How did ongoing product discounts and order coupons differ in their links to online spending?

Details

Researchers analyzed transaction data from a Chinese online retailer that provided discounts continuously, rather than only during temporary promotions. They distinguished discounts on individual products from coupons applied to an entire order, and examined weekly purchasing, item counts and total order spending.

For product discounts, the estimated relationship with spending was negative below a discount of 19% and positive above that threshold—a U-shaped pattern. Larger product discounts were also associated with more items purchased, but the additional increase became smaller as discounts deepened. Larger order coupons, by contrast, were associated with increases in both spending and item counts that became steeper as coupon value rose.

Customers’ expectations also mattered: the relationship between current discounts and spending varied with expected discounts. Expected discounts themselves showed U-shaped relationships with purchasing, so the pattern was not simply that expecting more savings always went with buying more.

Higher spending should not be read as higher profitability: the authors noted that order coupons reduced the profit margin on the entire basket. The abstract does not report sample size, study period or estimates of statistical uncertainty. These observational findings from a single retailer do not establish cause and effect or show that the same discount threshold applies elsewhere.