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The Role Demographics Have on


Customer Involvement in Obtaining a
Hotel Discount and Implications for Hotel
Revenue Management Strategy
a b c
Seung Hyun Lee , Billy Bai & Kevin Murphy
a
Department of Tourism, Events & Attractions , University of
Central Florida , Orlando , Florida , USA
b
William F. Harrah College of Hotel Administration , University of
Nevada Las Vegas , Las Vegas , Nevada , USA
c
Department of Food-services and Lodging , University of Central
Florida , Orlando , Florida , USA
Published online: 15 Jun 2012.

To cite this article: Seung Hyun Lee , Billy Bai & Kevin Murphy (2012) The Role Demographics
Have on Customer Involvement in Obtaining a Hotel Discount and Implications for Hotel Revenue
Management Strategy, Journal of Hospitality Marketing & Management, 21:5, 569-588, DOI:
10.1080/19368623.2012.682622

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Journal of Hospitality Marketing & Management, 21:569588, 2012
Copyright Taylor & Francis Group, LLC
ISSN: 1936-8623 print/1936-8631 online
DOI: 10.1080/19368623.2012.682622

The Role Demographics Have on Customer


Involvement in Obtaining a Hotel Discount
and Implications for Hotel Revenue
Management Strategy
Downloaded by ["Queen's University Libraries, Kingston"] at 03:05 30 December 2014

SEUNG HYUN LEE


Department of Tourism, Events & Attractions, University of Central Florida,
Orlando, Florida, USA

BILLY BAI
William F. Harrah College of Hotel Administration, University of Nevada Las Vegas,
Las Vegas, Nevada, USA

KEVIN MURPHY
Department of Food-services and Lodging, University of Central Florida, Orlando,
Florida, USA

This study attempted to focus attention back on identifying


consumers based on certain demographics. The purpose of this
study was to examine the role of gender, age, education, and
income in influencing consumers level of involvement in obtain-
ing a hotel discount. The results showed that females and con-
sumers with less education tend to demonstrate higher involvement
in obtaining a discount. There was not a significant difference
between age groups, and younger consumers were found not sta-
tistically associated with higher levels of involvement. Interestingly,
consumers with different incomes tended to respond comparably
to discounts, unless consumers were very affluent. The findings are
helpful for hotel management in designing discounts.

KEYWORDS price promotion, demographics, revenue manage-


ment, customer involvement

Address correspondence to Seung Hyun Lee, University of Central Florida, Orlando, FL


32816, USA. E-mail: seunghyun.lee@ucf.edu

569
570 S. H. Lee et al.

INTRODUCTION

Hotels use various discount strategies in order to attract consumers. In par-


ticular, the U.S. lodging industry has experienced significant declines in
demand and profits (Woodworth, 2009). It is a well-documented practice
that during tough economic times hotels drop prices to stimulate demand
(Enz, Canina, & Lomanno, 2009) and to increase cash flow in the short term
(Kimes, 2009). However, the literature suggests that marketers should have
some knowledge about customer characteristics before offering any dis-
counts to travelers (Duman & Matilla, 2003). Since discounts are specifically
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designed for those who are more price sensitive, firms do not want con-
sumers that are willing to pay higher prices to take advantage of discounted
prices (Philips, 1981; Kimes, 2011). Also, Enz (2003) argued that rooms that
are likely to be sold anyway should not be available through discount-
oriented sites. Hotels do not want to offer discounts when demand exceeds
supply. In New York City, for example, hotels near Times Square have no
need to offer discounts through online channel distributions on a New Years
Eve. In turn, hotel operators must have a good idea of expected demand.
Thus, it is critical for hotel operators to segment the market effectively so
that lower prices can be used to attract price-sensitive consumers, who oth-
erwise wouldnt purchase, while retaining the price-insensitive customers
who are willing to pay higher prices.
Although many hotels have increasingly adopted revenue management
and made price changes in a response to marketplace demand and dif-
ferent levels of willingness to pay (Dimicco, Maes, & Greenwald, 2003),
other hotels may seek easy procedures to segment consumers into dif-
ferent groups, such as demographic profiles. Past literature indicates that
consumers have different information search behaviors and deal prone-
ness based on demographics such as age, income, education, and gender
(Bawa & Shoemaker, 1987; Blattberg, Buesing, Peacock, & Sen, 1978;
Duman & Mattila, 2003; Narasimhan, 1984; Webster, 1965). Yet, the results of
studies attempting to identify deal prone consumers based on demographics
have been modest, inconsistent and outdated (Bareham, 2004; Henderson,
1987).
In some studies, younger consumers more often seek deals (Duman &
Mattila, 2003; Teel, Williams, & Bearden, 1980), but in other studies, older
consumers are price sensitive as well (Nielsen, 1980; Webster, 1965). Bawa
and Shoemaker (1987) argued that a household of a younger wife and older
husband is positively related to deal proneness. In terms of the levels of
education, less-educated consumers reacted more actively toward a discount
(Duman & Mattila, 2003), but greater educated ones can be more price
sensitive (Narasimhan, 1984).
Consumers information search habits and buying strategies change over
time. Currently there are more challenges predicting who are price-sensitive
Role of Demographics on Involvement in Obtaining a Discount 571

consumers than there was in the past, due to the economic situation and
technology tools. As decision-making involved in many purchase decisions
becomes more complex, it appears that increasingly the consumer is less
predictable and less of a machine than some existing characteristics of
demographics that identify and segment consumers would imply (Bareham,
2004). The uncertainty about the predictive power of current segmentation
methods of consumers deal proneness leads to uncertainty about how to
provide discounts. Still, hotel marketers need to close the gap between what
they already know and what they should know about identifying price-
sensitive consumers. Additionally, hoteliers need to be able to update the
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profile frequently in response to dynamic environments. Therefore, the pur-


pose of this study was to examine the role of gender, age, education, and
income influencing consumers level of involvement in obtaining a hotel
discount.
While studies have shown that consumers react differently toward dis-
counts of the same products or services (Campo & Yague, 2007; Kimes,
2002), different levels of involvement can be used to segment consumers
into low, moderate, and high involvement groups and offer different pro-
motional strategies (Baker, Cronin, & Hopkins, 2009). The characteristics
chosen have been largely demographic, and the different involvement a
consumer attributes to obtaining a discount may not be independent from
their demographic profile. The managerial importance of the results from
this study, on demographic characteristics, can be demonstrated by taking
into consideration the extent to which consumer demographic segments dif-
fer in their levels of involvement in obtaining a hotel room discount. The
results will be helpful for hotel management in designing price promotions.

LITERATURE REVIEW

Hotels in the United States are suffering one of the most drastic declines in
occupancy and revenue in history (Vincent, 2009; Woodworth, 2009) due
to the worldwide financial crisis and economic hardship (Butscher, Vidal, &
Dimier, 2009). Firms use pricing as a key strategic lever to manage revenue
(Noone & Mount, 2008). Despite the importance of understanding pricing, it
is the least understood of the marketing variables (Kotler, Bowen, & Makens,
2003). Moreover, pricing mistakes can harm firms much more heavily in
a downturn than in an upturn. Coping effectively with pricing becomes
difficult and complicated for hotel managers in an economic downturn.
Recently, revenue management is recognized as profitable for industries like
airlines, hotels, cruises, rental cars, and golf (Kimes, 2002, 2011; Duman &
Mattila, 2003; Sahay, 2007; Licata & Tiger, 2010). Revenue management refers
to making price changes in a response to marketplace demand that can
be implemented in several different ways (Dimicco et al., 2003). Revenue
management helps a firm to sell the right inventory unit to the right
572 S. H. Lee et al.

consumer at the right time and for the right price (Kimes, 2002). Thus, the
popularity of using revenue management makes more hotels probable to
offer a variety of discounts at a designated time period.

Discounting Strategies of Hotel Product


Firms use discounted rates to stimulate demand (Noone & Mount, 2008). For
example, many U.S. hotels cut their rates to fill rooms that remain unsold
as check-in dates approach. Marketers continually create different types of
discounts to attract potential consumers (Duman & Mattila, 2003). At the
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same time, customers have become more price sensitive and discount driven
(Drozdenko & Jensen, 2005). Consumers are motivated by lower rates and
will select the lower priced hotel, when all things are equal, and their buying
habits tend to respond in accordance with the increase and decrease in
prices.
Hotels can lower their room prices and achieve an increase volume with
relatively small increase in cost because the hotel industry often has high
fixed costs and low variable costs. In other words, hotels do not incur much
more additional operating costs to sell 100 rooms compared to 80 rooms.
The nature of high fixed cost and low variable cost reassures hotels to lower
their room prices while bearing the reduced revenue. By lowering room
prices, hotels can increase profits through a larger volume of sales. If costs
are controlled, then aggressive room pricing can elicit positive results; on
the other hand, if low prices fail to cover costs such as maintenance, in the
long run benefit may be diminished (Enz et al., 2009). Thus, rate reductions
must be targeted and differentiated.
Replacing cost-based pricing with market-based pricing creates market
segments and ensures that hotels are able to discriminate on price, which
is at the heart of pricing revenue management tools that charge different
prices on the basis of demographic characteristics (Kotler et al., 2003). Often
services are place, time, and customer specific and capacity constrained,
so substantial opportunities exist for service providers to use discriminate
pricing (Wirtz & Kimes, 2007). In order to avoid migration from high to low
priced products, hotels introduce price fences that are defined as conditions
under which specific products are offered on the market. Well-designed rate
fences allow customers to self-segment on the basis of their willingness to
pay and on service, transaction, and consumption characteristics (Wirtz &
Kimes, 2007).
Often discounts are offered to attract those who are more price sen-
sitive (Philips, 1981; Kimes, 2011) and hotels should segment the market
in an effective way so that lower prices are used to attract price-sensitive
consumers who otherwise wouldnt purchase, while higher prices are
retained for price-insensitive consumers. However, many independently
owned, small hotels often have a limited structure to estimate the volume of
Role of Demographics on Involvement in Obtaining a Discount 573

sales, compare demand and supply, or to differentiate customers based on


willingness to pay.

The Effects of Technology


A major trend currently shaping the field and influencing the practice of
services marketing is technology (Bitner, 2001). With the technology dra-
matically and profoundly changing the nature of services (Zeithaml & Bitner,
2000), firms are able to deploy pricing strategies at affordable prices (Sahay,
2007). Technological development presents marketers with new tools and
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opportunities such as data warehousing and data mining so that companies


can gain greater insights into the prediction of consumer purchase behavior
(Bareham, 2004; Duman, 2011; Rust, 2004).
However, pricing has become transparent and hotels have often lost
control of their inventory such that many consumers have learned to book
a room at one price, shop for a better price, and then cancel and rebook
(Enz, 2003). Customers currently have instant access to information from
a broader range of available alternatives among competitive firms at little
effort or cost (Kashyap & Bojanic, 2000). According to the recent study, the
majority of tourists were occasional or experienced Internet users and had
online vacation reservation and purchase experience (Duman & Tanrisevdi,
2011). However, it is noted that not all customers are equally interested
in using technology as a means of interacting with firms (Parasuraman &
Colby, 2001). For example, older consumers may not be interested in, or
comfortable with, using technology as a means of searching for information
as much as younger consumers do in a mass of two-way communications
via e-mail and mobile phone.
However, sales promotions through promotional pricing in electronic
commerce of hotels need to be explored more in depth (Christou, 2011).
Recently, the Pew Research Centers Internet & American Life Projects Spring
Tracking Survey was conducted in 2011 with 2,277 adults, and reviewed
demographics of Internet users. As indicated in Figure 1, there were equal
shares of male and female Internet users. Younger participants use more of
the Internet than older participants, and more educated participants use the
Internet more as compared to less educated participants. Lastly, participants
with higher household income showed more of the Internet usage than
those with lower household income. Based on the results, it can be assumed
that the more consumers have an access to the Internet, the more they are
exposed to discounts as more and more discounts are offered through the
Internet (Duman & Mattila, 2003).

Involvement
The concept of consumer involvement has been widely researched.
Zaichkowsky (1985) provided comprehensive concepts of involvement in
574 S. H. Lee et al.
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FIGURE 1 Demographics of the Internet users (color figure available online).


Source: The Pew Research Centers Internet & American Life Projects Spring Tracking Survey (2011).

consumer behavior, defining involvement as a persons perceived relevance


of the object based on inherent needs, values, and interest.
The construct of involvement is widely studied in hospitality
and tourism research (Alexandris, Kouthouris, Funk, & Giovani, 2009;
Amendah & Park, 2008). For instance, involvement profiles were used
to segment winter sport tourists by motivation (Alexandris et al., 2009).
In Amendah and Parks study (2008), the sociopsychological concept of
involvement to ecotourism was applied in a way to explain self-beliefs about
environmental concerns representing the reasons that foster the consumers
involvement.
Involvement creates a state of arousal and generates interest since
involvement leads individuals to search for information related to products
and services (Amendah & Park, 2008; Richins & Bloch, 1986). Involvement
could be measured by the time and energy spent on the product search, the
number of alternatives examined, and the extent of the decision process
Role of Demographics on Involvement in Obtaining a Discount 575

(Stone, 1984). Involvement with purchases also leads one to search for
more information and spend more time searching for the right selection
(Richins & Bloch, 1986). The idea of consumer involvement with purchases
can be measured with the intensity of efforts spent on obtaining a specific
activity. Other behavioral surrogates for involvement are given in a leisure
context, such as frequency of participation, money spent, miles traveled,
ability or skill, ownership of equipment, and number of memberships (Kim,
Scott, & Crompton, 1997). While different people lead to various levels of
involvement (Houston & Rothschild, 1978), this measure of involvement
was developed that would pick up differences across people, objects, and
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situations (Zaichkowsky, 1985).


In terms of deal proneness, high-involvement consumers spend more
time, effort, and money to search for better deals (Schindler, 1998) while
low-involvement consumers are considered passive toward price deals
(Farahmand & Chatterjee, 2008). Customers actively search for and use infor-
mation to make informed choices, but a great deal of consumers do not
involve extensive search for information (Zaichkowsky, 1985). In general,
low involvement conditions include a relative lack of active informa-
tion seeking, little comparison among attributes, perception of similarity
among different brands, and no special preferences for a particular brand
(Zaichkowsky, 1985). Thus, some consumers are concerned with receiving a
discount and they actively get involved in obtaining a discount, while others
are not motivated to make a careful search for deals.

Demographic Characteristics
Previous literature shows that certain demographic profiles of consumers
tend to be more likely to search for price promotions than others. Such
profile information includes a travelers gender, age, income, and education
(Bawa & Shoemaker, 1987; Blattberg et al., 1978; Duman & Mattila, 2003;
Narasimhan, 1984; Webster, 1965), as consumers with certain characteris-
tics appear to be more price sensitive or deal prone. For instance, older
consumers (Nielsen, 1980; Webster, 1965), consumers with higher income
(Bawa & Shoemaker, 1987; Blattberg et al., 1978; Teel et al., 1980; Nielsen,
1980), and consumers with higher education (Bawa & Shoemaker, 1987;
Narasimhan, 1984) tend to be more price sensitive.
Teel and his colleagues (1980) conducted a survey of female heads-of-
household to study the characteristics of those using coupons, one form of
price promotions. The results revealed that coupon users have significantly
larger incomes and are significantly younger than nonusers of coupons.
Also, Duman and Mattila (2003) studied the roles of demographic variables
that influence cruise travelers discount acceptance and usage behaviors.
Their results concluded that female and younger travelers were significant
predictors of discount usage. While older customers were believed to seek
576 S. H. Lee et al.

more for price deals (Nielsen, 1980; Webster, 1965), their results were not
consistent with previous studies in terms of age.
Narasimhan (1984) argued that consumers incur some costs to enjoy
the savings from price promotions. Many costs are identified including the
cost of looking through Web sites or magazines and time spent in storing,
retrieving, and comparing the information. This cost of time will be affected
by other demographic variables such as the education and income level of
consumers. For example, consumers with more income may treat their time
more valuable than those with less income.
Demographic profiles can be simply implemented into a daily operation
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to provide hotel operators with a better knowledge of which demographic


customers are more likely driven by a discount. According to price knowl-
edge literature, consumers levels of knowledge about prices in a given
category are influenced by their demographic background (Rosa-Diaz,
2004). Thus, it may be reasonable to expect that the consumers level of
involvement in obtaining a discount would vary as a function of demo-
graphics. There have been extensive studies done on deal proneness based
on demographic profiles. However, it seems the results of these studies have
been inconsistent. In particular, with an enhanced technology, consumers
behaviors toward searching for information and seeking for deals may have
changed.

Research Hypotheses
There is an assumption that hotels make price decisions after analyzing
supply and demand, differing customers needs, and willingness to pay to
optimize the best price. However, many independently owned, small hotels
may not have a structure. Instead, these hotels set their room prices based
on intuition, competitors, and offer discounts to whoever asks for (Hanks,
Cross, & Noland, 2002). For those independently owned small hotels, demo-
graphic information is easy to obtain and implement in designing discounts.
Thus, this study suggests that segmentation based on demographics is still
important, and profiling the price-sensitive customers demographics needs
to be updated.
While price promotional activities are traditionally directed toward cer-
tain demographics, many studies have been outdated and new studies may
be needed related to the linkage between price promotions and demo-
graphics, especially in the hospitality industry. Yet, many marketers design
discounts based on past data believing certain demographics are price
sensitive, which may not be appropriate to use at the current time.
Consumers demographic backgrounds can influence their level of
knowledge about prices in a given category (Rosa-Diaz, 2004). Thus, demo-
graphic characteristics such as age, income, and gender are often used
as the basis for market segmentation (Kotler et al., 2003). For instance,
females have a better knowledge of prices than men (Rosa-Diaz, 2004).
Role of Demographics on Involvement in Obtaining a Discount 577

Also, females are still assumed to have a more responsibility than males for
household decisions even though the differences have lessened (Estelami,
1998). Females are often the decision maker, and in turn they will search for
more information and seek for discounts.
In regard to the age variable, some studies argue that older consumers
have a better knowledge of prices because this age group tends to have
more spare time, which allows them to spend more time studying the prices
(Rosa-Diaz, 2004). However, nowadays most discounts are offered over the
Internet, and the usage of Internet may influence consumers levels of seek-
ing for deals. The popularity of the Internet and its increasing role in tourist
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decisions is becoming an important area of research (Duman & Tanrisevdi,


2011). According to the Pew Research Center (2011), younger consumers use
more of the Internet, so it is reasonable to expect that younger customers
have an easier access to the information and in turn show higher levels of
involvement in obtaining a discount. A similar logic applies to income and
education variables. Consumers with more income and higher education
levels tend to use the Internet more than consumers with less income and
lower education levels. As for younger consumers, those with more income
and higher education have a better access to the Internet, spend more time
and effort to search for price information, and are more likely to encounter
a discount.
In this study, 35 years or younger is considered the younger group while
35 years or older is the older group. There is some debate over the ranges
of dates when Generations X and Y began, and on the cut-off period. Fran
Kick (2005) notes,

There are no hard and fast lines that occur between December 31st of
one year and January 1st of the next. More often than not, it is a shift
that occurs over three to five years, maybe more depending on who you
ask (p. 33).

Thirty-five years old is considered the cut off, which is in line with the
literature that suggests that Generation Y is typically thought of as being
born between 1976 and 1999 inclusively (Normand, 2010).
Based on the previous discussions regarding the influence of gen-
der, age, education level, and income level on involvement in obtaining
a discount, the following four hypotheses are proposed:
H1: Females are more likely to be involved in obtaining a hotel discount
than males.
H2: Younger consumers are more likely to be involved in obtaining a
hotel discount than older consumers.
H3: Consumers with more income are more likely to be involved in
obtaining a hotel discount.
H4: More educated consumers are more likely to be involved in
obtaining a hotel discount.
578 S. H. Lee et al.

METHODOLOGY
Survey Instrument
A survey was conducted to identify whether demographic variables affect
the levels of involvement in obtaining a hotel room discount. Twenty
questions regarding the levels of involvement in obtaining a discount
and four questions regarding demographic characteristics were included.
The questionnaire was pretested on a sample of 30 respondents to
check on the design of the questionnaire and the quality of measures
employed.
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To measure a consumers involvement of price promotion,


Zaichkowskys (1985) Personal Involvement Inventory (PII) was employed.
PII is a semantic differential scale and offers a comprehensive collection of
measurement scales from many different areas of marketing. In this study,
PII measured involvement as the extent to which respondents feel about
receiving a discount on a hotel room and classified respondents on the basis
of their involvement scores, ranged from 20 to 140. Using a 7-point Likert
scale (1 = lowest involvement; 7 = highest involvement), respondents were
asked to judge whether they perceive receiving a discount is important, is
relevant, means a lot to them, is valuable, is interesting, is appealing, is
needed, is of concern to them, is useful, is fundamental, is beneficial, mat-
ters to them, is interested, is significant, is vital, is exciting, is fascinating,
is essential, is desirable, is wanted, or vice versa. Some items were reverse
coded to make sure respondents read each question carefully.

Sample
The sample consisted of customers at a caf inside a courthouse in a south-
western metropolitan city in the United States. At the courthouse, there are
5,000 employees and several hundred people who come to the court each
day for different purposes that include serving jury duties, making pay-
ments, and probation check-ins. During a 1-week period in April 2010, the
researcher and three trained assistants approached patrons in the caf each
day. Voluntary participation was sought, and a chance to win a $100 gift card
was offered to encourage their participation. Participants were instructed to
complete the survey; the researchers were present at all times, explaining
procedures and providing instructions. A total of 120 usable surveys were
received after 17 responses were eliminated due to incompleteness.

Reliability
To test reliability of the multi-item scale of PII, Cronbachs alpha was mea-
sured ( = 0.97). The cut-off point is generally regarded to be 0.6 (Hair,
Role of Demographics on Involvement in Obtaining a Discount 579

Black, Babin, & Anderson, 2010), so the items in the PII measure were
proved reliable.

Data Analysis
Correlation analysis was used to describe the strength and direction of the
linear relationship between demographic variables and levels of involvement
in obtaining a hotel discount. To test Hypotheses 1 and 2, a t test was carried
out to compare the mean scores of between subject groups. A one-way
analysis of variance (ANOVA) was used for testing Hypotheses 3 and 4.
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RESULTS
Profile of Respondents
Based on the sample of 120 respondents, the categories of the profile of
respondents are discussed in Table 1. The results of the demographic profile
indicate that the gender distribution of the respondents was fairly compara-
ble, with 57% males and 43% females. The age and education level of the
respondents were evenly distributed among participants. The respondents
appeared to have a high level of income: more than half of participants had
an income exceeding US$40,000, while 18% of this group had an income
higher than US$80,000. According to the U.S. Census Bureau (2011), the

TABLE 1 Sample demographics

Demographics Frequency %

Age
1824 years 54 46
2544 years 57 48
45 or older 7 6
Gender
Male 68 57
Female 52 43
Income
$20,000 or less 20 17
$20,000$39,999 29 25
$40,000$59,999 15 13
$60,000$79,999 28 24
$80,000 or more 21 18
Others 5 4
Education
High school or less 20 18
Some college 29 26
2-year college 15 13
4-year college 28 25
Masters degree or higher 21 19
580 S. H. Lee et al.

median household income in 2009 was around $50,000 and the median edu-
cational attainment in the United States was some college. In our sample,
the median household income fell in the range of $40,000$59,999, and the
median educational attainment was 2-year college; thereby, corroborating
the representativeness of the sample.

Correlation Analysis
Correlation analysis was used to describe the strength and direction of the
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linear relationship between demographic variables and levels of involvement


in obtaining a discount.
Preliminary analyses were performed to ensure no violation of the
assumptions of normality, linearity and homoscedasticity. The relationship
between gender and involvement was investigated using the point-biserial
correlation coefficient, as presented in Table 2. Using Cohens criteria
(1988) there was a marginally significant relationship between gender and
involvement, r(118) = 0.178, p = .052, with female consumers tending
to show higher involvement in obtaining a hotel discount. For income,
a negative relationship was found between income and involvement,
r(118) = 0.254, p = .005, suggesting consumers with less income tend
to be more involved in obtaining a hotel discount. However, the obtained
Pearson product-moment correlation coefficient showed that there was
not a significant correlation between the age variable and involvement,
r(118) = 0.142, p = .121, with younger consumers associated with higher
levels of involvement in obtaining a hotel discount. Lastly, there was not a
significant relationship between education and involvement, r(118) = .147,
p = .110. Thus, correlation analysis revealed that the four demographic vari-
ables partially influenced the levels of involvement in obtaining a discount.

T Test and ANOVA


Next, an independent-samples t test was conducted to compare the involve-
ment scores for males and females. There was a difference in scores

TABLE 2 Correlation demographics and involvement in obtaining a hotel discount

Measure Involvement Age Gender Income Education

Involvement .142 .178 .254 .147


Age .142 .010 .409 .236
Gender .178 .010 .172 .141
Income .254 .409 .172 .461
Education .147 .236 .141 .461

p < .05 (two-tailed).
Role of Demographics on Involvement in Obtaining a Discount 581

TABLE 3 Involvement in obtaining a hotel discount for


males and females

Gender

Male Female t df

Involvement 108.62 117.23 1.96 118


(23.01) (24.93)
Note. Standard deviations appear in parentheses below means.
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for males and females, Mm = 108.6 versus Mf = 117.2, t(118) = 2.8,


p = .075 (two-tailed), as presented in Table 3. The difference was marginally
significant, but still the magnitude of the differences in the means (M dif-
ference = 8.6, 95% CI: 2.514.7) was noteworthy (2 = .03).
The results consisted of responses from the younger group (n = 79)
and older group (n = 39). There is some debate over the ranges of
dates when Generations X and Y began. According to Normand (2010),
Generation Y is typically thought of as being born between 1976 and 1999
inclusively. For the current study, the cut-off age of 35 years old was
used for categorization purposes. As presented in Table 4, the younger
group showed higher scores. However, there was not a significant differ-
ence detected in scores between the younger group and the older group,
My = 114.4 vs. Mo = 107.3, t(116) = 1.507, p = .134 (two-tailed).
ANOVA results were presented in Table 5. A one-way between-groups
analysis of variance was conducted to explore the impact of income and
education on the levels of involvement in obtaining a hotel room discount,
as measured by PII. For the income variable, Participants were divided into

TABLE 4 Involvement in obtaining a hotel discount for


younger and older group

Age

Younger Older t df

Involvement 114.38 107.28 1.51 116


(22.18) (27.53)
Note. Standard deviations appear in parentheses below means.

TABLE 5 Analysis of variance for involvement in obtaining


a discount

Source of involvement df F MS p

Income 4 6.252 3,311.610 .000


Education 4 6.168 3,422.841 .000

p < .001.
582 S. H. Lee et al.

five groups according to their income: Group 1 (income less than $20,000;
n = 16); Group 2 ($20,000$39,999; n = 21); Group 3 ($40,000$59,999;
n = 35); Group 4 ($60,000$79,999; n = 20); and Group 5 ($80,000 or
more; n = 26). There was a significant difference at the p < .001 level
in involvement scores for the five income groups: F(4, 113) = 6.252,
p < .001. The effect size, calculated using eta squared, was .11. Post-
hoc comparisons using the Tukey HSD test indicated that the mean score
for Group 5 (M = 97.81, SD = 28.70) was significantly lower than other
groups.
For the education variable, participants were divided into five groups
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according to their education: Group 1 (high school/GED or less; n = 20);


Group 2 (some college; n = 29); Group 3 (2-year college; n = 15); Group 4
(4-year college; n = 28); and Group 5 (masters degree or higher; n = 21).
There was a significant different at the p < .001 level in involvement scores
for the five education groups: F(4, 108) = 6.168, p < .001. The effect
size, calculated using eta squared, was 0.11. Post-hoc comparisons using
the Tukey HSD test indicated that the mean score for Group 2 (M = 124.41,
SD = 19.56) was significantly higher than Group 1(M = 109.35, SD = 23.13),
Group 3 (M = 101.00, SD = 25.18), and Group 5 (M = 107.48, SD = 25.02) as
shown in Table 7. Thus, consumers with some college appeared to have a
higher involvement in seeking hotel discounts in comparison to those with
a high school diploma, 2-year college graduates, and those with a masters
degree or higher.
Based on Figure 1 as well as past studies (Bawa & Shoemaker, 1987;
Blattberg et al., 1978; Teel et al., 1980; Narasimhan, 1984; Nielsen, 1980), it
was hypothesized that consumers with more income would have a higher
tendency of involving a discount. However, the results show that although
a positive correlation between income and involvement was found, most
consumers respond to discounts comparably except for very affluent con-
sumers, as shown in Table 6. Also, there were significant mean differences
among education groups, but more-educated consumers did not necessarily
showed higher PII than the others. Instead, consumers with some college
tend to have a higher PII compared to other groups (Table 7).

TABLE 6 Means of PII by income level

Income N M SD

Less than $20,000 16 115.13 18.75


$20,000$39,999 21 116.48 25.70
$40,000$59,999 35 115.71 20.41
$60,000$79,999 20 116.05 19.90
$80,000 or more 26 97.81 28.98
Role of Demographics on Involvement in Obtaining a Discount 583

TABLE 7 Means of PII by education level

Education N M SD

High school or less 20 109.35 23.43


Some college 29 124.41 19.74
2-year college 15 101.00 25.63
4-year college 28 113.46 25.78
Post graduate 21 107.48 25.33

DISCUSSIONS
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The results partially support that the demographic variables such as gen-
der, income, and education significantly influence the levels of involvement
in obtaining a discount. Despite at the marginal level, female consumers
are highly correlated with involvement in obtaining a hotel discount, and
the mean difference between female and male consumers was noteworthy.
However, there is no significant different on involvement levels between
different age groups although younger consumers tend to be more involved
in discount-seeking behavior. Income variables also influence the levels of
involvement in obtaining a discount. It is noted that the consumers with
income of $80,000 or more tend to be significantly less involved in obtain-
ing a discount, but other income groups seem to show similar levels of
involvement in price promotions. In other words, consumers with differ-
ent income levels tend to respond comparably to discounts, except for the
very affluent. Lastly, consumers with less education are overall associated
with higher levels of involvement in obtaining a discount. In particular, con-
sumers with some college showed higher involvement scores than those
with a high school degree or less.
While previous studies were reviewed related to price knowledge and
involvement, the current study tried to explain how demographics influ-
ence the levels of involvement in obtaining a discount. Hotel managers
in the service industry have little empirical basis on which to plan their
price promotions (Wakefield & Bush, 1998), and as such it was worth-
while to update the demographic profiles in deal proneness. This study
has concluded that the demographic profile may represent important roles
in relation to different levels of involvement in seeking discounts.
Thus, it may be the case that hotel managers should learn about
consumer levels of involvement in obtaining a discount and identify char-
acteristics of the price promotion before launching any discount offers to
the public, in order to maximize consumers responses to a price promo-
tion (Duman & Mattila, 2003; Schindler, 1992). Taken together, the findings
of this study recommend hotel managers to design discounts targeting at a
specific group such as females and those consumers with some college.
584 S. H. Lee et al.

At the same time, the transparency of pricing becomes an issue the


industry must address it in a more comprehensive manner (Smith, 2009).
With the help of technological innovations, many consumers have learned to
search for price, product, and service at different sources. To deal with price
transparency on the Internet, information on different pricing options should
be made available (Choi & Mattila, 2009; Kimes, 2002). Although, as a mar-
ket becomes more familiar with revenue management practices, managers
must ensure that customers are being educated about them (Wirtz & Kimes,
2007).
When discounts are designed, it is suggested that substantial discounts
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are communicated primarily with certain demographics. For example, hotel


managers can sponsor associations or events where the majority of members
or attendees are female and have an income of $80,000 or less and some
college. If hotel managers know the demographic characteristics of those
who actively respond to discounting, they can offer promotional discounts
to target those markets.
The results of this study should be used with caution. Data was col-
lected in a caf inside a courthouse so the sample included many attorneys
who were relatively young with large incomes, which could explain a large
proportion of income groups that make more than $80,000 and could distort
the quality of data. In addition, the ages of respondents were regrouped into
two categories, and it may seem to be unrealistic to categorize those under
35 years old as the younger group and those 35 years or older as the older
group.
Due to the lack of time and resources, the study was limited to a
convenience sample. Since the survey was conducted in a single place,
respondents would be limited to the given area at that given time. The
results would not represent the views of the entire population, and may
differ with a larger, random sample. The study was conducted during tough
economic times, so further studies should be carried out during good eco-
nomic times to see if the economy affects consumers emotions, behaviors,
and preferences about price strategies. Future research can explore the role
of the size of price differences. It would be insightful to explore at what
price thresholds consumers change their consumption behavior. Moreover,
additional variables such as family size would be of interest. Finally, this
study only involved U.S. consumers. Cross-cultural samples may be helpful
in revealing more meaningful results.

CONCLUSIONS

As a result of war, economic crisis, terrorism, and increased antagonism


to governments, global businesses and organizations, consumers have
a different value set, so it becomes difficult to predict their behaviors
Role of Demographics on Involvement in Obtaining a Discount 585

with existing data (Bareham, 2004). Companies use price promotions to


influence consumers, and online environment enables firms to efficiently
manage discounts. However, previous studies suggest that pricing decisions
should be made with a careful understanding of their impact on con-
sumers responses (Choi & Mattila, 2009). Discounts should be designed
for those who are more price-sensitive, and companies should try not to
allow those consumers that are willing to pay higher prices take advan-
tage of discounted prices (Philips, 1981). Thus, hotels need effectively and
timely tools to segment the market so that lower prices can be used to
attract price-sensitive consumers who otherwise wouldnt purchase, while
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retaining the price-insensitive customers who are willing to pay higher


prices.
This research has aimed at contributing to discount strategies of the
hotel industry. Most importantly, the argument addressed in this study has
added to our knowledge of how demographic profiles have influenced on
involvement in searching for discounts due to the technology. Surprisingly,
age did not make an impact on the involvement in obtaining a hotel dis-
count. It may be the case that some of the emergent consumer groups
in society may not behave in the same way as the traditional groups did
(Bareham, 2004).
In conclusion, companies need to have a predictive power of meth-
ods of segmenting consumer behaviors, and this study attempts to shed
some light for hotel managers and encourage them to make a use of their
demographic profiles. When experiencing a decrease in demand, hotels may
choose to offer discounts. The design of discounts should be focused on
specific demographic characteristics such as gender, income, and education
levels. For example, in this study, those female consumers with income less
than $80,000 and a college degree were found to be the right target segment
in order to maximize the effects of discounts and to avoid others to take
advantage of the discounts.

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