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					                                        Periodic Pricing Revisited: Beyond Pennies-a-Day
                                                                                         Stephen A. Atlas and Daniel M. Bartels
                                   Abstract                                                                                                                                     Study 3: Scope Insensitivity (n=227)
Previous research has shown that periodic pricing (i.e.                                                                                                     We manipulate scope insensitivity through empathy (Hsee,
reframing a single payment as a series of payments over time)                                Study 1: Pleasure of Daily Donations (n=150)                   Rottenstreich and Xiao, 2005) to find further evidence that
can increase a consumer's willingness to purchase by making                            We presented respondents with a hypothetical opportunity to          periodic pricing is most effective when the transaction’s
the cost of purchase seem trivial.                                                     donate a daily amount ($1) or an equivalent yearly amount            benefits are scope insensitive benefits with a large initial onset
                                                                                       ($350) to a charity and tested how the daily vs. annual frame        (the big initial spike). We expect and find that periodic pricing
We present evidence that triviality is neither a necessary nor                                                                                              increases contributions to the Komen Foundation only after
sufficient condition for periodic pricing to increase willingness                      affected their perceptions of the offer’s costs and benefits.
                                                                                                                                                            reading the empathetic scenario and not the control scenario.
to purchase, and expand the domain of situations in which
periodic pricing increase purchase.
We propose that periodic pricing amplifies the perception of a
transaction’s benefits. This contributes to the pennies-a-day
effect and find that periodic pricing can be effective even in
cases where each payment is not trivial. We present evidence
from four studies that scope insensitivity plays an important
role in this effect.

                    Typical Explanation:
             Daily frame trivializes some costs

                                               $1 Per Day
                $365 For Year
                                              For One Year

               “Integrated Price             “Periodic Price
                   Framing”                    Framing”




                                                                    Gourville, 1998,
                                                                    1999, 2003



       Notably, this model predicts that periodic pricing
           backfires outside the low-cost domain.


             Taking the Proposal As Presented                                                        Study 2: Not Just Pennies (n=60)                                           Conclusions about Periodic Pricing
• Decision makers tend to use frame as per decision context                            If periodic pricing increases purchase intentions by magnifying      • Periodic pricing can inflate perception of a transaction’s
  (Concreteness Principle; Slovic, 1972; Read et al, 1999)                             the offer’s benefits, then periodic pricing could, in theory,          benefits
                                                                                       increase purchase intentions even when costs are not                       • Study 1 finds that differences in perceived benefits
• … and they do not spontaneously combine outcomes
                                                                                       perceived as trivial. In study 2, we predict that respondents will            accounts for a substantial portion of the pennies-a-
  (Thaler and Johnson, 1990; Linville and Fischer, 1991)
                                                                                       prefer to pay for a luxury automobile—an affect-rich product—                 day effect
• We propose narrowly bracketing a transaction’s costs                                 on a daily basis, even when the costs are not considered trivial     • Periodic pricing can increase purchase even for non-trivial
  causes decision makers to narrowly bracket its benefits.                             ($20/day vs. $7,250/year).                                             amounts
                                    Brackets
                                    Benefits                                                                                                                       • Study 2 finds periodic pricing increases willingness
                   Periodic         Narrowly            Purchase                                                                                                       to purchase an expensive product category
                    Pricing                            Intentions
                                   Can Trivialize                                                                                                           • Initial benefits must be most important
                                    Small Costs
                                                                                                                                                                       •     Study 3 finds periodic pricing increases willingness to
                                                                                                                                                                             purchase only when its benefits are scope-insensitive
  Narrowly Bracketed Benefits and Overall Evaluation
• Periodic pricing encourages decision makers                                                                                                                                                          References
• to bracket benefits narrowly.                                                                                                                             Gourville, John T., "Pennies-a-Day: The Effect of Temporal Reframing on Transaction Evaluation," The
• We propose this can enhance the transaction’s benefits                                                                                                        Journal of Consumer Research, 24 (1998), 395-408.
                                                                                                                                                            Gourville, John T., "The Effect of Implicit versus Explicit Comparisons on Temporal Pricing Claims,"
  when increasing scale doesn’t add value                                                                                                                       Marketing Letters, 10 (1999), 113-124.
                                                                                                                                                            Gourville, John T., "The Effects of Monetary Magnitude and Level of Aggregation on the Temporal Framing
                                                                                                                                                                of Price," Marketing Letters, 14 (2003), 125-135.
                                                                                                                                                            Linville, Patricia W., and Gregory W. Fischer, "Preferences for separating or combining events," Journal of
                                                                                                                                                                Personality and Social Psychology, 60 (1991), 5-23.
                                                                                                                                                            Read, Daniel, George Loewenstein, and Matthew Rabin, "Choice Bracketing," Journal of Risk and
                                                                                                                                                                Uncertainty, 19 (1999), 171-197.
                                                                                                                                                            Slovic, Paul, "Psychological Study of Human Judgment: Implications for Investment Decision-Making,"
                                                                                                                                                                Journal of Finance, 27 (1972), 779-799.
                                                                                                                                                            Thaler, Richard H., and Eric J. Johnson, "Gambling with the House Money and Trying to Break Even: The
                                                                                                                                                                Effects of Prior Outcomes on Risky Choice," Management Science, 36 (1990), 643-660.




      Scope insensitivity: Decision makers are responsive                                                                                                                    p< 0.1, *; p<0.05, **, p<0.01, ***
         to presence of stimuli but not its magnitude

				
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