IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v11y2019i17p4637-d261047.html
   My bibliography  Save this article

Trapping Fake Discounts as Drivers of Real Revenues and Their Impact on Consumer’s Behavior in India: A Case Study

Author

Listed:
  • Iqbal Thonse Hawaldar

    () (College of Business Administration, Kingdom University, Riffa 40434, Bahrain)

  • Mithun S. Ullal

    () (Department of Commerce, Manipal Academy of Higher Education, Manipal 576104, India)

  • Felicia Ramona Birau

    () (Faculty of Social Science, University of Craiova, 200585 Craiova, Romania)

  • Cristi Marcel Spulbar

    () (Faculty of Economics and Business Administration, University of Craiova, 200585 Craiova, Romania)

Abstract

This empirical study contributes towards identifying the effect of both fake and real discounts in the Indian marketing environment. A common but unsustainable practice in India is to increase the selling price and then offer a discount on the product. Increasing sales based on fake discount pricing strategy is a primary business development objective in India. The discounts, however, vary across store type and time and are based on product features. The selected databases were collected from the top five Indian e-commerce portals in terms of volume of sales, and from popular brick and motor outlets of tier 2 and tier 3 cities in India. The empirical results indicate that offers based on price in India had an impact of 2.8 times higher than the actual quality of the product. The outcomes suggest that marked price has a significant impact on consumer’s behavior. The results also indicate the existence of a strong correlation between trapping fake discounts and purchase by deceiving and persuading customers in India. Research is empirical in nature and respondents have been selected based on purposive sampling. The study is limited to tier 2 and 3 cities of India for 250 days, and the results are applicable to online and offline retail stores.

Suggested Citation

  • Iqbal Thonse Hawaldar & Mithun S. Ullal & Felicia Ramona Birau & Cristi Marcel Spulbar, 2019. "Trapping Fake Discounts as Drivers of Real Revenues and Their Impact on Consumer’s Behavior in India: A Case Study," Sustainability, MDPI, Open Access Journal, vol. 11(17), pages 1-20, August.
  • Handle: RePEc:gam:jsusta:v:11:y:2019:i:17:p:4637-:d:261047
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/11/17/4637/pdf
    Download Restriction: no

    File URL: https://www.mdpi.com/2071-1050/11/17/4637/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August.
    2. Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2012. "Salience Theory of Choice Under Risk," The Quarterly Journal of Economics, Oxford University Press, vol. 127(3), pages 1243-1285.
    3. Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2013. "Salience and Consumer Choice," Journal of Political Economy, University of Chicago Press, vol. 121(5), pages 803-843.
    4. Linnemer, Laurent, 2002. "Price and advertising as signals of quality when some consumers are informed," International Journal of Industrial Organization, Elsevier, vol. 20(7), pages 931-947, September.
    5. Eric A. Greenleaf, 1995. "The Impact of Reference Price Effects on the Profitability of Price Promotions," Marketing Science, INFORMS, vol. 14(1), pages 82-104.
    6. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
    7. Urbany, Joel E & Bearden, William O & Weilbaker, Dan C, 1988. "The Effect of Plausible and Exaggerated Reference Prices on Consumer Perceptions and Price Search," Journal of Consumer Research, Oxford University Press, vol. 15(1), pages 95-110, June.
    8. Keith S. Coulter & Robin A. Coulter, 2007. "Distortion of Price Discount Perceptions: The Right Digit Effect," Journal of Consumer Research, Oxford University Press, vol. 34(2), pages 162-173, June.
    9. Bagwell, Kyle & Riordan, Michael H, 1991. "High and Declining Prices Signal Product Quality," American Economic Review, American Economic Association, vol. 81(1), pages 224-239, March.
    10. Kai P. Purnhagen & Erica Herpen, 2017. "Can Bonus Packs Mislead Consumers? A Demonstration of How Behavioural Consumer Research Can Inform Unfair Commercial Practices Law on the Example of the ECJ’s Mars Judgement," Journal of Consumer Policy, Springer, vol. 40(2), pages 217-234, June.
    11. Hyun Joung Jin & Eun Young You, 2019. "Do Discounts in Ticket Prices Induce Sustainable Profit to Performing Arts Suppliers?," Sustainability, MDPI, Open Access Journal, vol. 11(14), pages 1-12, July.
    12. Gupta, Sunil & Cooper, Lee G, 1992. "The Discounting of Discounts and Promotion Thresholds," Journal of Consumer Research, Oxford University Press, vol. 19(3), pages 401-411, December.
    13. Mujtaba Piracha & Mick Moore, 2016. "Revenue-Maximising or Revenue-Sacrificing Government? Property Tax in Pakistan," Journal of Development Studies, Taylor & Francis Journals, vol. 52(12), pages 1776-1790, December.
    14. Gheorghe Orzan & Anca Francisca Cruceru & Cristina Teodora Bălăceanu & Raluca-Giorgiana Chivu, 2018. "Consumers’ Behavior Concerning Sustainable Packaging: An Exploratory Study on Romanian Consumers," Sustainability, MDPI, Open Access Journal, vol. 10(6), pages 1-11, May.
    15. Faical Akaichi & Rodolfo M. Nayga Jr & José M. Gil, 2015. "Effect of Price‐discount Distribution in Multi‐unit Price Promotions on Consumers’ Willingness to Pay, Sales Value, and Retailers’ Revenue," Agribusiness, John Wiley & Sons, Ltd., vol. 31(1), pages 14-32, January.
    16. Piracha, Mujtaba & Moore, Mick, 2016. "Revenue-Maximising or Revenue-Sacrificing Government? Property Tax in Pakistan," Working Papers 14000, Institute of Development Studies, International Centre for Tax and Development.
    17. Mohammed T. Nuseir, 2018. "Impact of misleading/false advertisement to consumer behaviour," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 16(4), pages 453-465.
    18. John McCollough, 2010. "Consumer Discount Rates and the Decision to Repair or Replace a Durable Product: A Sustainable Consumption Issue," Journal of Economic Issues, Taylor & Francis Journals, vol. 44(1), pages 183-204.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Peiman Ghasemi & Amir Mehdiabadi & Cristi Spulbar & Ramona Birau, 2021. "Ranking of Sustainable Medical Tourism Destinations in Iran: An Integrated Approach Using Fuzzy SWARA-PROMETHEE," Sustainability, MDPI, Open Access Journal, vol. 13(2), pages 1-32, January.
    2. Daniel Iulius Doaga, 2020. "Literature Survey Onsustainable Fiscal Policy Within The Countries Of Central And Eastern Europe," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 115-120, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eric Rasmusen, 2008. "Quality-Ensuring Profits," Working Papers 2008-10, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    2. Rosa Ferrer Zarzuela & Helena Perrone, 2017. "Consumers’ costly responses to product-harm crises," Economics Working Papers 1571, Department of Economics and Business, Universitat Pompeu Fabra.
    3. Utaka, Atsuo, 2008. "Pricing strategy, quality signaling, and entry deterrence," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 878-888, July.
    4. Helmut Bester & Juri Demuth, 2015. "Signalling Rivalry and Quality Uncertainty in a Duopoly," Journal of Industry, Competition and Trade, Springer, vol. 15(2), pages 135-154, June.
    5. Laurent Linnemer, 2011. "Caught In A Stranglehold? Advertising: What Else?," Manchester School, University of Manchester, vol. 79(1), pages 63-80, January.
    6. Schmidbauer, Eric & Lubensky, Dmitry, 2018. "New and improved?," International Journal of Industrial Organization, Elsevier, vol. 56(C), pages 26-48.
    7. Carla Guadalupi, 2018. "Learning quality through prices and word‐of‐mouth communication," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 27(1), pages 53-70, March.
    8. Mark Armstrong & Yongmin Chen, 2020. "Discount Pricing," Economic Inquiry, Western Economic Association International, vol. 58(4), pages 1614-1627, October.
    9. Eric Schmidbauer, 2013. "New and Improved?," Working Papers 2013-01, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    10. P. Vanin, 2009. "Competition, Reputation and Cheating," Working Papers 683, Dipartimento Scienze Economiche, Universita' di Bologna.
    11. Félix Muñoz-García & Heriberto González Lozano, 2009. "“Last-chance” sales: what makes them credible?," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(1), pages 61-80, May.
    12. Bambauer-Sachse, Silke & Massera, Laura, 2015. "Interaction effects of different price claims and contextual factors on consumers' reference price adaptation after exposure to a price promotion," Journal of Retailing and Consumer Services, Elsevier, vol. 27(C), pages 63-73.
    13. Adriani, Fabrizio & Deidda, Luca G., 2009. "Price signaling and the strategic benefits of price rigidities," Games and Economic Behavior, Elsevier, vol. 67(2), pages 335-350, November.
    14. Andreas Lange & Andrew Stocking, 2009. "Charitable Memberships, Volunteering, and Discounts: Evidence from a Large-Scale Online Field Experiment," NBER Working Papers 14941, National Bureau of Economic Research, Inc.
    15. Chen Lian & Yueran Ma & Carmen Wang, 2019. "Low Interest Rates and Risk-Taking: Evidence from Individual Investment Decisions," Review of Financial Studies, Society for Financial Studies, vol. 32(6), pages 2107-2148.
    16. Jie Bai, 2016. "Melons as Lemons: Asymmetric Information, Consumer Learning and Seller Reputation," Natural Field Experiments 00540, The Field Experiments Website.
    17. Ellingsen, Tore, 1997. "Price signals quality: The case of perfectly inelastic demand," International Journal of Industrial Organization, Elsevier, vol. 16(1), pages 43-61, November.
    18. Rasmusen, Eric, 2017. "A model of trust in quality and North–South trade," Research in Economics, Elsevier, vol. 71(1), pages 159-170.
    19. Ajay Kalra & Surendra Rajiv & Kannan Srinivasan, 1998. "Response to Competitive Entry: A Rationale for Delayed Defensive Reaction," Marketing Science, INFORMS, vol. 17(4), pages 380-405.
    20. Jeanine Miklós-Thal, 2012. "Linking reputations through umbrella branding," Quantitative Marketing and Economics (QME), Springer, vol. 10(3), pages 335-374, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:11:y:2019:i:17:p:4637-:d:261047. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (XML Conversion Team). General contact details of provider: https://www.mdpi.com/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.