Consumer response to promotions in the presence of surcharge: implications for online retailing

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Abstract:

This research examines the impact of surcharges on deal value perceptions of online promotions and purchase intentions. Based on research on mental accounting and price partitioning laboratory experiments investigate if consumers differ in perceptions of economically equivalent promotions presented as reduced product price, reduced shipping surcharge, a partitioned price (dollars-off promotion) or a bundled price (free shipping) for high and low priced items with relatively low or high shipping fees at retail websites. Experimental analyses show that sales price promotions are more effective than others for low-base price and low surcharge items. For relatively high surcharge or high base price, purchase intent is highest for free shipping followed by reduced shipping, dollars-off and sale price for all items. Results suggest that effectiveness of various promotion frames at online stores differs based on base price and relative surcharge level.

Keywords: E-RETAIL; MENTAL ACCOUNTING; PARTITIONED PRICING; PRICE FRAMES; SURCHARGE

Document Type: Research Article

DOI: http://dx.doi.org/10.1362/147539210X511335

Publication date: June 1, 2010

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