Research Summary
Research Summary
The Asymmetric Effect of Discount Retraction on Subsequent Choice
Description
This paper examines the subsequent impact of a temporary price discount on brand preference after the promotion is retracted. Theorizing that price salience has an impact on price sensitivity, we propose that the effects of retracting a discount depend on the promoted brands regular price/quality positioning. In a first experiment in which we track consumer choices across a sequence of choice occasions, we show that retracting a discount posted by a higher quality, higher price brand is detrimental to that brand. In contrast, a discount posted by a lower quality, lower price brand is capable of enduringly diverting consumers away from high-end brands. A second experiment relies on process measures to provide evidence for the underlying price salience mechanism. A third experiment tests our hypotheses with real incentives and offers additional support for our price salience theory by testing its most peculiar behavioral implication. (with A. V. Muthukrishnan and Bart Bronnenberg, in Journal of Consumer Research 31(3), December 2004, pp.652-657)