The effects of promotion framing on consumers' price perceptions

Purpose – The use of price-based promotions is common in the service industry due to their positive impact on sales in the short run. To gain a better understanding of the effectiveness of various types of promotions, the current research aims to examine the contrasting effect of two popular framing methods (i.e. percentage-off versus dollars-off) on consumers' perceived savings and willingness to buy. More importantly, this research examines the moderating effect of personal sense of power on such relationships. Design/methodology/approach – The study used 2×2 between subjects quasi-experimental design to test the hypotheses. Respondents were asked to read a scenario regarding booking a hotel room and then complete scales that measured their perceptions of savings and willingness to book. Findings – Results indicate that personal sense of power moderates the effects of the promotion frame on perceived savings and willingness to book. Individuals with a low sense of power perceive significantly more savings and exhibit significantly higher booking intentions when the promotion is framed in dollars-off rather than in percentage-off format. The framing manipulation, however, had minimal effects among high power individuals. In addition, the authors find that confidence in estimating the promoted price is the psychological mechanism that potentially explains the casual link from power to perceived savings and willingness to book. Originality/value – Drawing on the social psychology theory, the current study discovered some boundary conditions for the framing effect in the context of pricing of services. In addition, the current research advances the theoretical understanding of power's psychological and behavioural effects in the context of price promotions.