Elsevier Editorial System(tm) for International Journal of Research in Marketing Manuscript Draft Manuscript Number: IJRM-D-13-00177R2 Title: The effects of promotional frames of sales packages on perceived price increases and repurchase intentions Article Type: Full Length Article Corresponding Author: Dr. Hsuan-Yi Chou, Ph. D. Corresponding Author's Institution: National Sun Yat-sen University First Author: Hsin-Hsien Liu, Ph. D. Order of Authors: Hsin-Hsien Liu, Ph. D.; Hsuan-Yi Chou, Ph. D. Abstract: This article explores how framing a promotional package (i.e., presenting the promotion as a bundle versus as a free gift) influences consumers' price assignments to the individual items in the package. It examines the potential influences of framing on consumers' perceptions of price increases and repurchase intentions after the promotion expires. The findings show that when a package contains two different products, consumers in the free gift (bundle) condition assign a higher price to the focal (supplementary) product, perceive a smaller price increase, and exhibit higher repurchase intentions toward the focal (supplementary) product after the promotion ends. If the promotional package contains two identical products, the free gift promotion generates higher perceived price increases and lower repurchase intentions than a price bundle, through similar price assignment mechanisms. An incentive-compatible experimental design finds that a free gift promotion lowers consumers' willingness to pay for the target product compared with a price bundle promotion. The findings of this research have significant implications for both framing research and marketing practice. Forthcoming IJRM Volume 32 #1 (2015)
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Elsevier Editorial System(tm) for International Journal of Research in Marketing Manuscript Draft Manuscript Number: IJRM-D-13-00177R2 Title: The effects of promotional frames of sales packages on perceived price increases and repurchase intentions Article Type: Full Length Article Corresponding Author: Dr. Hsuan-Yi Chou, Ph. D. Corresponding Author's Institution: National Sun Yat-sen University First Author: Hsin-Hsien Liu, Ph. D. Order of Authors: Hsin-Hsien Liu, Ph. D.; Hsuan-Yi Chou, Ph. D. Abstract: This article explores how framing a promotional package (i.e., presenting the promotion as a bundle versus as a free gift) influences consumers' price assignments to the individual items in the package. It examines the potential influences of framing on consumers' perceptions of price increases and repurchase intentions after the promotion expires. The findings show that when a package contains two different products, consumers in the free gift (bundle) condition assign a higher price to the focal (supplementary) product, perceive a smaller price increase, and exhibit higher repurchase intentions toward the focal (supplementary) product after the promotion ends. If the promotional package contains two identical products, the free gift promotion generates higher perceived price increases and lower repurchase intentions than a price bundle, through similar price assignment mechanisms. An incentive-compatible experimental design finds that a free gift promotion lowers consumers' willingness to pay for the target product compared with a price bundle promotion. The findings of this research have significant implications for both framing research and marketing practice.
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The effects of promotional frames of sales packages on perceived price
increases and repurchase intentions
Hsin-Hsien Liu
Department of Asia-Pacific Industrial and Business Management
National University of Kaohsiung
700, Kaohsiung University Rd., Nanzih District, Kaohsiung City, Taiwan, R.O.C.
participants assessed the perceived attractiveness of the promotion (“I feel the promotion is
attractive”), perceived product quality (“I feel the quality of Essential shampoo is good”), and
brand likeability (“I like Essential”). These three variables could influence participants’
attitudes toward Essential, which subsequently might influence their WTP. Participants also
indicated if they had ever used Essential shampoo (yes/no).
On the final page, we presented the WTP task, as follows:
[WTP Scenario] Imagine that after one and a half months you have used up your first
bottle of Essential shampoo. After another one and a half months, you are almost out of
the second bottle, so you intend to buy more shampoo. When you go to the store where
you previously bought the Essential shampoo, you notice the promotion has ended, and
Essential shampoo is now sold only as single bottles.
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With a reminder that their WTP would determine if they would acquire the target
shampoo or money, participants responded to the item, “What is the maximum dollar amount
that you are willing to pay for a single bottle of Essential shampoo now?” Finally, participants
responded to the prompt, “If the price of Essential shampoo went back to NT$199 (without
any discount), would you buy it? (yes/no).”7 After participants completed the questionnaires,
we awarded the prizes (see steps 4 and 5 in Table 4). All other details were the same as those
in Experiment 3.
8.3. Results and discussion
With regard to the control variables, the frames had no impact on perceived attractiveness
of the promotion (5.33 vs. 5.59, F(1,87) = .51, p > .1), perceived product quality (4.15 vs.
4.24, F(1,87) = .12, p > .1), or brand likability (4.02 vs. 4.15, F(1,87) = .18, p > .1).8
However, the dichotomous product usage experience variable significantly affected the
perceived attractiveness of the promotion (6.13 vs. 5.21, F(1,87) = 5.50, p < .05), perceived
product quality (4.96 vs. 3.92, F(1,87) = 11.84, p < .01), and brand likeability (5.09 vs. 3.73,
F(1,87) = 19.75, p < .01). These three variables might influence participants’ WTP for
Essential shampoo and confound the effects of the frames, so we averaged them (Cronbach’s
7 The experimenter emphasized that participants’ answers were irrelevant to the prize contest. 8 The finding that the frames did not influence perceived attractiveness is inconsistent with Sinha and Smith’s
(2000) and Smith and Sinha’s (2000) findings that consumers prefer “buy one, get one free” to “buy two, get
50% off.” Perhaps the promotions in the current study are so attractive in both frames (5.33 and 5.59 on a
seven-point scale) that they produced a ceiling effect.
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α = .84) to form a brand attitude score, which we included as a covariate in our analyses.
An ANCOVA showed that the frames (price bundle vs. free gift) had a significant impact
on participants’ WTP (F(1,86) = 13.72, p < .01), such that participants showed higher WTP in
the price bundle than in the free gift promotion (150.40 vs. 126.51), in support of H5.
Moreover, their brand attitudes had a significant impact on WTP (F(1,86) = 11.06, p < .01).
When the promotion expired, more participants in the price bundle condition indicated they
would repurchase the shampoo than participants in the free gift promotion condition (33.3%
vs. 14.6%, χ2(1, n=89) = 4.15, p < .05), which is consistent with the results in Experiment 3.
A logistic regression with the brand attitudes as a control variable showed that both
frames (χ2(1,n=89) = 4.74, p < 0.05) and brand attitudes (χ
2(1,n=89) = 7.75, p < 0.01)
significantly influenced participants’ repurchase decision. When WTP was included as a
predictor, another logistic regression showed that the frames had no effect on repurchase
decision (χ2(1,n=89) = 1.19, p > 0.1), though WTP and brand attitudes both had an effect
(χ2(1,n=89) = 9.75 and χ
2(1,n=89) = 5.20, respectively, both ps<0.03) (Table 3, final column).
Therefore, the frames influenced participants’ repurchase decision through WTP.
9. General discussion
9.1. Conclusions
According to our results, the framing of a promotional package influences how
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consumers assign prices to the individual items in the package, and framing also affects
consumers’ perceptions of price increases and repurchase intentions after the promotion
expires. Regardless of the promotional benefit level, if two different products appear in a
single promotional package, consumers assign higher prices to the supplementary item if they
encounter a bundle promotion, but they assign higher prices to the focal item if they encounter
a free gift promotion. After the promotion expires, consumers perceive higher price increases
and have lower repurchase intentions toward the focal (supplementary) item in the bundle
(free gift) settings. However, lower promotional benefit levels weaken the effects of framing
on perceived price increases and repurchase intentions. If the package contains two identical
products, a free gift promotion causes consumers to perceive higher price increases and thus
indicate lower repurchase intentions compared to price bundle promotions. The result is due
to consumers assigning lower prices to the second product, which constitutes the comparison
price basis for consumers’ future repurchase decisions. Furthermore, consumers show lower
WTP for a product in the free gift than in the price bundle promotion; therefore, the price
bundle promotion induces more consumers to decide to repurchase the product. Finally,
perceived price increases mediate the framing effects on repurchase intentions.
9.2. Theoretical implications
Previous research on promotional frames focuses on the short-term effects (Harlam et al.,
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1995; Lowe, 2010; Raghubir, 2004). We clarify the long-term effects of framing promotional
packages on consumers’ perceived price increases and repurchase intentions after a promotion
has expired. Our experimental designs, settings (promotional benefit levels), and target items
(facial cleaner, shower gel, hand sanitizer) varied across experiments, yet the experimental
results remained consistent. Furthermore, the prices for the focal and supplementary products
were the same in Experiment 1, so the results are not attributable to price differences.
Therefore our hypotheses receive robust support.
Whereas Sinha and Smith (2000) find that consumers prefer to “buy one, get one free”
rather than “buy two, get 50% off” promotions, our study specifies how consumers assign
different prices to the first and second items under two different promotional frames. We also
explicate how the assigned price for the second item influences consumers’ perceived price
increases, repurchase intentions, and WTP after the promotion expires. This study thereby
offers a distinctive, more comprehensive view and enlarges the scope for research into
promotional framing; it also defines the conditions in which a price bundle promotional frame
is more beneficial than the free gift promotional frame. The notion of consumers’ price
assignments, as implied by mental accounting theory (Thaler, 1985, 1999), has been scarcely
explored in previous studies (Jha-Dang, 2006). This study can help scholars more fully
understand the role of mental accounting in promotional settings. The mediation analysis in
Experiment 3 also shows that consumers regard the second item in both promotional frames
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as a basis for comparison in their repurchase decisions. This finding is meaningful for further
research into anchoring and reference prices.
Raghubir (2005) explores how the sales frames with two different products influence
consumers’ WTP for the supplementary item as a standalone product. Although both our
current study and Raghubir’s discuss the effects of promotional frames, our study is different
in several ways. First, using the value discounting hypothesis and persuasion knowledge
model (Friestad & Wright, 1994), Raghubir proposes that consumers infer that the production
cost of a product is low when it is offered for free (rather than included in a bundle), which
should reduce their WTP for that product as a standalone offering. In contrast, we focus on
consumers’ price assignments viewed through mental accounting theory and semantic cues,
and we detail the effects of sales frames for supplementary and focal items in promotional
packages. This theoretical approach provides a more complete explanation of consumers’
responses toward the focal and supplementary items in a package. For example, Raghubir
(2005) cannot explain why consumers pay more for a focal product included in a free gift
promotion than in a bundle promotion; our research identifies price assignments as the
explanatory mechanism. In addition, either product can be treated as the focal or
supplementary item when firms design promotional packages, so it is important to understand
price assignments between two items in different frames. Another key difference is that we
examine the effects of framing when the promotional package contains identical products. In
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so doing, we fill the gap left in Raghubir’s (2005) research and offer a more comprehensive
view that offers broad potential applications.
9.3. Managerial implications
Promotional packages that contain different products can improve consumers’ responses
and stimulate sales, but the termination of promotional campaigns may lead to negative
effects on sales of the products due to perceived price increases. If marketers want to sell a
focal (supplementary) product, they should use free gift (bundle) promotions, which generate
higher repurchase intentions because consumers perceive lower price increases when the
promotion expires. In addition, marketing managers should carefully determine if their
products represent the focal (supplementary) item in a bundle (free gift) promotion
undertaken with strategic partners. A bundle (free gift), compared with a free gift (bundle),
promotion may later produce more negative responses to the company’s product. Finally, a
free gift promotion might appear more attractive than a price bundle promotion when
consumers make purchase decisions about a specific product (Sinha & Smith, 2000), but the
offer can have greater negative impacts on future sales after the promotion ends. Marketing
managers must take this finding into consideration when determining the most suitable
framing for their promotions.
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9.4. Limitations and further research
This study used different promotional benefit levels to test the propositions; however, the
absolute monetary values of the promoted products also might be influential. For example, if
the percentage promotional benefit level from Experiment 2 (20% off) applied to more
expensive products (e.g., “buy a vacation for NT$24,000, get a free suitcase worth NT$6,000”
or “buy a vacation worth NT$24,000 and a suitcase worth NT$6,000 for just NT$24,000”),
would the framing effect be the same? A relatively higher promotional benefit amount could
strengthen the framing effect because consumers process the information more extensively.
Additional research should retest our propositions using different absolute promotional
benefit values.
In Experiments 3 and 4, participants made repurchase decisions when they had used
almost all of the previously purchased products, which is a pattern that is consistent with
consumers’ real-world behavior. Few consumers purchase a product when they still have
plenty available. However, the framing effect might be reduced or even reversed if they made
repurchase decisions right after starting to use the product for the first time (e.g., because a
really attractive promotion is about to end). In this case, they might focus more on the first
item and potentially consider its assignment price as a reference, which would be interesting
to explore in future studies.
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Finally, all the products in our experiments are utilitarian rather than hedonic. In addition,
our investigation of how frames influence consumers’ perceptions of price increases and
repurchase intentions centers solely on consumer goods. The results might vary for other
product types. For durable goods, consumers who encounter a free gift (bundle) promotion
will likely assign a lower price to the supplementary (focal) item, so they should perceive less
residual value and exhibit higher upgrade or replacement intentions toward the supplementary
(focal) product because it produces a lower sunk cost effect. Tests of these predictions might
be helpful for many industries.
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Table 1
Pilot study: Relative shares
Task Question Mr. Li
(bundle)
The
same
Mr. Chen
(free gift)
Test with
[ without] “the same” dataa
First task Which one would allocate a higher
price to the shampoo?
3.1 33.8 63.1 χ2(2, N = 65) = 35.11
[χ2(1, n = 43) = 35.37]
Which one would allocate a higher
price to the facial cleaner?
67.7 27.7 4.6 χ2(2, N = 65) = 39.72
[χ2(1, n = 47) = 35.77]
How much did Mr. Chen [Mr. Li]
pay for the shampoo/facial cleaner in
this sales package?
129.71/
87.23
- 186.17/
26.13
t(1,64) = -10.27/
t(1,64) = 9.84
Second
task
Who would perceive a higher price
increase for the shampoo?
70.8 24.6 4.6 χ2(2, N = 65) = 44.89
[χ2(1, n = 49) = 37.73]
Who would perceive a higher price
increase for the facial cleaner?
3.1 15.4 81.5 χ2(2, N = 65) = 69.40
[χ2(1, n = 55) = 47.29]
Who would exhibit a greater
repurchase intention for the
shampoo?
6.2 30.8 63.1 χ2(2, N = 65) = 31.78
[χ2(1, n = 45) = 30.42]
Who would exhibit a greater
repurchase intention for the facial
cleaner?
80.0 18.5 1.5 χ2(2, N = 65) = 66.49
[χ2(1, n = 53) = 49.08]
a All chi-square and t tests were statistically significant (all ps < .01).
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Table 2
Means for assigned price, perceived price increase, repurchase intention, repurchase decision, and WTP in Experiments 1–4
Notes: a The independent variable in Experiments 1-2 refers to the Frames × Targets interaction, and refers to the Frames in Experiments 3 and 4.
Moreover, the results in Experiment 4 included the effect of the covariate. b
The mediator in Experiments 1-3 refers to the perceived price increase, and it refers to WTP in Experiment 4. c The dependent variable in Experiments 1-3 refers to repurchase intention, and it refers to participants’ repurchase decision in Experiment 4.
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Table 4
Procedure in Experiment 4
Step 1 Sign your name on the first page of the questionnaire. Then respond to the
relevant demographic items.
Step 2 Turn to the second page and assess your feelings about the promotion.
Step 3 Write down the highest price you are willing to pay for a single bottle of
Essential shampoo after the promotion has expired on the third page.
Step 4 One participant will be randomly invited to draw one card from the bucket.
The number on the card represents the sales price (e.g., X) of Essential
shampoo after the promotion ends. Three participants will be randomly
selected to win to the prize.
Step 5 a. If the number on the card is higher than the price the selected
participants are willing to pay (e.g., NT$Y), they will receive the
monetary equivalent of the sale price of Essential shampoo (i.e.,
NT$X).
b. If the number on the card is lower than or equal to the price that the
selected participants are willing to pay, they will receive one bottle of
Essential shampoo.
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Fig. 1. Conceptual framework
H1 H2 H2
H4 H4 H4 H5
Sales frames:Bundle vs. free gift
Price bundle vs. free gift
Price assignments
Perceived price increases
(H3)
Repurchase intentions/
decisions/ WTP
Time: acquiring
initial sales packages
Time: making repurchase decisionsTime: delay period
Figure_FINAL
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Fig. 2. Perceived price increase and repurchase intention in Experiment 1A
Fig. 3. Perceived price increase and repurchase intention in Experiment 1B