The effect of permanent product discounts and order coupons on purchase incidence, purchase quantity, and spending

This paper examines the influence of a permanent discount strategy on customer purchase behavior, i.e., incidence in each week, quantity (in units), and total order spending CNY). Permanent discounts are defined as continuously provided by retailers. We identify two types discounts, namely, product-specific price (PD) coupons (OD, which can be redeemed for order). collect transactional data from Chinese online retailer empirically examine effects customers’ expectations PD OD. find nonlinear relationships between behavior. PDs negatively when they lower than 19% but show positive effect beyond this threshold, hence depicting U-shaped relationship. They also affect positively at decreasing rate. Customer incidence, spending, following patter with appearing high 31%, 27%, 18% respectively. On other hand, ODs an increasing OD relationship where shows 426 CNY, these higher 34 CNY. that interact current levels their spending. Combining results considering profit margin basket, we suggest retailers should offer relatively low value depth.