rominger, 1996) by testing several hypotheses regarding changes in the surcharging phenomenon that may have occurred over time.
Design/methodology/approach – The original study was constructed from data collected 20 years ago. This study went beyond a mere replication.
A key difference between this study and the original study was in the method of data collection. In the earlier study, students were used to collect
data. In this study, the author personally and carefully recorded the prices of the same 60 items that were noted in the original study. These new
prices were then compared with the original ones. Several matched paired
t
-tests were administered to analyze the mean differences between the
two sets of data.
Findings – The tests showed a highly significant difference in today’s pricing structure in comparison to the quantity surcharging phenomenon from
the prior study. It was found that both the quantity of the items surcharged and the magnitude of the surcharges decreased in comparison to the
surcharging reported in the original study.
Research limitations/implications – Reasons are given regarding what changed and why and suggestions are given for future research in the
areas of private or in-store branding, the proliferation of “big box” stores and the changes in the frequency and magnitude of surcharging that may
be occurring over time.
Originality/value – This study indicates that the quantity surcharging phenomenon has lessened. In fact, in mature markets which include big box
discounters, the quantity surcharging phenomenon of 20 years ago may have given way to today’s quantity discount.
Keywords Retailing, Consumer behaviour, Pricing strategy, Consumer goods
Paper type Research paper
Introduction
Quantity surcharges exist when a store’s per unit price for
its larger package exceeds that for its smaller package. An
ethical dimension comes to light, as most consumers expect
a discount on purchases made in quantity. This dimension
becomes especially apparent in light of the fact that
Northwest Indiana has a number of poor communities
including Gary and East Chicago. The residents of these
cities are in need of quantity discounts, not quantity
surcharges. A number of studies suggest that most of these
consumers will be sorely disappointed, as, instead of
enjoying a quantity discount, they are just as likely to
absorb a quantity surcharge; yet, the packaging, pricing and
display are such that they probably will not notice the
difference (Agrawal et al., 1993;Nason et al., 1983;Binkley
and Bejnarowicz, 2003).
The inability to notice the difference establishes a
so-called “blind man’s bluff” which is why the researchers,
Ohm Gupta and Anna S. Rominger, set out some 20 years
ago to gather pricing information to determine the extent of
the problem. This study proposes to re-examine the
phenomenon of quantity surcharging that was found to
exist in the 1996 study conducted in Northwest Indiana. In
the earlier study, “Blind man’s bluff: The ethics of quantity
surcharges” (Gupta and Rominger, 1996, p. 1302), the
phenomenon of quantity surcharging was studied in
Indiana’s Lake and Porter counties. The authors of the
earlier study explained, “This study was conducted in the
northwest corner of the state of Indiana. This region
represents a conglomeration of urban and semi-urban
population”.
Because an effort was made to replicate the earlier study,
this current research seeks to determine whether the
surcharging phenomenon is still the norm in the exact same
“urban and semi-urban” areas located in Northwest Indiana
and in the same stores as noted in the prior study. Although
this study is focused on a specific location, the author believes
that it has implications for the region, the State of Indiana and
perhaps the entire nation.
The remainder of this paper is organized as follows. The
next section contains a brief review of the literature. This is
followed by an explanation of the need for replication studies
and why this study is important. The methodology of the
study is then explained and includes detailed descriptions of
the data collection process, the development of several
hypotheses, the testing of these hypotheses and the
The current issue and full text archive of this journal is available on
Emerald Insight at: www.emeraldinsight.com/1061-0421.htm
Journal of Product & Brand Management
25/7 (2016) 721–728
© Emerald Group Publishing Limited [ISSN 1061-0421]
[DOI 10.1108/JPBM-02-2016-1101]
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