The Impact of Discount Uncertainty on the Decision to Buy

Document Type : Research Paper

Authors

1 Ph.D. Candidate, Department of Business Management, Faculty of Management, University of Tehran, Tehran, Iran.

2 Assistant Prof, Department of Business Management, Faculty of Management, University of Tehran, Tehran, Iran.

3 Adjunct Faculty Member, Singularity University, Santa Clara, CA, USA.

4 Associate Prof, Department of Business Management, Faculty of Management, University of Tehran, Tehran, Iran.

5 Assistant Prof, Department of Machine Intelligence and Robotics, School of Electrical and Computer Engineering, University of Tehran, Tehran, Iran.

Abstract

Objective
Due to the growing uncertain discounts in Iranian businesses, this study seeks to investigate the effect of discount uncertainty on the intention to buy among Iranian customers. Therefore, we initially attempt to compare uncertain discounts (ambiguity in the amount of discount) and certain discounts (a definite amount of discount) focusing on the source of uncertainty. Then, we should examine the effect of the design and introduction of uncertain discounts on the customers' preference. For this purpose, eight uncertain discounts were used, including four odds-based discounts (with probability of winning and different discount rates), three pull-down discounts (with different discount intervals), and one skill-based discount. In the third step, we will examine the effect of product type (utilitarianism and hedonism) on customers' preferences. Consequently, all decisions will be displayed once for a utilitarian product and then for a hedonistic product.
 
Methodology
For this purpose, an online within-subject full factorial experiment was designed and performed, where 59 people were faced with 72 decisions. In order to design this experiment, JavaScript programming language and jsPsych library 1.6 were used. Moreove, the JATOS platform 3.5.3 was employed in order to load the test and generate the link and run it on the server. Then, participants were asked to choose between one of the two types of discounts based on their preferences. Nine discounts (eight uncertain discounts and one certain discount) were used for two products: a powerbank (utilitarian) and tablecloth (hedonism). All participants were randomly assigned to those decisions.
 
Findings
Iranian customers acted based on risk-resisting ideology in choosing between discounts based on chance and skill compared to normal discounts; thus, they preferred certain discounts. However, there is no significant difference between the choice of individuals when facing tensile discounts. In odds-based discounts, people prefer to win less amount of discount compared to the lower chance of winning big discounts. In tensile discounts, the upper margine of the certain discount has a positive effect and the lower margine has a negative effect on the customets’ desire to choose a discount. Therefore, there was no difference between the type of product (hedonistic or utilitarian) in people's decisions.
 
Conclusion
In designing discounts with uncertainty, marketers should consider customers' preferences over certain discounts and attempt to increase the attractiveness of such discounts by addressing other aspects of these discounts, such as creating a fun, exciting, and enjoyable experience. Regarding tensile discounts, marketers should be aware that the upper margine of the discount has a greater impact on customer attraction compared to the lower margine.

Keywords

References

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Journal of Business Management
Volume 13, Issue 3
2021
Pages 791-813

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