The Effect of Perceived Risk in Discount Condition on the e-Purchase

MAYFEB Journal of Business and Management - ISSN 2371-7742 Vol 2 (2017) - Pages 1-8

The Effect of Perceived Risk in Discount Condition on the e-Purchase Intention Bahareh Ahmadinejad, [email protected] MSc in Management, Islamic Azad University (IAU), Qazvin Branch, Marketing, Qazvin, Iran Hadi Najafi Asli, [email protected] Master student of IT Management, Islamic Azad University, North Tehran Branch, E –Business, Tehran, Iran Salar Ahmadinejad, [email protected] Master student of Management, kharazmi University, MBA, Tehran, Iran Abstract- The phenomenon of e-business is changing the business and organizations will lead to the e-market. A key issue in e-business is customer trust. Trust, is one of the components of empowerment in e-business, and the most important feature of the success of a website in the virtual world and also a key factor in maintaining and developing lasting relationships with customers. Several studies show that customer feel less risk in buying face to face or traditional rather than e-purchasing. The main reason is the lack of trust in the e-purchase. The purpose of this paper is to examine the relationship between perceived risks and purchase intentions for discount products that sold online. An online questionnaire was distributed to 390 internet user in Iran. There was a scenario at the top of each questionnaire that respondents who responded by putting themselves in the scenario then responded to questions. The results show that exist a significant positive relationship between Product performance risk and security risk with purchase intention of discount product and there is a negative relationship between convenience risk with purchase intention of discount product. Keywords: discount product, e-business, perceived risk, e-purchase intention

I.

INTRODUCTION

The discount is a very common type of promotion that is a direct stimulus to motivate customers and attract them to purchase. The discount is very interesting because it is very complicated to customers that interpret price signals. Evaluation of discount for the seller because it requires a cognitive process. When customers see the discounted they are evaluating several components such as percentage and/or dollar amount of discount, original price and calculation of the selling price. When customers see the discounted, they may try to understand why the product is discounted, whether it is a temporary bargain or if the product is outdated or defective. If discount are unexpected, the customer may be more skeptical. For instance, a low list price with a low discount was more believable for customers than a high list price with a high discount, even though the selling price was the same so, high discounts raise risk perceptions [1]. The perceived risk is the overall risk perceived by consumers in a product category. At product category, this risk is also known as inherent or latent risk. Bauer stated in his influential essay that the consumer behavior includes risk because each action of the consumer is followed by results which include some uncertainty. Also, he believed that consumers create methods to reduce the risk through acquiring information. The methods enable them to act in situations of uncertainty with some confidence. The other studies have also shown that risk information reduces uncertainty and contradiction [2]. Numerous research studies in the field of e-customer and the factors influencing their behavior during the process of buying from the web are done. In 2010 a study was conducted on Saudi customer purchase intention (Customers who have online shopping experience). This study showed that satisfaction of online shopping customer, Dependent on the satisfaction of the product price, product quality, customer service, payment methods, payment security is perceived and delivery time. Results showed that overall satisfaction of e-purchase and attitude to this type of purchase, have a significant and positive impact on customers planning to e-purchase. The e-shopping problems negatively and overall customer satisfaction positively, influences on the attitude to e-shopping [3].

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Sohn and Tadisina (2008) identify six dimensions of service quality for online financial services include Trust (financial security), customized communications (providing suitable facilities for customers on site), ease of use, content, reliability (the ability to institute strict implementation and perfect customer service) and speed of delivery (including transaction speed and quick response to customer requests) identified with the help of factor analysis. These factors effectively, as factors in attracting customers online financial institutions based on confirmatory factor analysis were introduced [4]. The quality of e-shopping creates a sense of being useful, build confidence and pleasure of this type of purchase to the customer that impacts to his attitude toward e-shopping [5]. Lee and Lin (2005), were identified that website design, site reliability, responsiveness, and customer confidence in using e-services as well as factors affecting the overall quality of service and customer satisfaction. In addition, they found that the overall quality of customer service and satisfaction was significantly associated with intention to repurchase by the customer [6]. So, the aim of this study is to examine the influence of perceived risk on the online purchase intention of discount product. II.

LITERATURE REVIEW

The expansion of the Internet and E-business has given rise to the reputation of online shopping. Sometimes, buyers order numerous items together to pay only one transport fee instead of individual transport fees for each item and even save time through performing only one transaction, which may also cause less psychological costs due to performing fewer transactions [7]. Online shopping enables consumers to purchase products without intermediaries and directly from online retails. So, the customer experience within an online retails shows his/her real experience in this environment. Thus, design and appearance of the retailer's website may effect on customer attitudes toward online shopping. The higher quality of the retail website lead to more positive attitudes of consumers towards online retailer [8]. When customers see a discount, the conflict is created in their minds that why the product is discounted, Whether it is a temporary transaction, or if the product is outdated or damaged. Also, when the discount is unexpectedly large and outstanding, it seems strange and customers may be more unbelieving about the reliability of the product and the retailer. For instance, a low list price with a low discount was more acceptable for customers than a high list price with a high discount, even though the selling price was the same. Then, high discounts raise perceived risk. In other hand, if online retailers suggest big discounts, customers may doubt both the product quality and the retailers' reliability, which is different from the deduction from a low original price [1]. Risk has many forms: functional, physical, financial, social, and psychological. High levels of risk, frustrate many customers. Communication can receive a reduced risk or even destroy it incomplete. Bauer in his influential article stated that consumer behavior in this respect, includes the risk, that any action by a consumer is followed by results in the consumer which brings it with some uncertainty. Furthermore, Bauer argued that consumers build some methods by means of information, so as to reduce the risk, and this enables them to act with trust in uncertain situations. Other marketing research has addressed this concept that information on risk reduces uncertainty and conflict [9].

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It remains to be seen whether spicy discounts are impressive marketing tools in driving purchases because larger discounts may raise perceived risk enough to interfere with, or reciprocate, the positive discount effects on purchase intentions. Some factors that influence perceived risks: 

Customer demographics



Internet shopping experience



The frequency of online purchasing



Adoption of other remote retail purchase transactions such as Teleshopping



Different product categories [1].

Perceived risk, which may cause feelings good or bad beliefs, attitudes, and behavioral intentions influence [10]. Attitude toward discount is very important. Attitude is a complex mental state that involves customer knowledge, experience, feelings, values, and tendencies to particular situations. The attitude is to develop a new trend to be able to respond consistently and predictably to a stimulant. Also, price, quality, association perceived risk in sensitive product categories has significant impacts on the purchase products [11].

A. HYPOTHESIS H1: There is a positive relationship between product performance risk and e-purchase intention of the discount product. Product risk is related to the inappropriate performance of a product when the performance of a product or brand does not meet the desired expectations [12]. Consumers cannot assess the performance of the online products. In addition, the consumer’s skills to assess the product or brand are limited in the online site because of inaccessible of physical control of a product including touching, brand colors, inaccurate information of product features which results in an increase of the product performance risk. A study in 2012 showed that there is a negative relationship between product performance and purchase not standardized products like clothing while there is a positive relationship between consumer shops standard products like cell phones and performance risk [13]. Masoud after reviewing 395 cases of online shoppers came to the conclusion that product risk had negatively affected online purchasing behavior [14]. H2: There is a positive relationship between security risk and e-purchase intention of the discount product. Trust plays an essential role for customers involve in transactions. It is reducing the information complexity as well as reducing perceived risk in the transactions. Studies showed that trust can be built by personal relationships as there is an eenvironment so the stages of trust also extended because in e-markets personal trust is inexpressive to decrease the risks [15]. When the consumers, make e-shopping they are required to share their financial and personal information with the attendant shopping website during the registration and payment transactions. Details as to address, credentials and credit card are important information from the prospect of consumers and may create problems such as deception or unauthorized access and etc. for individuals in cases where the same are not under protection. Personal information will be under the control of the consumers and companies will be rewarded with an increasing sense loyalty, willingness, intentness and consumer trust. Finally, healthy development of the e-marketing will be maintained through the contribution of the increasingly rising standards of IT and network technology [15].

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Research sshowed that the t gap of co onsumer’s trusst leads to neegative attitud des toward on online shoppin ng. Therefore, keeping conssumer’s persoonal informatiion safe and secure leads to more possitive attitudees toward onlline shopping. Grabner-Kraeeuter said truust is more im mportant and basic factor for the reduction of unceertainty and complexity c off financial transactions and relationship r [1 16]. The other sside, Perceiveed web quality y refers to thee quality and all over the performance p oof an online reetails website, and it is a meeasure of the extent to which the websitte design and processes aree simple, clearr trustworthy,, and effectivee [8].As we knoow, website quality q consistted of websitee design, website contents, and website sstructure. Wee can concludee that discount product with the acceptablee quality of thhe website, it gains g the custo omer's belief, trusts in the certain c e-store, and finally ennhance the saales. Studied showed s that ssome featuress that attract the t customer contain: attraactive website, good quality of the websitte support system, the coloor of websitees, website content, websitee structure, trrustworthinesss [17]. r betweeen conveniennce risk of the purchase intention of the ddiscount produ uct. Accordingg H3: There is a positive relation s conv venience is peerceived of the ability to sh hop regardlesss of time, placce and withoutt to Forsythe, eet al. (2006), shopping visiting the sttore. Convenieence is measu ured by some ffactors such as a duration of time consumeed, location to o shop and thee process of puurchasing. Unnlike traditionaal shopping, oonline shoppin ng gives more convenient to customers [18]. Despitee the advantagee of conveniennce shopping, cannot be ignnored risks off it. There is a much lack off trust in the judgment of e-shopping. Theere are a num mber of pressurres and threatts such as priv vacy policy or about identityy which exist in the type off web based ppurchasing. Besides the ad dvantage of tiime, it may be negative sometimes w when transaction process iss occurring. It m may be a delay in online sh hopping in receeiving a produ uct [19]. These threee types of riskk (product peerformance, seecurity and co onvenience rissks) have beeen consistently y identified inn research exam mining risks of online purch hasing [20]. A Accordingly, th he conceptual model is pressented as follo ows.

Figgure 1. Conceptuaal model.

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III.

METHODS

This study used an experimental design to investigate the influence of perceived risks on the e-purchase intention of the discount product. Three items measured product performance risk, security risk and convenience risk. There was a scenario at the top of each questionnaire that respondent who responded by putting themselves in the scenario then responded to questions. The scenario was as follows: "In cyberspace, faced with a product that has great discounts. You may need it or do not need but you are tempted. Users were asked to answer questions with regard to the conditions. Cochran formula was used to determine the number of samples. The minimum sample size, according to this formula was 384. The online questionnaire was distributed among 390 internet users in Iran. There were no limitation ages for participants. A questionnaire based on the Likert scale ratings has 5 options. The questions that were not fully answered, were excluded. The outcomes from the statistical SPSS program reported.

IV.

RESULT

The first step of a research is to think about what problem the study will focus on. This will set the choice of methodology, the theory approach and the data collection [21]. In this study, we focused on the problem of perceived risk in the e-purchase of the discount product. The type of data distribution was determined. Data had a normal distribution. 44.7% of women and 55.3% of participants were male and it was found that 57.1% of participants were employed and 42.9% were unemployed. Linear regression was used to assess the association between variables. According to sigh < 0.05 in the below table, it can be concluded that the model used to predict e-purchase intention is appropriate.

TABLE I. ANOVA Model

1

Sum of Squares

df

Mean Square

F

Sig.

180.086

.000

Regression

2506.017

3

835.339

Residual

1785.849

385

4.639

Total

4291.866

388

b

a. Dependent Variable: purchase intention b. Predictors: (Constant), Convenience risk, security risk, product performance risk

As shown in the below table, sig > 0.05 and T-value is greater than 1.96, with 95% confidence we can conclude that there is a positive relationship between product performance risk (B= .289) and security risk (B= .551) with the intention of e-purchase the discount product. There is a negative relationship between convenience risk and e-purchase intention of the discount product (B= -.348). This means that with reduce convenience risk, purchase intention of the discount product will increase.

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TABLE II. Coefficients Coefficients Standardized Unstandardized Coefficients Model 1

B

Std. Error

(Constant)

-2.313

.668

Product performance risk

.397

.052

Security risk

1.167

Convenience risk

-.412

Coefficients Beta

t

Sig.

-3.463

.001

.298

7.632

.000

.083

.551

14.104

.000

.040

-.348

-10.377

.000

a. Dependent Variable: purchase intention

V.

DISCUSSION

The significance of social networks as a marketing tool is growing rapidly and includes many areas. Cyberspace can be a market available at very low cost, in order to achieve the company's objectives and the organization [21]. The integrity of customer data, creating a secure database and ensure that the purchase of goods in the case of the Internet can provide quality and in accordance with customers' demands, can reduce the e-purchase risks. The high degree of the trust not only meet customer expectations but also eliminated risks from online transactions. The most important feature of the product that is the effect on e-shopping, including price, brand, after-sales service, speed and attractiveness of the website. This research was done in this direction because e-shopping has become popular recently in Iran and is also expected to increase young generation and busy people, this type of shopping is more common in the future. We examined that when customers face to high discounts in the e- market, they are incredulous about the quality of the product. Studies showed that some customers avoid purchasing products online because they perceive the risks associated with epurchasing. Yeung and Morris (2006) Stated that security and convenience risk associated with e-shopping have a significant negative influence on the frequency of searching online with intent to buy. Other studies show that there is a strong negative relationship between perceived risks and online purchasing behavior [20]. This article result showed that product performance risk and security risk have a positive relationship with the e-purchase intention of the discount product. We found in discount condition, purchasing behavior of people is a little uncertainty. One of the reasons that customers e-purchase is convenient, but customers would perceive less convenience with e-purchasing if they expect difficulties contacting customer service, returning products or waiting for delivery [20]. The result showed that convenience risk and e-purchase intention have a negative relationship, this means that when customer face to a product discount in e-markets, because of convenience risk, they became hesitant.

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VI.

LIMITATION

The limitations of this study, respondents were not in real condition and this does not attempt to measure actual epurchasing behavior. Respondents based on the scenario responded. It is recommended that further studies be carried out in real condition. Among other limitations was studying population, due to the online questionnaire, people who had responded familiar with the Internet. Certain products were not considered to determine consumer buying behavior and the questionnaire is answered in general. In addition, subsequent studies would need to do for special products.

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APPENDIX Questionnaire Product performance risk 

I am confident that this product will perform as expected



I am sure that this product will perform satisfactorily



I believe there is possible risk in purchasing this product

Security risk 

I think that it is safe to give my credit card number or any form of financial information during the

course of purchasing this product 

It is likely that the information or credit card number given to this retailer while purchasing this

product will be misused 

The information and credit card number given to this retailer will be kept confidential by this retailer

Convenience risk 

The retailer would not provide good customer service and after sale support



It would be hard to contact their customer service personnel



A return or a refund would be difficult after purchasing this product at this price

Purchase intentions 

I would purchase this product



I would consider buying this product at this price



This is a strong likelihood that I will buy this product at this price

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