The Price That Binds: Perceived Fairness and the Effectiveness of Restricted Price Promotions

53 Pages Posted: 14 Mar 2023

See all articles by Shangwen Yi

Shangwen Yi

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

David J. Hardisty

Sauder School of Business

Dale W. Griffin

University of British Columbia (UBC) - Division of Marketing

Thomas Allard

Nanyang Technological University (NTU)

Date Written: March 7, 2023

Abstract

This research examines the effectiveness of two common types of restricted price promotions: threshold promotions (conditional on spending more than a threshold amount or a promotion “trigger”) and capped promotions (limited to a maximum dollar value or a cap “trigger”). Results show that threshold promotions are more effective than comparable capped promotions—even though capped promotions dominate in economic savings—when the promotional trigger value (the critical spending level) is low because consumers use the trigger value as an expectation-based reference point, leading to perceptions of greater fairness. However, when the trigger value is high, this effect reverses, and capped promotions are seen as fairer and consequently are more effective than threshold promotions. We observe these results in a series of six pre-registered studies, including a field study on TikTok, in both price and charity promotion contexts and for separate and joint evaluation modes. We discuss the implications of our results for the effective management of price promotions.

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

Suggested Citation

Yi, Shangwen and Hardisty, David J. and Griffin, Dale W. and Allard, Thomas, The Price That Binds: Perceived Fairness and the Effectiveness of Restricted Price Promotions (March 7, 2023). 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 J. 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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