An examination of consumer price cue usage in US discount formats

Abstract

Purpose As retailers in the discount sector proliferate into US retail markets their presence poses competitive challenges for all types of formats that vie for the same target consumer. Practitioners and academics traditionally characterize the discount consumer as one who seeks low‐cost goods and broad assortments. Yet, as US discounters have begun to differentiate their retail offerings, consumers appear to be responding to these initiatives, suggesting that they may seek value beyond low price in this context. The purpose of this paper is to identify the price cues used by consumers in the discount environment, segment these consumers based on their price cue usage, and describe the price segments in terms of store choice and demographics. Design/methodology/approach A telephone survey was used to gather a nation‐wide sample of US discount format shoppers (n=354). Confirmatory factor analysis is used to evaluate the price cue measures and K‐means cluster analysis is used to identify unique price cue segments. χ2, analysis of variance and descriptive statistics are used to describe the price cue segments. Findings Four shopper segments are identified with distinct operations of the price cue, suggesting that discount shoppers seek more than low price in the discount environment. Differences in segments in terms of store choice, income and age emerge from the data. Originality/value The study provides understanding of the manner in which consumers perceive and act upon price, beyond low‐price and value, in the discount sector. The results suggest that popular wisdom regarding price and the US discount shopper is oversimplified, which may portend even greater opportunity for discounters and threat to their intra‐type competitors.

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