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Many apparel brands use growth strategies that involve extending a brand’s line horizontally (same price/quality) and/or vertically (different price/quality). While such opportunities for growth and profitability are enticing, pursuing them could dilute a highly profitable parent brand. Categorization theory’s bookkeeping model and the cue scope framework provide the theoretical framework for this study. The purpose of this study is to test whether specific attributes of a line extension (i.e. direction of extension, brand concept, price discount and perceived fit) make a parent brand more susceptible to dilution.

This experimental study manipulates brand concept (premium or value brand) and price level (horizontal or vertical: −20per cent, −80per cent) and measures perceived fit to test effects on parent brand dilution. ANOVA and t-tests are used for the analysis.

Vertical extensions dilute the parent brand, but horizontal extensions do not. Dilution is strongest for premium (vs value) brands and when line extensions are discounted (i.e. −20per cent or −80per cent lower than the parent brand), regardless of the perceived fit between brand concept and brand extension price. Overall, brand concept is the strongest predictor of parent brand dilution in the context of vertical-downward extensions.

This study establishes which factors emerge as important contributors to parent brand dilution. Although previous studies on brand dilution are abundant, few studies have compared the effects of horizontal and vertical extensions on brand dilution. This study offers strong theoretical as well as practical implications.

The purpose of this paper is to investigate the opaque inventory information disclosure strategy for an online retailer who sells two substitutable products to customers in two selling periods.

The authors develop a two-period model where an online retailer sells two substitute products with two inventory composition structures to maximize profits. The authors investigate the optimal inventory disclosure decision from both ex post and ex ante perspectives. Sensitivity analysis is performed to investigate the effects that discount rate, transaction cost and the probability of agreeable inventory situation have on the equilibrium disclosure outcome. The authors also consider risk-averse customers and horizontally differentiated products to highlight the robustness of our results.

The authors find that the online retailer will choose the opaque information disclosure when attempting to increase revenue and reduce the mismatch of supply and demand in both ex post and ex ante inventory information conditions. Comparing with ex post disclosure strategies, ex ante opaque disclosure is optimal in a larger price region, and the total revenues gap between opaque disclosure and complete disclosure gradually increase as discount rate, transaction cost or the probability of agreeable inventory situation decreases. Furthermore, strategic customers may tend to be risk neutral when faced with opaque inventory information in a two-period sales setting.

This current paper is the first paper to study the online retailer's inventory information disclosure strategy in two selling periods. Moreover, this paper presents the conditions under which the online retailer should share complete or opaque inventory information with customers to maximize the online retailer's total revenues.

The purpose of this paper is to examine the signaling effects of high versus low price discounts by integrating extant literature on price discounts, perceived risks and purchase intentions for products sold online. The study examines the influence of price discounts on perceived risks, and the subsequent influence of these risk perceptions on online purchase intentions.

This study used an experimental design. The manipulated factor was price discount (10, 30, 50, 70 and 90 per cent). Responses were collected via online surveys. Nonlinear regression analysis with the MEDCURVE macro was used for the analysis.

The results show that the discount size increases customers’ perceived risks, and that these perceived risks mediate the relationship between price discount and purchase intentions.

This study provides a better understanding of customers’ risk perceptions for online price discounts, which enables retailers to decide appropriate price discounts to attract customers.

Most previous literature focusing on price discounts takes into consideration the presentation effect on consumers’ positive perceptions, while this study investigates the price discount effect on customers’ negative perceptions. In particular, this study examines the mediating effect of perceived risks on the relationship between price discount and purchase intention, which has not been investigated in previous studies.

This paper aims to examine how consumers evaluate and respond after failing to receive the promotional price for a quantity discount because the minimum purchase requirement (MinPR) is out of reach. Although quantity discounts are effective in terms of increasing sales volume, the outcome of using them is not always positive.

Two 2 × 2 experiments are carried out to test the research hypotheses in the context of apparel shopping.

The results of Experiment 1 demonstrate that offering quantity discounts with a high MinPR (e.g. “4 for 30 per cent off”) can result in greater willingness to buy (WTB) a single product at the full price than offering promotions with a low MinPR (e.g. “2 for 30 per cent off”) in the wake of a missed quantity discount. In other words, the purchase quantity has a positive effect on the consumers’ WTB even when they are not able to take advantage of the discount. However, this relationship weakens when the selection of discounted items is limited (i.e. the scope of the promotion is narrow). The results of Experiment 2 reveal that when the missed quantity discount is based on dollars rather than on the number of pieces (e.g. “Buy $100, get 30 per cent off” vs “Buy four pieces, get 30 per cent off”), the effect of purchase quantity on WTB is enhanced. Finally, perceived closeness of purchase outcome to the MinPR mediates the effect of purchase quantity on WTB.

To maximize internal validity, hypothetical scenarios were used as stimuli rather than an actual consumption experience, and the setting involved only a single product category (clothing). Future work including other types of merchandise and a more natural setting is needed to generalize our findings.

The purchase quantity or MinPR serves as a reference point that influences consumers’ purchase decisions, even those who do not buy enough to qualify for the price reduction. Our findings suggest that retailers should specify a relatively high MinPR for quantity discounts. In addition, proper selection of the promotional scope and discount base will significantly improve consumers’ behavioral reactions when they are not able to take advantage of a quantity discount.

The primary contribution of this article to the marketing literature is that it provides empirical results that shed some light on the situational influences that missing a quantity discount has on the consumer’s WTB a single product at the regular price, and what the mechanisms for the purchase quantity effect might be.

Retailers are known to present tensile price claims (TPCs) stating high discounts to entice shoppers. Prior research on TPCs suggests that high TPC discounts increase purchase intentions. However, the current study proposes, first, that the TPC discount shifts expected price discount (EPD) and, second, that the gap between the actual price discount and the EPD influence perceptions of the discount deal. Support for these propositions would suggest that high TPC discounts will only be effective when they closely match the actual price discount. Therefore, the purpose of this paper was to evaluate the effectiveness of exaggerated maximum-discount TPCs.

Two experiments were used. Study 1 investigated the effect of exposure to a TPC on EPD. Study 2 examined discount discrepancy as a mediator of the relationship between a TPC and consumer perceptions (i.e. perceived savings and price fairness) and purchase intentions. PROCESS and ANOVA were used for the analysis.

This research showed that exposure to a TPC influenced consumers’ EPDs. As TPC discount increased, EPD increased and the discount discrepancy (i.e. actual price discount minus EPD) decreased (and, in some cases, became negative). The discount discrepancy influenced consumer perceptions of savings and fairness, as well as purchase intentions. Consequently, when the actual price discount encountered was not as large as the advertised TPC discount, the results showed a negative, indirect influence of exaggerated maximum-discount TPCs on consumers’ discount perceptions, mediated by the discount discrepancy.

Previous TPC studies found that the size of the TPC discount positively influences consumers’ discount perceptions, implying that larger discounts are more effective. However, this approach does not take into consideration the notion that larger TPC discounts increase consumer expectations about the size of discount and these expectations are used as a frame to evaluate a discount deal. The findings of the current research show a negative, indirect influence of exaggerated TPC discount on consumer perceptions and purchase intentions through discount discrepancy. Therefore, this study provides a new perspective to explain the influence of TPC discount size on consumer perceptions.

An experiment was conducted in which level of claim (plausible versus implausible), claim type (tensile versus objective), and brand familiarity were manipulated to determine consumer responses to sale ads. Conducted in an Asian setting using percentage instead of dollar value price reductions, the results replicated and extended past findings in the pricing literature. Specifically, implausible claims that purported exaggerated savings led to greater discounting, higher perceived price reduction, higher perceived offer value, and higher shopping intention than those with plausible price reductions. Objective price claims that state the exact amount of reduction generally elicited more favorable responses than tensile claims of the “save up to ____ percent” genre. When the price reductions were implausible, tensile claims resulted in higher discounting, lower perceived price reduction, and lower perceived offer value than did objective claims. Finally, greater brand familiarity resulted in higher claim discounting and lower perceived price reduction when the claims were implausible rather than plausible. Theoretical and managerial implications are furnished together with directions for future research.

The purpose of this paper is to empirically test whether stock liquidity and investor sentiment have interactive effects on seasoned equity offers (SEOs) price discounts in Australia.

The authors focus on the implicit cost borne by firms when issuing seasoned equity capital. This cost is measured as the relative difference between the SEO offer price and the last close price prior to the announcement of the issue. The primary measure of investor sentiment is a composite index constructed similar to that in Baker and Wurgler (2007).

The results show that, in periods of deteriorating investor sentiment, the increase in SEO price discounts for firms with illiquid stocks is larger than the corresponding increase for firms with liquid stocks. This suggests that, as sentiment wanes, investors become even more concerned about illiquidity, leading to even greater required compensation for holding illiquid assets. The authors find that information asymmetry is positively related to SEO price discounts but this relation is not affected by changing investor sentiment.

Collectively, the empirical results provide support for the argument that price discount of SEOs represents compensation to investors for bearing costs associated with illiquidity. The results also lend some support to the behavioural argument that pricing of equity offers is dependent upon investor sentiment, particularly for firms with illiquid stocks.

The ability for firms to raise capital in a cost-effective manner is critical for firm growth and stability. Investors require compensation for bearing the costs of illiquidity of their investments in equity. Accordingly, firms need to be conscious of their stocks’ existing liquidity and its influence on the cost of raising additional capital which, in turn, affects their operational stability and investment opportunities.

Ultimately, the implications of this study will assist firms in capital-raising decisions, investors in making portfolio investment decisions, and investment banks in setting offer prices on equity issues.

To the best of the authors’ knowledge, this is the first study to examine the interaction between investor sentiment and SEO price discounts in Australia.

Are share markets too volatile? While it is difficult to ignore share market volatility it is important to determine whether volatility is excessive. This paper replicates the Shiller (1981) test as well as applying standard time series analysis to annual Australian stock market data for the period 1883 to 1999. While Shiller’s test suggests the possibility of excess volatility, time series analysis identifies a long‐run relationship between share market value and dividends, consistent with the share market reverting to its fundamental discounted cash flow value over time.

The purpose of this paper is to investigate whether the negative effect of lower prices on perceived brand quality that has been demonstrated in evaluation tasks arises in a brand choice context.

The effects of lower prices on perceived quality are assessed via two laboratory experiments in which college students participated.

A lower price is associated with lower perceived brand quality in Study 1's evaluation task environment. However, Study 2's results indicate a reversal of the negative effects of lower prices on perceived brand quality in an evaluation task to generally positive effects when the lower price is offered in the form of a discount in a choice task.

In addition to providing evidence that fears of the detrimental effects of lower prices may be overblown, the results also provide insight to managers of brands of different levels of quality on how to manage discounts to build, or at least to insulate, perceptions of the brand's quality.

The paper's findings may guide both managerial practice and future research on the effects of lower prices, particularly those in the form of a discount.

Consumers are less likely to purchase perishable goods when their expiry dates are near. For this reason, retailers frequently implement a discount pricing policy when the products have reached closer to their expiry dates. This paper introduces a simple methodology for helping the managers in their discount pricing decisions. Based on the expected value approach, the suggested method utilizes the probability values obtained from the past experiences and calculates an expected profit value for each alternative discount policy. Decision maker then selects the discount policy with the highest expected profit.