1. Introduction
Online sales in the United States have been growing at a compounded annual growth rate of 17%, reaching $392 billion in 2016, and are expected to surpass $500 billion by 2020. The consumer electronics segment is the most popular category among online shoppers, driving the highest online sales in the country. In response to the significant growth in online sales, an increasing number of consumer electronics vendors have entered the online market. In a highly competitive business environment characterized by price transparency, dynamic pricing and ever-changing consumer preference, how to set the right price for products has become a real challenge for online vendors. Sales volume is the most widely used measure of a firm’s marketing performance. Managers are interested in understanding the factors that influence sales volume. It is therefore important for firms to develop effective pricing strategies that not only meet their business objectives, such as maximizing profits and sales revenue, but also provide them with the sustainable competitive advantage. This study aims to investigate the effect of different pricing strategies on the sales volume for online consumer electronics vendors. By addressing the existing gap in the understanding of the relative impact of costing and pricing theories and real sales performance and pattern in the emerging online business environment. The study will not only make a contribution to academic knowledge regarding the application of pricing theories in different business contexts, but also provide valuable insights for business managers. During the course of the study, 254 valid responses were collected from online consumers who have previously purchased electronic products online. The data involved in the study has good representation in terms of different demographic factors, such as age, gender, and income, which could help enhance the reliability and generalizability of the findings. However, the study limits the investigation to one product category – ‘smartphone’ only. Further research could consider incorporating different product categories in the consumer electronics segment for a more comprehensive analysis. By understanding the impact of different pricing strategies on sales volume, this study provides valuable guidance for the marketing management of online vendors in the consumer electronics industry.
1.1 Background
It is crucial for firms to attain profits in order to remain competitive. For a firm that operates in an industry which is already highly competitive, one way of making profits is by increasing sales volume and how much firms are able to sell are often associated with pricing strategy. As a result, pricing strategy is a common management tool to try to achieve the goal of profit maximization. With the widespread of the Internet and the development of a range of electronic applications, online sales have rocketed in recent years. It was reported that an unprecedented number of shoppers indulged in a spending spree in the run up to Christmas and many purchased goods online. Consumer electronics is a fast paced area where retailers do not expect customers to have a great deal of knowledge about pricing and are willing to shop around in order to find the best deal. However, it is also a highly competitive market and with the economic slump which leads to decrease in the purchasing power of consumers, customers become more price sensitive and thus retailers are under a great deal of pressure to sell their products. This research is aimed to provide empirical evidence to support the theoretical argument that has been made that sales volume is determined by both price and marketing. It seeks to show that different combinations of marketing expenditure and prices will result in different sales volume. With the rise of the Internet as a transaction channel, it is convenient for researchers to collect data through online and this has dominated due to its advantages over the traditional ways such as cost saving, instant feedback and collection of consumer information. In addition, online data is dynamic in nature. For example a range of information relating to the prices of shares can be accessed quite naturally in real time and prices for a wide range of goods could be recorded at various times throughout a day by use of robotic equipment. However, one of the major concerns for researcher is the validity and it is very much depends on the nature and the purpose of the research. Modern technology and data analysis methods offer a chance for many different kinds of data to be used in research. However, this also means that it’s necessary for a strategy to be developed to address the issues of integrity of data and to ensure that the use of such data is clearly justified. Well structured data collection techniques and their effective implementation are critical to a high quality research output. This research is also serves to extend knowledge in the area of price determination and sales volume as most existing research has been limited to analysis at the industry level, largely owing to the lack of data. Furthermore, the research findings could provide managers with the first set of empirical generalizations about the likely effects of different strategy variables. The research could also establish a sound foundation for future investigation on the subject. With this in mind, it is hoped that this research may be published in scholarly journals thus helping to build a scientific community.
1.2 Purpose of the Study
The study explores what impact the pricing strategy is making on the sales volume for consumer electronics which are sold online. Pricing in business is a very strategic issue. It is the only mix that generates a turnover for a business which produces revenue. All the other mixes are costs. Price is in fact a ‘mirror’ of the business, it’s a sign of its strength. These are not just words, so a business can only wield price with other information. So the importance of pricing on business cannot be underestimated. And that is the reason why in recent years there has been lots of focus and research on sales promotions and advertising. With this research, I will find out what vendors are the main players in this segment, and what sales strategies are commonly used by them. And then I will analyze the volume sales trend, to see how they are changing over the years. I will use correlation analysis to find out if the pricing strategy will affect the sales volume and if they are moving in the same direction. By engaging in this research, I believe that I can provide very useful insights for the online vendors who operate in the consumer electronics segment. And also I can help other potential entrants to have a better understanding of the marketing strategies in these segments.