Essay on Steadily Decreasing Discounts: A Better Tactic to Increase Product Market Potential

Introduction

The Journal of marketing is an article that proposes steadily decreasing discounts as the most suitable tactic of pricing as a method of increasing product market potential (Tsiros& Hardesty, 2010). The article compares the hi-lo tactic of discount adjustment against the steadily decreasing discounting. The Hi-lo discount tactic involves the implementation of a discount to a product for a specific duration of time and then re-instating the initial price in a single step. On the other hand, steadily decreasing discounting (SDD) refers to the systematic removal of a discount attached to a product through a gradual reduction of the discount until the product gets back to its initial price. Upon comparative research, the journal of marketing recommends the SDD promotion tactic as an alternative to the commonly utilized Hi-lo tactic of promotion. This literature aims at analyzing the scope of research that was adopted by the article.

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Describe the method, how the data was collected and analyzed. What was the most important limitation of the study design?

To begin, the research article adopted a laboratory experiment as a method of data collection to compare the effectiveness of each price promotion tactic based on regret anticipation and the future expected price factors. Through this method, participants were engaged in selling of iPAQ pc personal assistant where both the two tactics of price promotion were adopted. Each participant was exposed to a different pricing condition to accommodate the variations associated with each price promotion tactic. The method held the product's regular price, the first week's initial and prevailing prices common to both tactics. The product prices were adjusted every week to reflect the regular price of the product, the most recent price, and the week's prevailing price. These adjustments were conducted with respect to each price promotion tactic for seven weeks.

Data was collected from 463 undergraduates who viewed the two-pricing advertisement and provided information relating to their will of purchasing the product and the underlying reasons for the purchasing decisions. The responses were collected based on the participant's (potential buyers) level of regret anticipation and the percentage likelihood of purchasing the product at each week of the study. This was simultaneously adopted for the two promotion tactic advertisements. Finally, the total revenue associated with each tactic for each week was calculated and compared against each other for the determination of effectiveness.

This study design method exhibits a limited focus on the effects of middle traders in the chain of the seller to consumer interaction. This is evident from the study strictly assuming that product producers directly interact with the end-users as the customers not acknowledging the roles played by the wholesalers and other distributors of the respective product under study. This, therefore, serves the limitation of providing an unclear picture of the two price promotion tactics' effectiveness.

What is the most surprising finding reported in the paper? Why were you surprised?

The high revenue associated with steadily decreasing discount tactic forms my greatest surprise from the study. As a result of the gradual but steady decreasing discount aspect of this tactic, it is not normally a common expectation of many business participants to associate this tactic to generate relatively more revenue and profits. The idea behind increased anticipated regret for purchases not conducted during the previous stages of discount is most likely not known to many business stakeholders. Nevertheless, the increase in demand that originates from future expectations in pricing also contributes to the surprising increased profits and revenue (Tsiros& Hardesty, 2005). It is often expected that any slight change in status quo i.e. a slight increase in the price of a product from its current market price would negatively and significantly impact the demand of the product to a level that in some cases lower than the demand initially experienced by the product before the first case of discount introduction.

What did you like the least about this research?

The most unappealing aspect of this research to me is its complex nature. This is evident from the various applied arithmetic comparisons and the many participants that are involved in the study. Involvement of many study participants and complicated arithmetic equations makes the research confusing and challenging to follow thereby finally limiting the acknowledgment of benefits associated with the study research.

How can marketers use the findings of this research?

This research is of great importance to the marketing department of most business organizations. This is because marketers can adopt a steadily decreasing (SDD) discount price promotion technique as an alternative to the widely used hi-lo pricing tactic. This is because SDD is associated with generating more revenues to the organization by building a good and strong market base through its pricing structure (Darke& Chung, 2005). Nevertheless, SDD effectively aids in improving the level of sales through its positive effects relating to improved purchases initiated by increased expectations on the product's price and anticipated regrets for the previously missed discount offers. Moreover, varying pricing which forms an aspect of SDD also greatly contributes towards the realization of more sales (Haruvy&Erev, 2002). Additionally, marketers can also focus on the unresearched areas, challenges, and limitations of this study to achieve maximum benefits associated with this study finding in their professional duties which aim at improving product sales.

Conclusion

In conclusion, pricing forms a significant factor in product promotion. As a result, marketers need to be open to the emerging tactics of product price promotions that have been realized through research to be more effective. Finally, the steadily decreasing discount as a price product promotion technique is more effective than the hi-lo pricing technique as it achieves most of the marketing department goals and objectives.

References

Darke, P. R., & Chung, C. M. (2005). Effects of Pricing and Promotion on Consumer Perceptions: It Depends on How you Frame it. Journal of Retailing, 81(1), 35-47. https://doi.org/10.1016/j.jretai.2005.01.002

Haruvy, E., & Erev, I. (2002). Variable pricing: A Customer Learning Perspective. Unpublished manuscript, Technion-Israel Institute of Technology, Haifa, Israel.

Tsiros, M., & Hardesty, D. (2005, November Steady Decreasing Discounts in 2005 Fordham University Behavioral Pricing Conference). (p. 26).

Tsiros, M., & Hardesty, D. M. (2010). Ending a Price Promotion: Retracting it in one Step or Phasing it out Gradually. Journal of Marketing, 74(1), 49-64. https://doi.org/10.1509/jmkg.74.1.49