RESEARCH PROPOSAL ON

THE EFFECT OF DISCOUNT PATTERN ON THE CUSTOMER PURCHASE INTENTION

SUBMITTED BY:

GROUP:2
PRATEEK SOTI (1121309)

PRADEEP AV (1121322)

RAKESH PARDHI (1121335)

TANIYA GHOSH (1121343)

DEEKSHITA M (1121353)

RESEARCH PROPOSAL

INTRODUCTION TO THE RESEARCH CONTEXT Discounts are reduction in prices from the usual cost of the product. Companies generally give discounts across their various retail outlets. Such discounts are given to clear out the inventory, retain existing customers and sometimes it also attracts new customers to buy a product. Our study basically focuses on the discounting patterns adopted by the apparel industry. Also our study is limited to the organized retail outlets only. Various companies adopt various types of discount patterns to attract the customers. The discounting patterns adopted by the regular retail outlets include the following patterns. flat 50% off upto 50% off buy 1 get 1 free On the other hand there are companies which offer discounts throughout the year. These are companies who price their products at a premium and then give huge discounts. Examples of such companies are Koutons and Cantabil. They offer discounts like 50% + 40% off Buy 1 Get 6 Free Flat 90% off

Different types of discounts have different impact on the customers mindset. Also at the point of purchase these discount patterns lead to the unplanned purchases of the customers. Thus our study will focus on the discount patterns of the apparel industry. This study will be important from a marketers perspective because of the growth in the organized retail industry as far as the apparel industry is concerned. Every retail store gives a clearance sale at least twice in a year. So indentifying the effective discounting pattern will give a better insight on the discount strategies that the companies should adopt. PROBLEM The problem is to identify the effect of various discount patterns on the customer purchase intention. Companies generally offer discounts at the end of season to clear out their

stock. Also there are companies who offer discounts throughout the year. Different discount patterns have different impact on the target customers. Our problem will be to identify the most effective discount pattern and understand the extent to which it affects the customer purchase intention. We will concentrate on the changes in purchase intentions with different discounting techniques adopted by the retail stores. OBJECTIVES OF THE PROJECT The objectives of the study are as follows: To identify the most appealing discount pattern To find out the most appealing discount pattern the foremost task will be to identify the discount patterns which are currently present in the industry. Also the patterns for the study should be chosen in a way that different pattern have different impact on the customers mindset To analyze the effect of discount pattern on the purchase intention. The purchase intention of the customers can be studied by identifying the various attributes which affect the customers purchase intention. After that we have to understand the impact of the discount patterns on the attributes effecting the purchase intention. LITERATURE REVIEW There are not much research studies on the discount pattern and purchase intention exclusively. Many studies conducted in the past in this area have covered purchase intentions with respect to the perceived value.Purchase Intention: Dodds et al. (1991) has defined out purchase intention means the likelihood, the probability of purchase is product.Few of the finding of major studies related to the topic has brought clarity to our research. Relational benefits influences customer satisfaction and thus influences the purchase intension of the customers.1The purchase intention is influenced by building confidence in the

Ng and Nee, A study of the impact of relational benefits and relationship marketing on purchase intention in the lodging industry, Oklahoma State University publication

customer. Confidence creates lesser anxiety, greater trustworthiness and thus boosts the customers satisfaction. Along with satisfaction, the purchase intention of the customers is also influenced by the social benefits and special treatment benefits. These factors create a sense of commitment from the customers end, which results in long term relationship with the service provider. Thus the three factors influencing customers purchase intention are: relational benefits, social benefits and special treatment benefits. The study on The Effects of Discount Location and Frame on Consumers' Price Estimates demonstrates that the definition of discount encompasses two major parameterslocation and frame. Discount framing captures three types of discounts: cents-off, percentage-off and revised price discounts. On the other hand discount location suggests whether the position of the discount is proximate to or distal from regular price information.2 The discount frame and discount location affect both the immediate value and the persistence of consumers price estimates. The study also reveals that the correlation between cents-off promotions on lower price estimates is higher as compared to the percentage-off promotion. The study discloses that the price recall for on-pack discounts is lower as compared to on-shelf discounts. While comparing the discount frames, it is revealed that the recalled price and price estimates will be least in case of revised price when compared to cents-off frame or percentage-off frame. Also the distal discounts will result in higher price estimates than the proximal discounts. Attitude of consumers towards the US brand was the most important factor that defined purchase intention. Besides attitude, the other factors that attributed to purchase intention were external perceived behavioral control and subjective norm3. Comparison between external perceived behavioral control and internal perceive behavioral control disclosed that among the two, only external perceived behavior control was attributed to purchase intention (Jin, Byoungho; Kang, JiHye).

Vecchio, Devon; Lakshmanan, Krishnan, Shanker, The Effects of Discount Location and Frame on Consumers' Price Estimates, Journal of Retailing, suppl. Consumer Behavior and Retailing
3

Jin, Byoungho; Kang, JiHye, : Purchase intention of Chinese consumers toward a US apparel brand: a test of a composite behavior intention model, The Journal of Consumer Marketing

It is better to use a multiple discounts for high-price items than to use single discount in the online auction.4 When price of product is high, each message of discount is an important influence decision of customers wiliness to buy. Study on The Effects of Price Promotion Framing Messages on Consumer Purchase Intention. further elaborated that regardless brand name, multiple discounts (last message is more favorable discount than the initial message) could reduce attention other information in this product. Furthermore, multiple discounts would provide more psychological pleasure than single discount in the high price of product. Marketers could use the sales strategy to high-price products. There are eight factors were responsible for alternating consumer preference when they perform actual shopping at the retail stores. Those factors are Sales promotions which includes various discount patterns, unavailability of brands, time constraints, in store TVC, variety seeking behavior, product features, end of aisle display, and product convenience.5Shafayet and Prince (2012). The presence of a reference prices increases consumers deal valuations and purchase intentions and can lower their search intentions as compared to when a reference price is absent. 6 This suggests that sellers may be able to exploit reference prices in a manner that may be detrimental to consumers. Consumers may be particularly harmed if: a) these prices are not genuine, b) have been there for short periods of time but later abandoned, c) are misleading in the sense that they largely exceed the average competitive price, d) consumers are not readily able to compare them to an industry price, such as with unbranded or retailers own brand goods, and e) with less frequently purchased and more expensive items. The presence of a multiple unit price promotion (volume offer) can increase the quantity consumers buy to a greater degree than would be expected with single unit promotions even

:TOPCO (2011), The Effects of Price Promotion Framing Messages on Consumer Purchase Intention

Shafayet and Prince (2012), Factors influencing the bangladeshi customers purchase decision regarding fast moving consumer goods, The IPU Journal of Brand Management, Vol. IX, No. 1
6

Gorkan, Simon, John andAdrian ( March 2010), Their Effects on Consumer Behavior and Welfare, View Learning. University College London

when the discount does not differ (i.e. there is no incremental saving). This effect can be substantial (Gorkan, Simon, John and Adrian - 2010).
7

The willingness to buy increases as discount level increases and participants with

a pre-purchase goal were more willing to buy than those without a pre-purchase goal. Participants preferred discount over free gift and higher discount level over lower discount level regardless of the presence of a pre-purchase goal. Participants preferred discount over free gift and higher discount level over lower discount level regardless of the presence of a pre-purchase goal. Consumers planning to purchase a product are more responsive to promotion messages framed as reduction of losses (e.g. "pay less" and a discount) while consumers without a goal are more responsive to messages framed as additional gains (e.g. "save more" and free gift). Finally, consumers with different purchase goals respond differently to the depth of a discount. The study also reveals that Price promotions have several benefits such as increasing demand, adjusting to fluctuations in supply and demand, and increasing consumers' purchases over time (Xia, Lan; Monroe and Kent (2009). The study of The effect of framing price promotion messages on consumers perceptions and purchase intentions explained that when a percentage discount is translated in dollar terms the higher the price of a promoted product ,the greater the amount of dollar savings .But the subjects in the study showed a weaker intention to purchase. It was because to redeem such higher discount more sacrifice the consumer has to make in monetary terms. Also there was a higher perceived likelihood of quality reductions when higher discounts are offered.8

Xia, Lan; Monroe and Kent (2009), The influence of pre-purchase goals on consumers' perceptions of price promotions International Journal of Retail & Distribution Management, Vol. 37. 8, Page 680 -694.
8

Chen, Fen, Monroe, Kent and Lou The Effect of Framing Price Promotion Messages on Consumers Perceptions and Purchase Intentions, Journal of Retailing, Volume 74(3), pp. 353-372

Findings suggested that customized promotions may lead to higher perceived deal value and purchase.9 It was found that customized offers lead to significantly higher purchase intent compared to universal offers. Perceived fairness differed significantly across promotion types (free shipping, $ off and temporary reduced price) based on whether they were customized to the consumer or offered universally. RESEARCH QUESTIONS Which discounting pattern has the highest correlation with the purchase intention attributes? What are the major attributes of purchase intention? Whether the customer purchase intention is dependent on the discounting pattern? Whether the customer purchase intention is dependent on the area of purchase? Is there any significant difference in the discount patterns and the purchase intention of the customers?

HYPOTHESIS H1: Thecustomer purchase intention is dependent on the discount pattern H2:There is significant difference between the discounting patterns H3:The purchase intention is dependent on the area of survey H4: Perceived valueis the most important attribute for purchase intention RESEARCH DESIGN Type of research The research to be conducted is descriptive in nature. This type of research will basically study the data and characteristics of the population. The questions answered by this type of

Chatterjee, Patrali, McGinnis and John (2010), Customized online promotions: moderating effect of promotion type on deal value, perceived fairness, and purchase intent, Journal of Applied Business Research 26. 4 (Jul/Aug 2010): pp. 13-19

research study are of the form who, what, where, when and how. A factual study will be done based on the primary data which will be collected with the help of survey. The survey shall be done by using a questionnaire. Also a thorough study of the secondary data collected from the retail stores, proquest database, prowess database, journal of retailing, IUP journal of marketing and journal of marketing research. Sampling Plan Target Population The population represents the customers who go for apparel shopping in the brand retail outlets. They include the customers in organized retail outlets only. The population is distributed across Bangalore. The sample will be selected as such that it is a true representative of the population. The sample should include all the characteristics that should be present in the sample. Sampling Frame The sampling framerepresents the list of all the elements in the target population. The entire population is divided into 3 parts namely Tier A, Tier B and Tier C. This categorization is done based on their location in the city. Tier A represents the Brigade, M.G Road and Indiranagar area of Bangalore. This area is normally preferred by the upper class and the upper middle class of the society for their apparel shopping Tier B represents Kormangalaand Commercial Street. This area is supposed to be the shopping hub of the middle class of the city where people from all over Bangalore can be seen. Tier C represents Malleshwaram and Marathalli. Shoppers in this part of the city mainly represent the one-time shoppers for the branded apparel.

For each tier, retail outlets are selected based on each category of discount. The retail outlets are chosen for all the three tiers across all the 4 discount patterns. The framework for the sampling frame will be as follows: Flat 50% Tier A Reid Taylor Buy 1 & Upto 50% Get 1 Free & Lee Cooper Heavy discounts Total 7

Tier B

Lilliput, Peter England John Miller 4

Brand Factory Megamart 3

Lee, Cotton Koutons World, park Avenue, Levis Mom&Me Mega mart

Tier C Total

Lifestyle 6

Brand Factory 3

4 16

Sampling element The element of the sample will include the customers who have purchased discounted apparels from malls, exclusive stores, and multi brand outlets at least once in the past six months period. These respondents will belong to age group of 18 to 50 years and of both genders (male and female). There is no restriction on the employment status and the occupation of the sampling element. Sampling method The method of sampling would be probabilistic in nature. The entire population is divided into twelve strata based on the discount patterns and the area in Bangalore such that there is heterogeneity in between strata and the elements within each stratus are homogeneous to each other. A systematic random sampling is done across all the strata.

Sample Size The sample size is determined based on the previous study done in this area. After reviewing the literature we have observed that similar studies have been done by doing a sampling of around 350 samples. Thus we would do a sampling of around 350 samples.

ADMINISTRATION AND DATA COLLECTION INSTRUMENT Questionnaire Background Questions The background questions will capture the personal details and demographics of the respondents. They will include questions related to age, income, gender, occupation and the contact details. Target Questions The target questions will include the questions that provide answers to our research questions and objectives of the study. It will basically include the factors and attributes of purchase intention. Online and Offline administration Survey will be conducted offline as well as online. Offline survey will be carried across all the three tiers: A, B and C. The survey should be administered on customers in the shopping malls, exclusive retail outlets and multi brand outlets. It will be carried out by visiting the specified places in the evening. After briefing the concerned customers about the topic, they will be requested to fill questionnaire. Online survey will be carried out through mails and online portals.

LIMITATION OF THE STUDY The survey is conducted by dividing the population into three tiers based on the area and thus assuming that the customers in these three areas represent the entire population. Some customers will be in hurry and so they willnot communicate properly. Study will not take into account the bias or exaggeration that customers will have during response delivery.

REFERENCES Ng and Nee, A study of the impact of relational benefits and relationship marketing on purchase intention in the lodging industry, Oklahoma State University publication Vecchio, Devon; Lakshmanan, Krishnan, Shanker, The Effects of Discount Location and Frame on Consumers' Price Estimates, Journal of Retailing, suppl. Consumer Behavior and Retailing Jin, Byoungho; Kang, JiHye, : Purchase intention of Chinese consumers toward a US apparel brand: a test of a composite behavior intention model, The Journal of Consumer Marketing TOPCO (2011), The Effects of Price Promotion Framing Messages on Consumer Purchase Intention Shafayet and Prince (2012), Factors influencing the bangladeshi customers purchase decision regarding fast moving consumer goods, The IPU Journal of Brand Management, Vol. IX, No. 1 Gorkan, Simon, John andAdrian ( March 2010), Their Effects on Consumer Behavior and Welfare, View Learning. University College London Xia, Lan; Monroe and Kent (2009), The influence of pre-purchase goals on consumers' perceptions of price promotions International Journal of Retail & Distribution Management, Vol. 37. 8, Page 680-694. Chen, Fen, Monroe, Kent and Lou The Effect of Framing Price Promotion Messages on Consumers Perceptions and Purchase Intentions, Journal of Retailing, Volume 74(3), pp. 353-372

Chatterjee, Patrali, McGinnis and John (2010), Customized online promotions: moderating effect of promotion type on deal value, perceived fairness, and purchase intent, Journal of Applied Business Research 26. 4 (Jul/Aug 2010): pp. 13-19