Small Probabilistic Discounts Stimulate Spending: Pain of Paying in Price Promotions

Published on Feb 8, 2019in Journal of the Association for Consumer Research
· DOI :10.1086/701901
Chang-Yuan Lee2
Estimated H-index: 2
,
Carey K. Morewedge27
Estimated H-index: 27
+ 1 AuthorsDan Ariely95
Estimated H-index: 95
Sources
Abstract
AbstractWe find that small probabilistic price promotions effectively stimulate demand, even more so than comparable fixed price promotions (e.g., “1% chance it’s free” vs. “1% off,” respectively), because they more effectively reduce the pain of paying. In three field experiments at a grocer, we exogenously and endogenously manipulated the salience of pain of paying via elicitation timing (e.g., at entrance or checkout) and payment method (i.e., cash/debit cards or credit cards). This modulated the attractiveness of probabilistic discounts and their ability to stimulate spending. Shoppers paying with cash or debit cards, for example, spent 54% more if they received a 1% probabilistic discount than a 1% fixed discount (experiment 2). A fourth experiment showed that consumers’ sensitivity to pain of paying modulates the greater comparative efficacy of small probabilistic than fixed discounts. More broadly, the results elucidate a novel affective route through which price promotions stimulate demand––pain o...
📖 Papers frequently viewed together
142 Citations
15 Citations
2010
63 Citations
References0
Newest
Cited By3
Newest
#1Karl Akbari (University of Vienna)
#2Udo Wagner (University of Vienna)H-Index: 17
Gambled price promotions, i.e., discounts in which the customers’ savings depend on the outcome of a game, have recently gained increasing attention from research and practice. This type of promotion is often framed as an in-store event, and consumers experience two properties inherent in gambling: entertainment and varied financial payoffs. Depending on the consumers’ assessments of these two elements, these experiences might drive two postpurchase consequences of such campaigns: customer satis...
Source
#1Dirk Totzek (University of Passau)H-Index: 10
#2Gabriel Jurgensen (Baden-Württemberg Cooperative State University)H-Index: 1
1 CitationsSource
#1Dan R. Schley (EUR: Erasmus University Rotterdam)H-Index: 9
#2Bart de Langhe (Ramon Llull University)H-Index: 9
Last. Andrew R. Long (LSU: Louisiana State University)H-Index: 2
view all 3 authors...
Companies can create value by differentiating their products and services along quantitative attributes. Existing research suggests that consumers’ tendency to rely on relatively effortless and affect-based processes reduces their sensitivity to the scope of quantitative attributes and that this explains why increments along quantitative attributes often have diminishing marginal value. The current article sheds new light on how “system 1” processes moderate the effect of quantitative product at...
2 CitationsSource
#1Faith Shin (UIUC: University of Illinois at Urbana–Champaign)H-Index: 3
#2Dov Cohen (UIUC: University of Illinois at Urbana–Champaign)H-Index: 33
Last. Jesse Lee Preston (Warw.: University of Warwick)H-Index: 15
view all 4 authors...
Psychologists and economists often discuss the "pain" of paying for our purchases. Four experiments examine how people evaluate prospective debt payments, analyzing how different features of a loan (down payment, final payment, duration, monthly payments) affect willingness to accept the loan. Akin to previous findings on physical pain, participants exhibited duration neglect and overweighted final moments. However, participants also focused heavily on the monthly or average payment (unlike in r...
Source
2 CitationsSource