When more is Less: The Impact of Base Value Neglect on Consumer Preferences for Bonus Packs over Price Discounts

Abstract

The interpretation of a percentage change often hinges on the base value to which it is attached. The authors identify a tendency among consumers to neglect base values when processing percentage change information and investigate the implications of such base value neglect for how consumers evaluate economically equivalent offers presented in percentage terms, such as bonus packs and price discounts. The authors first document a substantial advantage in sales volume for a bonus pack over an economically equivalent price discount in a field experiment conducted in a retail store. Furthermore, in a mall-intercept survey and multiple lab studies, the authors provide additional evidence in support of the effect and identify managerially useful boundary conditions for when the effect is likely to manifest. The article concludes with a discussion of the theoretical and managerial implications of the findings.

Can Bonus Packs Mislead Consumers? A Demonstration of How Behavioural Consumer Research Can Inform Unfair Commercial Practices Law on the Example of the ECJ’s Mars Judgement

“…This stream of literature has indicated a preference of consumers for bonus packs over price discounts for virtue products (Mishra and Mishra 2011) and for smaller-sized promotions (Diamond 1992). More relevant to the current investigation, consumers have been shown to have difficulties in processing numeric information such as percentages (Chen and Rao 2007), which leads them to neglect base values, and prefer bonus packs over economically equivalent price promotions (Chen et al 2012). Given this difficulty in interpreting percentages, consumers may be more susceptible to influences of a coloured area on pack.…”

Brand the Pricing: Critical Critique

“…For this purpose, many research scholars investigate contextual impacts that make prices perform favorable to consumers. Many Scholars like, Hamilton and Chernev (2013); Miniard et al (2013) ;Chen et al (2012) and Biswas et al (2013) deliver valuable insights into many aspects that apply this kind of contextual and perceptual impact from store and product level to brand level. Hamilton and Chernev (2013) and Miniard et al (2013) explore the customer's aspects from price inferences and study types of observable pricing to non-pricing associated information customers when understanding vital but unobservable prices, such as at store level and at competitors' level prices.…”

“…Hamilton and Chernev (2013) and Miniard et al (2013) explore the customer's aspects from price inferences and study types of observable pricing to non-pricing associated information customers when understanding vital but unobservable prices, such as at store level and at competitors' level prices. Chen et al (2012) and Biswas et al (2013) study the impact of promotional pricing demonstration on buyers' numerical way of (price) information processing.…”

“…Nevertheless, in context with the principle that comparatively priced product/brand in a category is the norm, if vender compares prices on more than one product/brand in the category, customers will surmise that the selected product/brand is opted, and the spillover effect to other products/brands models in the product category line will be diluted. Chen et al (2012) explain the model concept that how price perceptions influence consumers' abilities and norms in form of numerical processing information. The model shows that customers are weak processors of numerical processing values, which presented in terms of some percentages.…”

“…Some scholars highlight simple but earlier unrecognized marketing practices that executives can employ to develop the positioning of their prices like; Hamilton and Chernev (2013); Miniard et al (2013);Chen et al (2012) and Biswas et al (2013). For instance, one pervasive promotional practice is the use of reference price promotion.…”