The article by Cai, Bagchi and Gauri published in Journal of Consumer Research named “Boomerang Effects of Low Price Discounts: How Low Price Discounts Affect Purchase Propensity” demonstrates that lower discounts for low priced product reduce the propensity to purchase non-essential, low priced goods (especially groceries). This paper provides a summary of their research findings.
First, the article shows the factors that drive the purchase of low priced groceries. Generally, it is believed that a discount will increase the propensity to purchase. However, the argument put forward in the article is that a low discount on essential goods will increase the propensity to purchase but will lower the same for nonessential goods (Cai, Bagchi and Gauri 804). The authors explain this phenomenon using the theory of purchase value. Depending on the theory of purchase value, consumers derive two kinds of value – acquisition and transaction. Acquisition value is the net gain derived from the purchase while transaction value is the pleasure that the consumer derives from the perceived financial gain from the purchase (804-5). In the case of essential products, both the values are indispensable. However, in the case of nonessential products, transaction value gains precedence over the acquisition value, inducing purchase decision. The study is divided into two parts – first, a distinction between essential and nonessential products and second, an impact of a low price discount on the purchase decision (805).
The study hypothesizes that there exists a boomerang effect on the purchase decision for nonessential goods when minimal price discount is given. The data for the study are collected from the suburban grocery market in a midsized city in the USA. The researchers obtained transactional-level data from six categories of goods comprising of three essential and three nonessential goods (Cai, Bagchi and Gauri 807).
The result of the study shows a U-pattern in the volume of goods sold for discounted products in case of nonessential goods (Cai, Bagchi and Gauri 808). The researchers computed total volume sold for the products at different discount levels over the entire period studied. The results derived from the regression analysis suggest that the main effect of discount was negative on volumes sold. This indicated that with an increase in discount, there is a decline in sales, however, with an increase in discount size, there is a rise in sales for nonessential goods (Cai, Bagchi and Gauri 808). In the case of essential goods, the pattern is altered with an increase in sales at lower discounts, but as discounts increase, there is a decline in sales (808). In order to examine the boomerang effect, the researchers conduct five separate studies (Cai, Bagchi and Gauri 807-14).
The first study of the boomerang effect demonstrated that when a smaller quantity of low priced nonessential goods are purchased, a lower discount has a negative influence on the purchase decision (808). However, this effect reverses in the case of higher volume purchase of nonessential goods (Cai, Bagchi and Gauri 809). The second study indicated that when purchasing low-volume nonessential goods, the propensity to purchase decline with lower discount. Thus, studies support boomerang effect on the purchase propensity to but nonessential good when discount is low. A third study on the boomerang effect and transaction value demonstrates that boomerang effect occurs when the perceived transaction value is low (Cai, Bagchi and Gauri 812). Further, the fourth study demonstrates that the boomerang effect occurs only for nonessential goods and not for essential goods. The fifth study shows that for a nonessential good the propensity to buy declines when a low price discount is offered (Cai, Bagchi and Gauri 814).
Work Cited
Cai, Fengyan, Rajesh Bagchi and Dinesh K. Gauri. “Boomerang Effects of Low Price Discounts: How Low Price Discounts Affect Purchase Propensity.” Journal of Consumer Research 42 (2015): 804-816. Print.