Quantity consumer goods pricing: has yesterday’s surcharge become today’s discount?

Abstract

Purpose This study aims to extend by way of replication an earlier study, “Blind man’s bluff: The ethics of quantity surcharges” (Gupta and Rominger, 1996) by testing several hypotheses regarding changes in the surcharging phenomenon that may have occurred over time. Design/methodology/approach The original study was constructed from data collected 20 years ago. This study went beyond a mere replication. A key difference between this study and the original study was in the method of data collection. In the earlier study, students were used to collect data. In this study, the author personally and carefully recorded the prices of the same 60 items that were noted in the original study. These new prices were then compared with the original ones. Several matched paired t-tests were administered to analyze the mean differences between the two sets of data. Findings The tests showed a highly significant difference in today’s pricing structure in comparison to the quantity surcharging phenomenon from the prior study. It was found that both the quantity of the items surcharged and the magnitude of the surcharges decreased in comparison to the surcharging reported in the original study. Research limitations/implications Reasons are given regarding what changed and why and suggestions are given for future research in the areas of private or in-store branding, the proliferation of “big box” stores and the changes in the frequency and magnitude of surcharging that may be occurring over time. Originality/value This study indicates that the quantity surcharging phenomenon has lessened. In fact, in mature markets which include big box discounters, the quantity surcharging phenomenon of 20 years ago may have given way to today’s quantity discount.

New product performance advantages for extending large, established fast moving consumer goods (FMCG) brands

“…Bulk discounting is measured as the price per volume price difference between the largest and smallest sized items offered by the brand, capturing how much a consumer saves per ounce when purchasing the largest item available versus the smallest item. Bulk discounting has become a common market practice and is generally expected to improve sales performance (Dunphy, 2016).…”

Marketing of Private Labels

“…Brands understand the importance of creating a strong customer demand. When Walmart decided to pull Hefty and Glad food bags from its shelves, selling just Ziploc and its own Great Value brand, Hefty and Glad stood to lose because the retail giant accounted for a third of its sales (Dunphy, 2016). Consumers were not satisfied and complained about their loss.…”

“…They switched and started shopping from other stores. Walmart understood the consumer reactions and put the brands back on the shelves (Dunphy, 2016).…”

Unit pricing for multiple product sizes: identifying moderators and mediators of consumer evaluations

“…QD is considered the most widely used pricing tactic in the marketplace (Binkley and Bejnarowicz, 2003;Gupta and Rominger, 1996;Widrick, 1985). However, numerous field studies have confirmed incidences of QS in various grocery products and stores (Widrick, 1979a;Dunphy, 2016). Figure 1 shows real illustrations of QD and QS offered by the same grocery store in Japan.…”

“…Although QS may occur unintentionally through retailers' common price-setting practices, consumers who adopt the strategy may feel exploited when they find out that they purchased a surcharged size (Sprott et al, 2003;Widrick, 1979b). Similarly, Dunphy (2016) stated that QS might be seen as unfair and disrespectful to consumers who assume that they can save money by purchasing larger packages. Hence, it is vital to incorporate brand-size pricing into marketing decision-making (Sprott et al, 2003).…”