Price Promotion Literacy and Numeracy: How Well Do Consumers Understand Price Promotion Communication?

31 Pages Posted: 4 May 2015

See all articles by PJ Tan

PJ Tan

Ehrenberg-Bass Institute for Marketing Science

Svetlana Bogomolova

Ehrenberg-Bass Institute for Marketing Science

Date Written: May 3, 2015

Abstract

Consumer literacy is a skill that combines literacy and numeracy abilities applied to shopping tasks. It influences consumers’ success in making financially sound decisions. Failure to understand price promotion signage, a very common occurrence in modern retail, might result in confusion and eventually lead to sub-optimal decisions. This study describes the results of two large-scale consumer surveys conducted in the United States and Australia that tested consumer understanding of the most commonly used price promotion communications.

Of the U.S. and Australian consumers, 25% and 23%, respectively, could not accurately perform literacy and numeracy tasks related to price promotion information. Regression modeling shows that young consumers with low incomes had the most difficulties in understanding the information on price promotion signage. Thus, this group is the most vulnerable to retail price manipulations. However, this group of future consumers could benefit the most from making financially sound purchase decisions. Our results call for national educational efforts in developing young consumers’ consumer literacy to empower them for independent purchase decisions and smart spending behaviors.

Keywords: Price promotions, literacy, numeracy, consumer confusion

JEL Classification: M31

Suggested Citation

Tan, PJ and Bogomolova, Svetlana, Price Promotion Literacy and Numeracy: How Well Do Consumers Understand Price Promotion Communication? (May 3, 2015). Available at SSRN: https://ssrn.com/abstract=2602077 or http://dx.doi.org/10.2139/ssrn.2602077

PJ Tan

Ehrenberg-Bass Institute for Marketing Science ( email )

GPO Box 2471
Adelaide, 5001
Australia

Svetlana Bogomolova (Contact Author)

Ehrenberg-Bass Institute for Marketing Science ( email )

GPO Box 2471
Adelaide, 5001
Australia

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