Feeling Happier When Paying More: the Role of Promotional Framing of Prices and Counterfactual Thinking in Consumer Affect

EXTENDED ABSTRACT - Abstract Counterfactual thinking (i.e., imagining of alternatives to reality) can guide consumers’ behaviors, thoughts, and feelings. In Experiments 1 and 2, we demonstrate that the effects of upward and downward counterfactual thoughts generated by the presence of categorical cutoff points in price-cut promotions are sufficiently strong to cause a satisfaction reversal: those consumers who objectively pay more money feel better than those who pay less for the same product. In Experiment 3, we further demonstrate that the strength of CFT effects on consumer affect deteriorate as one’s purchase outcome moves away from a given categorical cutoff point.

Citation:

Sukki Yoon and Patrick T. Vargas (2005) ,"Feeling Happier When Paying More: the Role of Promotional Framing of Prices and Counterfactual Thinking in Consumer Affect", in AP - Asia Pacific Advances in Consumer Research Volume 6, eds. Yong-Uon Ha and Youjae Yi, Duluth, MN : Association for Consumer Research, Pages: 272-273.

Asia Pacific Advances in Consumer Research Volume 6, 2005      Pages 272-273

FEELING HAPPIER WHEN PAYING MORE: THE ROLE OF PROMOTIONAL FRAMING OF PRICES AND COUNTERFACTUAL THINKING IN CONSUMER AFFECT

Sukki Yoon, University of Illinois at Urbana-Champaign, U.S.A.

Patrick T. Vargas, University of Illinois at Urbana-Champaign, U.S.A.

EXTENDED ABSTRACT -

Abstract

Counterfactual thinking (i.e., imagining of alternatives to reality) can guide consumers’ behaviors, thoughts, and feelings. In Experiments 1 and 2, we demonstrate that the effects of upward and downward counterfactual thoughts generated by the presence of categorical cutoff points in price-cut promotions are sufficiently strong to cause a satisfaction reversal: those consumers who objectively pay more money feel better than those who pay less for the same product. In Experiment 3, we further demonstrate that the strength of CFT effects on consumer affect deteriorate as one’s purchase outcome moves away from a given categorical cutoff point.

Consumers seek better deals. This tendency seems to be the essential reason why we are bombarded with promotional strategies in the modern retailing environment. Frequently used pricing tactics are "buy two, get one free" or "spend $100, get 20% off." One common objective of the retailers offering this form of conditional price-cut deal is to increase sales volume. Consumers buy a greater amount, but in return, they get a superior deal value: a lower unit cost. From a psychological perspective, this deal-seeking behavior (i.e., getting more for the same price or paying less for the same amount) is apparently a rational choice. However, consumers often exhibit non-rational behaviors. For example, deals with restrictions (e.g., "limit three per customer") are found to increase product sales more than the same deals without such restrictions (Inman, Peter, & Raghubir, 1997). Requiring customers to spend a certain dollar amount as a qualification for a discount is one common type of restriction, which consumers may or may not react to rationally. In any case, however, not having such a restriction (e.g., "30% off all purchases") rather than having one (e.g., "spend $100, get 30% off") is obviously a better deal for consumers.

Imagine a person who plans to buy a $90 bookcase. While walking in the store, she notices a sign that says, "spend $100, get 30% off." She will have to ponder for a moment to decide whether she will adhere to her original plan, therefore buying a bookcase and paying $90, or will buy an additional item or two in order to exceed the $100 cutoff point so that she can get a discount. She might also think, "if the cutoff line were $90, I could get 30% without unnecessary purchases." This kind of 'what if’ thinkingBthe process of imagining of alternatives to reality, or of comparing 'what is’ with 'what might have been’Bis what psychologists refer to as counterfactual thinking (CFT).

CFT, along with reality, impacts consumers’ behaviors, thoughts, and feelings. Previous research demonstrates that the presence and the direction of CFT amplifies satisfaction and regret (Roese, 1994; Medvec, Madey, & Gilovich 1995; Medvec & Savitsky 1997). Downward CFT (i.e., thinking about how a purchase outcome could have been worse) is known to help consumers feel better, whereas upward CFT (i.e., thinking about how a purchase outcome could have been better) can have negative consequences. The consumer in the above example engages in upward CFT; however, suppose that the cutoff line for the price cut in the above scenario was set at $80. In this case she would receive the discount without making unplanned purchases, which would in turn lead her to engage in downward CFT (e.g. "I might not have received a discount").

In the present research, we attempted to demonstrate that the effects of counterfactual comparisons are sufficiently strong to cause those consumers who objectively pay more money feel better than those who pay less for the same product. In Experiments 1 and 2, we sought to provide evidence that the presence of downward CFT (i.e., "I could have paid more") generated by barely attaining the categorical cutoff point positively influences consumer affect, whereas engaging in upward CFT (i.e., "I could have paid less") due to just missing the cutoff point has a negative influence. In Experiment 3, we further attempted to demonstrate that the strength of CFT effects on consumer affect would deteriorate as one’s purchase outcome moves away from a given categorical cutoff point. That is, barely making it to the cutoff point or just missing it is anticipated to make more dramatic effects than is completely making it or entirely missing it.

Participants in Experiment 1 were presented with a shopping scenario in which they were faced with two types of price promotions: a categorical cutoff point ("25% off if you spend at least $200"), or no cutoff point ("30% off all purchases"). The discount amounts in these two conditions were deliberately altered (i.e., 25% versus 30% off) in order to observe a satisfaction reversal. The scenario led them to believe that they had to spend a certain amount by adhering to the preplanned shopping list. It was hypothesized that consumers who objectively pay more ($151.39 after 25% off) in the cutoff condition actually would feel better due to their engagement in downward CFT (i.e., "I could have paid more, but I did not"), than those who pay less ($141.30 after 30% off) in the no-cutoff condition. As expected, it was found that people in the cutoff condition felt happier than those in the no-cutoff condition, F (1, 116)=5.08, p<.05. (Figure 1)

In the second experiment, we examined whether upward counterfactual thoughts have a similar effect in an opposite direction. We hypothesized that just missing the cutoff point would have a negative consequence for consumer affect strong enough to cause a satisfaction reversal: people who just miss the cutoff point, though paying less, would feel worse than those who pay more in the no-cutoff condition. As predicted, consumers in the categorical cutoff condition appeared to feel worse on average than their counterparts in the continuous percentage condition, t (100)=-7.55, p<.00. (Figure 2)

In Experiment 3, as expected, a 2 x 3 ANOVA (CFT direction: upward vs. downward X proximity to the cutoff point: close, middle, and far) showed 1) a significant main effect for CFT direction revealing that those who engaged in downward CFT appeared happier on average than their counterparts in the upward CFT condition, F (1, 305)=117.86, p<.01., and 2) a significant two-way interaction suggesting that the effect of counterfactual thoughts becomes stronger as the purchase outcome approaches the cutoff point, F (2, 305)=4.96, p<.01. (Figure 3)

The findings demonstrated that counterfactual thoughts generated by the presence of a cutoff point influence consumers’ feelings in a striking way: paying more can make you feel better, and paying less can make you feel worse. When exposed to conditional price-cut deals, consumers seem to pay more attention to what they achieve rather than how much they save. The implications for consumer advocacy groups are clear: 1) when a cutoff is set high, consumers may spend more than necessary, whereas 2) when it is set low, consumers may feel overly satisfied.

FIGURE 1

FIGURE 2

FIGURE 3

REFERENCES

Inman, J. Jeffrey, Anil Peter, and Priya Raghubir (1997), "Framing the Deal: The Role of Restrictions in Accentuating Deal Value," Journal of Consumer Research, 24 (1), 68-79.

Medvec, Victoria H., and Kenneth Savitsky (1997), "When Doing Better Means Feeling Worse: The Effects of Categorical Cutoff Points on Counterfactual Thinking and Satisfaction," Journal of Personality and Social Psychology, 72 (6), 1284-96.

Medvec, Victoria H, Scott F. Madey, and Thomas Gilovich (1995), "When Less is More: Counterfactual Thinking and Satisfaction among Olympic Athletes," Journal of Personality and Social Psychology, 69 (4), 603-610.

Roese, Neal J. (1994), "The Functional Basis of Counterfactual Thinking," Journal of Personality and Social Psychology, 66 (5), 805-818.

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