Date of Award

2015

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Business Administration

First Advisor

Albert Della Bitta

Abstract

A framing strategies that marketers widely employ in pricing is a Pennies-a-Day (PAD) strategy. This decomposes the total price in order to frame it into a smaller, more palatable daily amounts. To date, several theoretical perspectives were investigated in an attempt to identify mediators of PAD effectiveness: perceived triviality, perceived benefits, and the feeling of being misled.

Interestingly, despite evidence suggesting consumer response to PAD pricing is more complex, the extant literature has not investigated moderators of PAD effectiveness. Based on studies in information processing, the current study suggests that consumers' price familiarity could act in a moderating role on the effectiveness of the PAD strategy.

More specifically, the current study hypothesizes that consumers who have low price familiarity will develop a greater purchase intention when the target product is presented in a daily price frame than in an aggregate price frame if the requested daily amount is small due to low levels of perceived cost. Further, it is hypothesized that their purchase intention toward the target product depends on their attitudes toward a comparison product when the product is displayed along with the target transaction in the advertisement to demonstrate the affordability of an advertised product.

In contrast, the levels of perceived cost and perceived benefits of consumers who have high price familiarity will not be influenced by the price framing strategy regardless of the amount requested as well as regardless of their attitude toward the comparison product. Instead, the current study hypothesizes that when consumers have high price familiarity, the level of purchase intention in a daily price frame will be lower than in an aggregate price frame, due to the feeling of being misled.

Exploratory studies were conducted and showed a moderating effect of price familiarity on PAD effectiveness on product attitude. In a series of studies across a variety of product categories, the moderating role of price familiarity was found; when consumers have high price familiarity, their purchase intention was not influenced by frame. However purchase intention was not influenced by attitude toward the comparison product. Interestingly, perceived cost in a daily price frame was lower than in an aggregate price frame at both low and high levels of price familiarity. A daily price frame generates higher levels of the feeling of being misled, compared to an aggregate frame. Especially, the negative effect of a daily frame was larger when participants have high price familiarity. The effect on perceived benefits was not consistent across studies.

This research adds value to the growing body of literature in price reframing by enhancing and better understanding the underlying mechanisms of the PAD strategy by providing an alternative view to past research. Although a daily price frame has been shown to be beneficial, in a long-term strategic perspective, marketing managers might need to be cautious about potential negative effects since a daily framing is likely to generate higher levels of feeling of being misled. This dissertation supports the need to monitor promotional communications and consumer education to limit the potential for marketers to manipulate the perception of cost and purchase decision making.

Share

COinS