Absolute discount vs percentage discount: Which has a higher impact on purchase intention?

Abstract

The marketing mix plays a significant role in promoting a new brand or a product. Among the 4Ps, promotion/ discounts are an important factor, especially for the retail sector—the purchase intention of the customers changes with the discounts offered. This project aims to understand the impact of absolute value discounts and percentage discounts on the purchasing behavior for durable and non-durable products. We started our project with the perception that for durable products, absolute value discounts have a greater impact on the customer's purchase intentions and for non-durable goods, percentage value discounts have a higher impact on the customer's purchase intention. The methodology adopted is that of experiment, where different control groups were exposed to two different kinds of promotions and were asked to rate their purchase intention separately. ANOVA analysis was done on the data obtained and the inference from the data validate the hypothesis. We understood that absolute value discounts have a greater impact on the customer's purchase intentions than percentage value discounts for durable goods. But for non-durable goods, consumers are indifferent to absolute value discounts and percentage value discounts. This analysis recommends companies decide on the type of discount promotions that can be used to increase the sales of different consumer durables in the retail segment.