Influence of Pricing Strategies on Consumer Buying Behaviour: A Case Study of Amazon, Australia

This research paper examines the influence of pricing strategies on consumer buying behaviour in the Australian retail industry, with a case study of Amazon. It explores the significance of pricing in the retail industry, motivation for pricing decisions in the Australian market, and the impact of pricing strategies on customer buying behaviour.

INFLUENCE OF PRICING STRATEGIES IN CONSUMER BUYING BEHAVIOURS:
A CASE STUDY OF AMAZON, AUSTRALIA
Business Research (HI6008-B1)
Assignment 2 – Business Research Proposal
Submitted By: Sumit KC (BCM8424)
Holmes Institute,
Brisbane campus
Submitted To: Paul Ryder

TABLE OF CONTENTS
Contents
INFLUENCE OF PRICING STRATEGIES IN CONSUMER BUYING BEHAVIOURS:..........1
A CASE STUDY OF AMAZON, AUSTRALIA............................................................................1
1. INTRODUCTION.......................................................................................................................3
1.1 Overview................................................................................................................................3
2. Scope of Research....................................................................................................................4
3. LITERATURE REVIEW...........................................................................................................5
3.1 Significance of pricing in retail industry................................................................................5
3.2 Motivation for pricing decision in Australian market............................................................6
3.3 Impact of pricing strategy on customers buying behaviour...................................................7
3.4 Gaps/ limitations....................................................................................................................8
4. RESEARCH QUESTIONS.........................................................................................................8
5. RESEARCH METHODOLOGY................................................................................................8
5.1 Research Design.....................................................................................................................8
5.2 Data collection method..........................................................................................................9
5.3 Sampling................................................................................................................................9
5.4 Data analysis method.............................................................................................................9
5.5 Research Limitations............................................................................................................10
5.6 Summary..............................................................................................................................10
6. TIME SCHEDULE....................................................................................................................10
7. CONCLUSION..........................................................................................................................11
8. REFERENCES..........................................................................................................................12

9. APPENDIX................................................................................................................................15

1. INTRODUCTION
1.1 Overview
Amazon is one of the popular online shopping traders which has been offering services in
Australia online even door to door free delivery services. The capital investment of Amazon
counts to millions of Australian dollars in digital platform to start, grow and sustain in Australian
market. The management of Amazon have forecasted that small-scale retailers in Australia
would be affected with their entry in the market (Low 2017). A lot of people in Australia has
already followed the shopping trend in online platform which has a neutral impact over
Amazon’s sales. The significant problem for business can be the distance between major cities
(The Straits Times 2017).
The major issue for Amazon could be the Storing and warehousing, however it tends to maintain
online platform to continue its services. During the initial stage of launching, Amazon would be
facing greater challenges in Australian market because the existing market or other service
providers offers a lot of offers, discounts, and benefits to attract the people and built a
community of loyal customers.
If the UK and Australian market is compared, they are different in geographical orientation to
deliver services to the customers. Moreover, there are no extended warehouses which disable the
organization to keep more stock of product or it must operate with less stock or limited stock and
lower price to manipulate the customers (Colgan 2017). Price wars has been experienced in
Australian market after the introduction of Amazon.The local retailers in Australian market has
been promoting the business products with competitive price and attractive brands already
(Whitely & Soper 2017). The range of competition has become extremely high after the
introduction of Amazon.
Australian local retailers such as Woolworths and Coles are popular and mostly visited retails in
Australia. They have been providing a great service to their customers and they have their own
roup of loyal customers, Amazon should back up itself to compete with these super stores to grab
the customer interests or form own customers group.

To maintain the customers interest, amazon could lower the price and provide discounts on their
product. Moreover, increasing the variety in product offers choices in customers. Lastly the
physical space should be make available to foster the business of Amazon. In these aspects, this
research paper would provide a guideline to consider the challenges encountered by the
company. The research question will be supplied accordingly to understand the circumstances of
Amazon in Australia.
Amazon is one of the well renowned multinational corporation and one o f the largest e-
commerce organization that is offering online retail, computing and consumer electronics
services, digital content as well as other local and domestic offerings. One the basis of an
executed research it has been analyzed that Amazon has been ranked at top in the list of the top
e-retailers in United states and other regions all over the globe. The business organization is
generating an approx. 178 billion U.S. dollars in 2017 net sales (Statista, 2018). The major sales
of the business enterprise are extracted through e-retail sales of electronics and other
products. The below presented is the market share of some of the multinational corporations that
are leading the chart:
Market Share
Amazon
Microsoft
IBM
Google
Sales Force
Talking about the corporate operations Amazon.Inc is making use of Glocal strategy as a
corporate strategy. This strategy can be used by the business organization for dealing the global
and local aspects of marketing all over the globe. For instance, as per the executed survey it is

analyzed that the Amazon’s strategy in India holds lessons for the e-commerce giant in other
markets, as well as for U.S. companies aiming to expand their international reach. And this all is
done by making implementation of glocal strategy.
2. Scope of Research
The main objective of this research paper is to find out the influence of Price over the consumers
buying behaviour specifically in Australian market.
Objectives
● To examine the implication of pricing strategy in Australian retailers.
● To determine pricing dynamics of Australian retailers
● To evaluate the impact of pricing strategies on customer buying behavior in Australian
retail industry.
● To recommend to Amazon for pricing significance in Australia.
3. LITERATURE REVIEW
In the process of collecting information the researcher will use various information sources such
as book, journals, articles and other published sources. Online search will be subjected to gather
information.
3.1 Significance of pricing in retail industry
Sales promotion is basically the combination of pricing strategies and product orientation. In the
online business, competitive advantage is essential to be sustained and hence strong marketing
strategies should be implemented. First, the demand is analysed about the product or services and
the prices made are directly proportionate with demand, i.e.; if the demand is high, the price will
be increased or vice versa. The primary motive of pricing is profit. so, the business should
analyse the pricing strategies. (Shin 2014).
Generally, the customers look for the competitive prices of any commodity they purchase. They
take similar commodity with price variance and select best alternatives. In retail business, pricing

alternatives are based on distribution channel. Organizations that adopt intensive distribution
tend to select low pricing strategy while moderate pricing strategy is focused in selective
distribution channels. Moreover, organisations using exclusive distribution channels adopt the
premium pricing strategy (Yeboah et al. 2013). For instance, Angus & Roberson has espoused
the low pricing strategy. It has enabled the organisation to draw the attention levels of customers
(Pantano et al. 2016). Government of Australia had witnessed that Adobe had espoused premium
pricing strategy in Australia and low pricing strategy in US market. Subsequently, the
organisation had reduced the prices of the products in Australian market (Jones 2013). It
concludes that sellers will chose effective pricing methods that will influence their customers.
Additionally, the distribution channels play important role in pricing that will influence the
consumer buying behaviour.
Price of any product has direct relation with customer satisfaction. A satisfied customer is a
repeated customer. Following this principle any retail organization mark their product price
reasonably to leave an inspiring impact on customer buying behaviour (Mohan 2013). One of the
popular online trader (books) in Australia is Amazon. It has always prioritized its pricing
strategies and geared up the surplus of US $14.5 billion. Amazon has been selling the lowest
price books in comparison to other sellers. The company has set up the price regarding customer
perspective to meet the satisfaction level of customers (Pride et al. 2012). Hence, the price is
directly related to satisfaction level of customers, market share and profit. In addition to this
customers retention is another important aspect. Price has direct relation with customer
expectation and satisfaction which influence their buying behaviour and maintain customer
loyalty (Al-Salamin & Al-Hassan 2016). Having a right pricing policy backed up with strong
sales promotion eventually increases the sales (Chovancova 2011). It concludes setting right
pricing strategies is essential for sales promotion and imprinting long term customer relation.
3.2 Motivation for pricing decision in Australian market
One of the basic components that determine the pricing strategy of any organization is
competition. One should always look for competitive pricing in the updated market before
setting the price or formulating pricing strategy. These pricing strategies should give competitive
advantage to the organization (Sije & Oloko 2013).

The major players in Australian retails such as Cole, Woolworth and Aldi have competition in
pricing. The price war has resulted the shift in price of a product in Australian market (AIHW
2012). Basically, there are internal and external factors that affect the pricing decision of retail
market. Internal aspects such as costs, market share, cash flow, and return on investment (ROI)
influence the pricing decision while external factors such as expectation of customers, product
lining, competitors pricing also affect the pricing of a product. Likewise, Product -price
correlation helps in formulating pricing strategy (Haron, 2016).
The Australian retail industry is seemingly highly competitive regarding the prices and hence the
competitors are forced to maintain the lower price to be sustained in market. For instance, the
three major retailers in Australian market namely, Coles, Woolworths and Aldi are taken. Aldi
lowered its price in order to sustain itself in competition with Coles and Woolworth. Success of
the pricing strategy depends on the response of its rivals (Hubbard, Garnett & Lewis 2014). It
makes us clear that pricing decisions are part of organizational decision making which may be
influenced by political, legal, environmental, technological factors (Faith & Edwin 2014).
Apparently, the above discussion concludes pricing decisions are altered by various factors
which has an affect over consumer buying behavior.
Amazon is following its traditional business model in Australia and satiating the demands of its
domestic costumers by opening up Fulfillment centers and shipping every day goods to the
consumers
3.3 Impact of pricing strategy on customers buying behaviour
Basically, the retailer uses three forms of pricing strategies to influence the customers motive to
purchase. The discount pricing, bundle pricing and odd even pricing are the basic forms of
pricing strategies used by market leaders to influence customer intention of purchasing. Retailers
collect and gather information regarding purchase decision made by customers and analyse them
to formulate their own strategy (Al-Salamin 2016). ODD EVEN PRICING
 BUNDLE PRICING
 DISCOUNT PRICING
CONSUMER
BUYING
BEHAVIOUR

Figure: Pricing-strategy
Source: Al-Salamin (2016)
The pricing decision of today have effect in upcoming days i.e. any company which thinks about
the short-term profit may increase the price of their product or services which will definitely
affect the future business regarding the specific product as it would have affected the buying
nature of customers. So, any company should price the product reliably in order to meet and
exceed customer needs and desire maintaining their satisfaction level (Hinterhuber & Lizou
2015). The retailer should always consider the expectation of customers with appropriate pricing
which plays a significant role in customer retaining. (Schnedlitz, Morchett & Rudolph 2010.
Hence, the pricing plays effective role in order to influence customers and gain customer loyalty
regarding the product and services.
While choosing a similar product the customer compares the line products offered by different
retailers based on the quality and price and easily switch to the low-priced retailers. Such price
game is encountered and tackled by large players as they will have enormous sources to tackle
the price war. (Williams 2012). In customers perspective, they attach price value to a specific
product and analye the price they are paying for the product. Retailers understand this and must
implement various pricing plans like as psychological pricing, skimming, dynamic pricing
differential pricing etc to influence customers (Faith & Edwin 2014). Referencing is another
technique used by retailers to influence customers perception of buying where customer looks
for price and value of the product comparing the selling price of the product (Hsu & Pham 2015).
It makes us clear that different strategies such as skimming and referencing are being used by
retailers to influence customers.
Odd and even pricing strategy: The strategy is a psychological pricing mechanism that is based
on a belief that some prices ranges are found to be more appealing to the buyers. This method
involves setting a price in odd numbers and just under the round even numbers, for instance,
$49.95 instead of $50.00.
Bundle pricing: This strategy is considered as marketing ploy under which several products are
combined unit that is often marked at a reduced price compared to the sum of their separate
purchase prices.

3.4 Gaps/ limitations
The research has some limitations and gaps. As, the literature has specified the pricing strategy
and its impacts over buying behaviour of customers while the essence of influence has not been
mentioned clearly. Technically, the pricing factors alone are not something that contributes the
influence over buyers, there are certain internal and external factors that leads customers to make
purchase or that make retailers to make pricing decisions. However, it is impossible to underline
the factors that influence the pricing decision of a firm. Hence, the basic factors are not
mentioned in the literature.
4. RESEARCH QUESTIONS
● Do pricing strategies have significance in current retail trends of Australia?
● What influence does online, and offline pricing strategy have on customer buying
behaviour in Australian retail industry?
● How effective is pricing decisions of Australian retailers?
5. RESEARCH METHODOLOGY
5.1 Research Design
Descriptive research design generally uses case study or survey to explore into the details of a
specific behaviour of a segment to ensure the accuracy. While, Exploratory research deals with
an unclear problem (Hair 2015). For the given research, descriptive research method will be
utilized because it aims to find out specific issue about pricing factors and customers behavior of
Amazon. The relationship existing between pricing decisions and consumer buying behavior is
to be explored in detail with no major explorations on its other elements. Moreover, the general
conceptual understanding is not required in this study thereby making other approaches to be
inappropriate.

5.2 Data collection method
Primary data collection method focuses on gathering the relevant information directly from the
research participants. Structured questionnaire will be distributed among the participants directly,
through mail or over telephone in order to gather required data (Reviere 2013).In this project
primary data collection method would be used to find out the information on the pricing
decisions of Amazon and influence on buying behavior of consumers in Australia. This method
provides accurate data with high precision to make the research more reliable.
The consumers over the retail stores will be encountered for data collection. Survey shall be done
as a research tool which will help to shorten the time for research. Moreover, use of closed
structured questionnaire will makes it useful for participants to offer their opinions easily.
Secondary data collection methods shall be avoided since the existing sources such as books,
journals and websites might have older data and can be subjected to time lags.
5.3 Sampling
Purposive sampling technique is used to select specific samples with subject knowledge
(Teddlie & Tashakkori, 2008). Purposive sampling shall be espoused for selection of suitable
participants based upon their knowledge and experience in retail industry such that they are able
to offer accurate answers for the questions on pricing decisions. A sample frame of 50 shall be
selected to avoid accessibility issues and to balance the reliability of the research findings. Other
types of sampling such as convenience will not be used as they might not be effective in
selecting eligible respondents.
5.4 Data analysis method
Generally, there are two methods of data analysis namely Qualitative and quantitative data
analysis methods. In the given report quantitative data analysis method will be utilised as it
involves converting textual data into statistical and transfer them in form of graph and charts for
accuracy (Bernard 2012). This report is based on survey information on pricing decision of
amazon, where the collected data will be transferred into numbers. The collected data will be
made readable by using statistical tools for effective presentation of results to elaborate the
results. As there is no textual data being collected for detailed analysis, qualitative method will
not be utilized.

The research would utilize the above-mentioned method to gather information for research and
the facts will be utilised to provide in depth understanding on the impact of pricing strategy on
customers buying behavior in Amazon.
5.5 Research Limitations
With regard to the given project the limitation could be having limited objective which congest
the field of study. Secondly the sample size taken for study is minimum, for accuracy. Thirdly,
the project is focused in limited area, if different city is concerned there could be different result.
5.6 Summary
To conclude, to achieve the competitive advantage in market, the pricing strategy is important
for retailers. Likewise, the internal and external factors are there to influence the retailers pricing
strategy. Overall, the pricing policy of any firm influence the buying decision of customers. So,
it can be said that there is a link between the research questions and identified information. A
deeper research has to be done on the topic for answering the research question and problems
identified.
6. TIME SCHEDULE
The time schedule for the given rrsearch is given below:
Activities Schedule/ week
Selection of topic 1
Literature review 5
Research questions 6
Questionnaire preparation 8
Final report 10
Submission 11

7. CONCLUSION
Amazon is still not officially launched in Australia, the organization has not declared the date
however, they are experiencing high degree of constraints for their operation. The recent pricing
strategy could be a drawback to Amazon as, the competition in retail sector has motivated all the
players to increase their product range and reduce the price for customers retention. Talking
about the Amazon’s operation, the existing competitors provide online services with discounts
under expected time. Hence, the level of rivalry among the retailers in Australian market is very
high. Therefore, Amazon must invent their market strategy to phase off price wars in the
industry. Hence, it could be stated the price wars, limited product availability, lack of storage
capacity and high degree of competition affects the management’s operation strategy. Therefore,
it is necessary that they improve their structure to overcome the existing problems.
It can be concluded that to achieve competitive advantages retailers should have appropriate
pricing Strategy which enables the market researchers to understand the customers expectation.
The price of any product is determining factor for customers purchase decision which is altered
by various factors including external and internal factors. Last but not the least customers
purchase decision is backed up by the pricing strategies of retail outlets. Moreover, after
analyzing the scenario it has been observed that the Australian goods and service tax (GST) is a
tax that has been imposed on the supply of goods and services in Australia and the rate at which
GST is levied is 10% of the final price of the goods and services. It has also been noted that from
1st July 2017 GST is applied on the sales of imported services and digital offerings for the
Australian customers. If international business organizations make these supplies and attaining
the registration turnover dawn of A$75,000, they are also expected to make registration for and
pay GST. However, overseas businesses will not be expected to pay GST on supplies they make
to Australian registered businesses that have provided them with their ABN and state they are
registered for GST.

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9. APPENDIX
Questionnaire
Survey Questionnaire to the customers of Australian Retail Industry
Section 1: Demographic Factors
1. Select your Gender
 Male
 Female
2. Select your Age group
 18 to 25 years
 26 to 35 years
 36 to 50 years
 Above 50 years
Section 2: Significance of Pricing Strategy to retailers
3. Which is the major necessity for following effective pricing strategy in retail sector?
 Increases sales
 Influences customers buying behaviour
 Increases customer retention
 Increases customer satisfaction level
Section 3: Various factors influencing pricing decision of retailers
4. Which one of the factors significantly influence pricing decision of retailers, based on your
opinion
 Product Demand
 Price-Product Relationship

 Advertisements and Promotions
 Labels and Packing
 Competition
Section 4: Effectiveness of various strategies of Amazon
5. Amazon offers effective Seasonal discounts on special products
 Strongly Disagree
 Disagree
 Neutral
 Agree
 Strongly Agree
6. High discounts on products offered by Amazon is effective
 Strongly Disagree
 Disagree
 Neutral
 Agree
 Strongly Agree
7. Amazon offers products for very Low Price when compared to other retailers
 Strongly Disagree
 Disagree
 Neutral
 Agree
 Strongly Agree
8. Best daily deals offers provided by Amazon are effective
 Strongly Disagree
 Disagree
 Neutral
 Agree

 Strongly Agree
9. Amazon offers Flexible payment options for consumers' convenience
 Strongly Disagree
 Disagree
 Neutral
 Agree
 Strongly Agree
Section 5: Impact of pricing strategy of Amazon on Australian Customers
10. The overall pricing strategy of Amazon has influenced my purchase intention
 Strongly Disagree
 Disagree
 Neutral
 Agree
 Strongly Agree