The effects of promotional package frames and price strategies on inaction inertia

Abstract

Inaction inertia is the phenomenon in which people are less likely to accept a less attractive opportunity after having missed a relatively more attractive one. Previous studies have mainly explored the inaction inertia effect on single products or services, whereas this study explored how the promotional frames of sales packages influence inaction inertia toward the individual items within the sales packages and the inaction inertia effect of the target product under different price strategies. On the basis of the cost assignments of mental accounting and comparisons of the current inferior promotion with missed superior promotion, this study found evidence that when consumers encounter a freebie (bundle) condition, they assign a higher cost to the focal (supplementary) product and a lower cost to the supplementary (focal) product.Therefore, consumers who have missed a freebie (bundle) promotion exhibit lower (higher) inaction inertia toward the focal product, but higher (lower) inaction inertia toward the supplementary product. Applying a similar internal mechanism to pricing strategies, the findings also show that when consumers encounter a two-component sales package with a surcharge promotion using a partitioned price (vs. a price discount promotion using an all-inclusive price), they assign a higher cost to the base product and a lower cost to the surcharge. So, consumers who have missed the surcharge (vs. price discount) promotion show higher inaction inertia when the surcharge of the current inferior opportunity is salient, but show less inaction inertia when it is not salient. Moreover, the percent of a surcharge as a part of the total package value moderates the impact of promotional price strategy frames on inaction inertia. These findings have significant implications for both theoreticians and practitioners interested in inaction inertia, promotional frames, and price strategies.

The effects of pricing strategy on upgrade intentions

“…Next, participants responded to the three following items about their upgrade intentions (Cronbach's α = 0.94), modified from Liu (2013) and Liu and Chou (2019): “The new E washing machine (home theater speaker set) is attractive”; “you have a high intention to buy the new E washing machine (home theater speaker set)”; “the possibility of buying the new E washing machine (home theater speaker set) is high” (1 = strongly disagre e, 7 = strongly agree ). Participants then reported their upgrade decision in response to the question, “will you upgrade to the new washing machine (home theater speaker set)?” (Yes / No).…”

“…Two common pricing strategies are partitioned pricing and all-inclusive pricing (e.g. Lewis, 2006; Liu and Chou, 2019; Morwitz et al , 1998). A partitioned price is divided into two separate components: a base price for the target product and a surcharge (e.g.…”

“…The pricing strategy (partitioned vs all-inclusive) used to sell a product should influence consumers' assignment of costs to specific mental accounts (Liu and Chou, 2019) and consumers' later recall of the target product's cost (Kim, 2006; Morwitz et al , 1998). Therefore, pricing strategy influences perceived residual value, which then should affect the consumer's intention to upgrade to a newer model (Liu, 2013).…”

Payment formats and hedonic consumption

“…This design more effectively elicits participants’ real preferences. Many studies in the fields of risk and consumer behavior have further developed and modified this procedure (e.g., Curley, Yates, & Abrams, 1986; Liu & Chou, 2018, 2019).…”

Negotiation Inaction Inertia: A Dynamic Model of the Impact of Missed Opportunities on Negotiation Decisions in Multi-issue Disputes

“…In the field of psychology, inaction inertia was explored mostly within the context of consumer decisions and has been employed to explain human behavior in varied domains such as commodity purchases, the effect of promotions, marketing, and investment decisions (Liu Hsin-Hsien & Chou Hsuan-Yi 2018, 2019Tsiros & Hardesty 2010;Zeelenberg & Van Putten 2005). Inaction inertia was also explored to account for the influence of bonuses on academic procrastination (Pittman et al 2008).…”