Expensive by the dozen?: consumer response to quantity surcharge

Goswami, Sameer
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University of Guelph

A product is sold on a quantity surcharge or premium when the consumer pays a higher unit price (price per pound, price per load, etc.) for a larger size. This paper improves our understanding of the impact of quantity surcharge on consumer buying behaviour. Literature on quantity surcharge highlights a general belief amongst consumers that it is cheaper to buy products in larger quantities, despite the frequency and prevalence of quantity surcharge. There is very little empirical evidence to explain consumer behaviour in the presence of quantity surcharge. Literature on quantity surcharge is observational, based on experimental manipulation of prices (scanner data) and quantities, recall from memory, and analytical or economic modelling, rather than tests of actual behaviour. This is the first paper that attempts to test the observations proposed by quantity surcharge literature. Grocery shoppers (150) were intercepted in stores and asked to make a series of choices about laundry detergents. In each choice, unit price, package size and package price were systematically varied. Analysis of collected responses suggests that consumers realize the incidence of quantity surcharge. Furthermore, statistical analysis indicates that consumers pay attention to unit prices, package prices and brand to make trade-offs, and are willing to buy detergents on quantity surcharge. Finally; the practical applications of the suggested model are discussed along with implications for marketers and researchers.

quantity surcharge, unit price, package size, package price, consumer buying behaviour