Using consumer-perceived risks to set optimal discount levels
by Marlene Jensen, Ronald G. Drozdenko
International Journal of Revenue Management (IJRM), Vol. 2, No. 4, 2008

Abstract: Managing revenue includes setting the lowest discounts necessary to achieve the desired boost in unit sales and profits. This study systematically examines how four risk types; financial, performance, social/psychological and physical, relate to the optimal discount selected by consumers in 12 product categories. Higher priced products had the highest perceived financial risk; performance and physical risk was highest for tyres; and social/psychological risk was highest for shirt/blouse. Two of the risk factors, social/psychological and physical, were found to be predictive of optimal discount levels. The revenue management implications of setting discount levels in different product categories are discussed.

Online publication date: Sun, 12-Oct-2008

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