Zhang Qiang: Final Price Neglect in Multi-Product Promotions: How Non-Integrated Price Reductions Promote Higher-Priced Products
The annual shopping spree season is when merchants must fight; the major merchants will launch a variety of preferential activities to start a price war. In the shopping spree, full discounts, coupons, and even direct price reductions, these promotional tactics imply what "marketing strategy"? The study Final Price Neglect in Multi-Product Promotions: How Non-Integrated Price Reductions Promote Higher-Priced Products by Professor Zhang Qiang of the School of Management and Economics (SME) at The Chinese University of Hong Kong, Shenzhen (CUHK-Shenzhen), provides an in-depth study of indirect price reductions (e.g., full reductions, coupons, etc.) and direct price reductions on vertically differentiated product selection. The study was accepted for publication in the Journal of Consumer Research, a top international journal.
Abstract
Price reductions take either an integrated form (e.g., a discount shown directly on the price tag) or a non-integrated form (e.g., a discount contained in a coupon sent to consumers and thus separate from the price tag). This research examines how non-integrated versus integrated promotions influence choices among vertically differentiated products. Under an integrated promotion (e.g., $10 off) applicable to multiple products (e.g., original list prices: $50 vs. $30), consumers directly compare these products’ post-promotion final prices displayed on their price tags (after a reduction of $10: $40 vs. $20). In contrast, under a non-integrated promotion of the same monetary value, consumers simply compare these products’ original list prices ($50 vs. $30) and neglect their post-promotion final prices, which require calculations. The list prices ($50 vs. $30; relative to the final prices: $40 vs. $20) as a basis for price comparison reduce the perceived price difference between these products. Consequently, a non-integrated promotion (compared to an integrated promotion) increases consumers’ choice of higher-priced products. A series of experiments (N¼5,187) demonstrate this effect and support the final price neglect mechanism. Furthermore, although attenuated, this effect still emerges for price reductions of a smaller magnitude or in a percent-off format.
