Promotion Architecture: Perceived Fairness of Restricted Price Promotions

79 Pages Posted: 14 Mar 2023

See all articles by Shangwen Yi

Shangwen Yi

University of British Columbia (UBC) - Sauder School of Business

David Hardisty

Sauder School of Business

Dale W. Griffin

University of British Columbia (UBC) - Division of Marketing

Thomas Allard

Nanyang Technological University (NTU)

Date Written: June 01, 2024

Abstract

This research examines the effectiveness of two comparable types of restricted price promotions: threshold promotions (conditional on spending more than a threshold amount; e.g., “Get $5 off on orders of $10 or more”) and capped promotions (limited to a maximum dollar value; e.g., “Get 50% off, up to $5 per order”). Results show that threshold promotions lead to higher purchase intentions, conversion rates, and overall sales than comparable capped promotions—even though capped promotions are equivalent or better in economic savings—when the trigger value (the spending amount at which the promotion activates or caps) is low. This effect occurs because consumers raise their promotion expectations for capped promotions and lower their spending expectations for threshold promotions, leading them to perceive the threshold promotion as fairer. However, this effect reverses when the trigger value is high, where consumers perceive capped promotions as fairer and prefer them to threshold promotions. We observe these results in seven pre-registered studies, including a field study. We discuss the implications of our results for the optimal management of price promotions.

Keywords: price promotion, framing, fairness, expectation, choice architecture

Suggested Citation

Yi, Shangwen and Hardisty, David and Griffin, Dale W. and Allard, Thomas, Promotion Architecture: Perceived Fairness of Restricted Price Promotions (June 01, 2024). Available at SSRN: https://ssrn.com/abstract=4384646 or http://dx.doi.org/10.2139/ssrn.4384646

Shangwen Yi (Contact Author)

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

David Hardisty

Sauder School of Business ( email )

Canada
604-827-3158 (Phone)

HOME PAGE: http://www.sauder.ubc.ca/Faculty/People/Faculty_Members/Hardisty_David

Dale W. Griffin

University of British Columbia (UBC) - Division of Marketing ( email )

Canada

Thomas Allard

Nanyang Technological University (NTU) ( email )

S3 B2-A28 Nanyang Avenue
Singapore, 639798
Singapore

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