Consumer Evaluations of Price and Promotional Restrictions—A Public Policy Perspective

Abstract

The authors investigate the effect of price and promotional restrictions on consumer perceptions of deal value and show empirically how such evaluations can be affected adversely when deal qualifications become excessively restrictive. They examine the reasons for the pervasive use of restrictions by marketers to limit their offers, discuss the Federal Trade Commission guidelines that govern this practice, and develop a typology of deal restrictions. The authors also propose a framework explicating the mechanism by which consumers process restrictions in conjunction with varying deal sizes and test its salient hypotheses through afield experiment. Results show that consumers negatively evaluate restrictions that they view as causing excessive inconvenience, that they perceive as misleading, and/or that lock them into binding commitments. In addition, such restrictive stipulations aggravate consumers’ evaluations even when paired with relatively attractive deal offers. Finally, the authors discuss several important public policy implications resulting from this study and illustrate with some recent examples.

Optimizing time limits in retail promotions: an email application

“…However, research has shown that, while time limits can help motivate customers to buy now rather than later (or not at all), time limits that are over or under restrictive may actually hurt response more than help. 1,2 In order to address this issue, we develop a decisioncalculus model to optimize the time limit for email offers and demonstrate its application by asking a retail marketing manager, for an Internet-only company, a series of questions regarding estimated consumer response under certain time conditions. We decompose the effect of time limit into two forces, namely, awareness and urgency.…”

When and how should retailers rationalize the size and duration of price discounts?

“…Instead, consumers will base their purchase intentions primarily on discount size and, assuming the size of the discount is deemed sufficient, whether the duration allows consumers to take advantage of the offer (Cheema & Patrick, 2008;Sinha, Chandran, & Srinivasan, 1999;Swain et al, 2006).…”

“…Future research should investigate other combinations of discount sizes and durations to better understand the boundaries of congruity, incongruity, and extremity. These boundaries are likely to vary with factors such as customer history, promotion type, product and service characteristics, and information formats, as well as schemas (e.g., retailer-level schemas) that arise from these factors (e.g., Kumar et al, 2004;Laroche, Pons, Zgolli, Cervellon, & Kim, 2003;Sinha et al, 1999;Weathers, Swain, & Carlson, 2012).…”

Pricing and Public Policy: A Research Agenda and an Overview of the Special Issue

“…First, we assess whether the advertised reference price provided in promotions can be deceptive and in what conditions they are more or less likely to deceive. This area has received considerable research attention, and two of the special issue articles examine issues associated with it (Biswas et al 1999;Sinha, Chandran, and Srinivasan 1999). Second, retailers use universal product code (UPC) systems and scanners to ring up the prices at the checkout counter.…”

“…Closely related to comparative price advertising are the issues associated with deal restrictions. Sinha, Chandran, and Srinivasan (1999), elsewhere in this issue, examine consumers' evaluations of various restrictions advertisers place on their promotions. Specifically, consumers can react negatively to certain restrictive disclaimers.…”