Sometimes “Fee” Is Better Than “Free”: Token Promotional Pricing and Consumer Reactions to Price Promotion Offering Product Upgrades
Graphical abstract
Section snippets
Product Upgrade in Conditional Price Promotion
A popular form of price promotion is to offer consumers upgrades of their purchased products at a special price (see e.g., Palmeira and Srivastava 2013). The many real-world examples already cited are cases in point. Specifically, an upgrade can be delivered as a supplementary good, which provides utility if consumed with the focal, base product (e.g., toothpaste for toothbrush; Guiltinam 1987). By virtue of introducing new features or capacities the base product does not have, the
Study 1
Study 1 tests the hypotheses that consumers evaluate a price promotion more positively when the upgrade is offered at a token price than free (H1), provided that the token price is sufficiently small relative to the regular retail price of the upgrade (H2).
Study 2
Study 2 was conducted with two goals in mind. First, it sought to replicate the TPP effect by allowing participants to purchase real products with real payoffs. Second, it tentatively ruled out several alternative explanations of the TPP effect.
Study 3
Study 3 examines whether encouraging consumers to contemplate the absolute amount of deal savings diminishes the TPP effect.
General Discussion
A popular form of price promotion, widely adapted by retailers around the globe, is to offer consumers a free upgrade of a pre-purchased base product to an augmented option. Freebie marketing may not be a retailers’ panacea (Raghubir 2004; cf. Kamins, Folkes, and Fedorikhin 2009), but contemporary literature documents a considerably larger body of evidence suggesting the many benefits a free offer can bring to the retailer. For example, freebies can provoke delight and rejoicing from the
Acknowledgement
The author thanks the Editor, the Associate Editor, and three anonymous reviewers for their insightful comments on earlier drafts of this manuscript. This research was partly supported by a startup research fund awarded to the author by SWUFE.
References (27)
The Evaluability Hypothesis: An Explanation for Preference Reversals between Joint and Separate Evaluations of Alternatives
Organizational Behavior and Human Decision Processes
(1996)- et al.
Similarity and Alignment in Choice
Organizational Behavior and Human Decision Processes
(1995) Free Gift with Purchase: Promoting or Discounting the Brand?
Journal of Consumer Psychology
(2004)- et al.
The Affect Heuristic and the Attractiveness of Simple Gambles
Journal of Behavioral Decision Making
(2007) - et al.
The Impact of Add-on Features on Consumer Product Evaluations
Journal of Consumer Research
(2009) - et al.
Constructive Consumer Choice Processes
Journal of Consumer Research
(1998) - et al.
The Price of “Free”-Dom: Consumer Sensitivity to Promotions with Negative Contextual Influences
Journal of Consumer Research
(2006) - et al.
Attitude Structure and Function
The Price Bundling of Services: A Normative Framework
Journal of Marketing
(1987)- et al.
Modeling Loss Aversion and Reference Dependence Effects on Brand Choice
Marketing Science
(1993)