Exploring the relationship between psychology and pricing in the retail industry (Clothing): Why does pricing strategy influence consumer purchasing behaviour?

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ACKNOWLEDGEMENT

I would like to thank my supervisor, colleagues, and all those who helped me in completing my research project, without their support the completion of this research study could not be possible.

DECLARATION

I adjudge, the content of this dissertation is completely collected and done by unaided effort and the material in it, has not been published ever before. The opinion that is reflected in this dissertation is purely my opinion and does not represent any University's opinion.

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Dated:

ABSTRACT

The aim of this particular research study is to examine the relationship between psychology and pricing in the retail industry. This dissertation examines the impact of strategic consumer behaviour on the attractiveness of different pricing strategies. Broadly speaking, consumers are said to behave strategically (or rationally) when they actively make self-optimal decisions, while anticipating and accounting for firms' actions and the behaviour of their fellow consumers. The study results indicate significant and positive relationships between consumer self-perceptions of pricing strategies and customer retention and loyalty. The participants indicated increased positive attitudes, subjective norms, and intentions toward sophisticated pricing methods relative to renewals, referrals, and additional purchases. Retail leaders should engage in research to incorporate the insights appropriately into product and pricing development and sales and marketing initiatives.

TABLE OF CONTENTS

ACKNOWLEDGEMENTII

DECLARATIONIII

ABSTRACTIV

CHAPTER # 1: INTRODUCTION1

Background of the Study1

Industry background1

Problem Statement2

Purpose of the Study3

Rationale of the Study3

Research Question4

Significance of the Study4

Structure of Dissertation4

Summary4

CHAPTER # 2: LITERATURE REVIEW6

Social influence in Consumption Psychology and Economic Studies6

Importance of Pricing8

Product Life Cycle10

Marketing Approach10

Price Determination11

Pricing Strategy13

Consumer Purchase Behaviour14

Summary15

CHAPTER # 3: METHODOLOGY16

Research Design16

Instrument for data collection16

Data analysis17

Reliability/Dependability17

Validity19

Ethical Considerations20

Summary21

CHAPTER # 4: FINDINGS22

Questionnaire Findings22

Correlation Analysis29

ANOVA Testing29

Market Concentration30

Testing for Group Differences31

Summary34

CHAPTER # 5: DISCUSSION AND CONCLUSION36

Discussion on Research Question36

Conclusion37

Summary38

REFERENCES40

APPENDIX44

Questionnaire44

CHAPTER # 1: INTRODUCTION

Background of the Study

The transformation of the apparel industry creates competitors focused on sustainable profitability and consumers. In an environment where the cost of products and services continues to rise, price for value is very important to the consumer. Adams and Schvaneveldt (2003) indicated survey results where 60% of respondents would switch retail stores for cost savings. The remaining 40% cited other factors such as life events and service issues as reasons for switching (Adams and Schvaneveldt 2003 85). Consumers who are more knowledgeable understand price for value and adjust behaviour towards a product and service provider accordingly (Chintagunta 2002 95). Relationships with customers occurred through face-to-face conversations. A retail owner had knowledge of the city or town and was aware of a customer's life events (Coldfeller 2004 98). The customers trusted the retail store to perform the research and present the best products to meet their current needs, and the agency became the centre of trust and dependence for both the customer and the company.

Industry background

The luxury industry is important in terms of both its sales volume (more than £ 100 billion annually) and its influence in creating the best design, using the best materials, developing the best merchandising and packaging methods, and hence, driving ...