Study on Consumer Preferences for Discount Presentations in Different Purchase Contexts

Abstract

Purpose: There is still lack of guidance for merchants toward price discount presentations (absolute/relative), especially for consumers in different purchase contexts. Based on the general evaluability theory, this study investigates consumers' preferences for the presentation of discounts in various contexts through experiments. Research design, data and methodology: The relationship between discount presentation and consumers' preference is investigated in Study 1 using a two-factor between-subject design of 2 (purchase type: material vs. experiential) ×2 (discount type: absolute vs. relative). The Moderating effect of thinking mode has been examined in Study 2 via a multi-factor intergroup design of 2 (purchase type: material vs. experiential) ×2 (discount type: absolute vs. relative) ×2 (cognitive load: high vs. low). One-way ANOVA and planned contrast have been performed for analysis. Results: Experiment 1 reveals that consumers prefer absolute discounts rather than relative discounts when in material purchases. However, when in experiential purchases, they are willing to choose relative discounts. Experiment 2 verifies the boundary conditions of matching effect and illustrates the generation of matching effect is determined by thinking mode. Conclusions: Our study enriches the theories of purchase type and thinking mode. Simultaneously, the results provide practical guidance for merchants to formulate the discount presentation and distribution pricing strategies.

1. Introduction

With the rapid development of the Internet, a kind of new e-commerce mode, i.e. social commerce, is rising and distributing around us. It can make traffic conversion and goods sales more effective by adding the social elements to the product distribution and transaction process.

The competitive edge of e-commerce lies in the convenience and speed by which the consumers can do their shopping anytime and anywhere. However, as far as online and offline shopping are concerned, there would generate different thinking modes for decision-making. As is well known, the daily consumption patterns of consumers can be divided into two categories: Material Purchases and Experiential Purchases. The former aims to purchase goods for the consumers themselves, but the latter aims to obtain the life experience by purchase, concretely, with the experience of a series of events (Van Boven & Gilovich, 2003). Previous studies on material purchases and experiential purchases have focused on the difference in their purchase results (Caprariello & Reis, 2013; Carter & Gilovich, 2010; Nicolao, Irwin, & Goodman, 2009; Goodman & Lim, 2018). Previous studies on purchase experience have focused on the difference of purchase types. Compared with the material purchase, experimental purchase not only brings more happiness (Van Boven & Gilovich, 2003), but also makes consumers more social (Caprariello & Reis, 2013). However, it's harder to compare (Carter & Gilovich, 2010) and the adaptation is much slow (Nicolao, Irwin, & Goodman, 2009), with less possibility to be selected as gifts (Tully, Hershfield, & Meyvis, 2015). Although the influences of different purchase types on consumer preferences have been compared, there are few studies on the effects of difference in the two purchases types before purchase and the decision-making processes of consumers. Likewise, whether the decision-makings of two purchase types are different under different purchase channels (online vs. offline) are still unknown. More importantly, facing different discount promotions in the processes of material purchases and experiential purchases, increasing attention should be paid to what kind of discount presentation is more attractive for consumers, so as to effectively increase the purchase probability.

Therefore, based on the assessable theory, this study explores which type of purchase (material purchase vs. experimental purchase) to be adopted for discount promotion to attract more consumer attention, thus to increase the probability of success consumption. Through the study, this work theoretically expands the consumption model on the influence of purchase types on consumers and the associated decision-making process. Thus, it can provide guidance for merchants to develop the optimum discount and distribution pricing strategies in certain consumption mode.

2. Literature Review

2.1. Absolute discount and relative discount

At present, there are mainly two types of discount presentations, namely, absolute value based on the amount, and relative value based on the percentage, thus, corresponding to different calculation methods. The first method is to subtract one number from another number to get the absolute difference (Biswas, Bhowmick, Guha, & Grewal, 2013; Monga & Bagchi, 2012; Wertenbroch, Soman, & Chattopadhyay, 2007), and the second one is to divide one number by another number to get the relative difference (Hsee, Yang, Gu, & Chen, 2009; Palmeira, 2011) .The existing studies show that different price discount presentations could bring different value perceptions to consumers, thus leading to different promotion effects or distribution prices. For example, the study of Hardesty and Bearden (2003) showed that for low price goods, consumers prefer relative discounts rather than absolute discounts. However, it is reported by McKechnie et al. (2012) that for the low-price goods, compared with the absolute discount by subtraction, a larger (smaller) relative discount in a percentage form would lead to a higher (lower) value perception of transaction under the same discount.

To sum up, in terms of consumers, the absolute discount and relative discount in different purchase contexts could result in different effects. The previous studies were mostly carried out based on the price discount. However, what kind of discount should be adopted under different consumption modes (material purchase vs. experiential purchase), as well as whether there would generate different decision-makings in different consumption channels have not been clear yet.

2.2. Relationship between consumption type and discount form

It has been reported by Ma and Roese (2013) that value sensitivity depends on the degree of countability, i.e., the individuals' satisfaction focuses on the experiential purchase rather than the difference in the material purchases (products' size). Moreover, there is essential difference in the evaluation modes of consumers for material purchase and experiential purchase. In comparison with the material purchase, the consumers think the experiential purchase has low comparability (Carter & Gilovich, 2010) and poor interchangeability (Nicolao et al., 2009).

Thus, the experiential purchase is evaluated by the consumers based on the feeling, while the material purchase is evaluated based on the calculation. Likewise, Yan (2019) further studied the comparison process in detail, and the results suggested that when the attribute is easily calculated (i.e., when the consumers have clear reference information), the consumers would like to calculate and depend on the absolute difference for judgment. On the contrary, when the attribute is less evaluable, the consumers prefer to use relative difference for comparison. In addition, the existing study results suggest that the absolute discount is more conducive to the products with high evaluability, such as grocery, etc. This is because the consumers have a highly accessible reference point.

However, as the consumers are not familiar with the price, the discount should be presented in a form of relative difference (Yan, 2019). As for consumers, the frequency of material purchases in their daily life is significantly higher than that of experiential purchases, so they are more familiar with the price of material purchases than that of experiential purchases. Accordingly, the hypothesis is proposed as follows.

H1: In the process of experiential purchase, the consumers prefer the promotions in a relative discount (vs. absolute discount) way. While in the process of material purchase, the consumers prefer the promotions in an absolute discount (vs. relative discount) way.

2.3. Moderating effect of thinking modes

For traditional offline purchase, the higher search cost often limits the further information seeking of consumers, thus resulting in limited products information. Hence, the offline consumers depends on the heuristic clues for effective purchase decisions. By contrast, for the online purchase, the consumers can obtain a large amount of product information with a lower cost (Häubl & Trifts, 2000). In addition, the consumers are less interfered by shopping places and sales personnel during the decision making process. Therefore, their decision-making is rational, which means, they can independently judge and make a decision by rich product information. As a result, they are more likely to make a rational decision with a systematic thinking mode.

Here, the purchase type and price discount information are two different decision-making clues for purchase. Among them, the purchase type can reflect the actual utility obtained by the consumers from the purchase, while different discount information are the price clues for consumers in the purchase decision process. The results of this paper suggest that only the consumers consider two clues together and then take them as the decision elements during the decision-making process could there generate the matching effect between purchase type and discount type.

Moreover, for the matching effect, the consumers must use the systematic thinking mode in the decision process and have enough cognitive resources to integrate the consumption clues for decisions. Inversely, as adopting the heuristic thinking mode, the consumers make the decisions in dependence on the main clue of the many clues. Obviously, the consumers are more sensitive to the price clue than the others. Hence, when the consumers adopt the heuristic thinking mode, they are more likely to make decisions according to the price clue of discount type and ignore the clues of purchase type. Simultaneously, the difference evaluability of absolute discount is significantly higher than that of relative discount. In this case, the effect of absolute discount is better for both material purchases and experiential purchases. Then, this study proposes the following hypothesis.

H2: The thinking mode of consumers can moderate the influence of purchase type on the preferences of discount presentations. Specifically, when the consumers adopt systematic thinking mode, the consumers prefer the promotions of absolute discount (vs. relative discount) under the material purchase (vs. experiential purchase) context. On the contrary, when the consumers adopt heuristic thinking mode, they prefer the promotions of absolute discount, no matter in material or experiential purchase context.

3. Research Methodology

3.1. Study 1

3.1.1. Experiment 1

This paper modifies the actual advertisement of sleeping bag in combination with the research results of Dai et al. (2020).

The promotion advertisement for the material purchase group is as follows. The sleeping bag (brand: SD) has a hollow cotton core to make fiber reserve more heat for cold resistance and warmth. Its high-density and wear-resistant fabric can keep out the wind and guard against damp with a high durability. Moreover, the elastic bag mouth design can adjust internal temperature, by opening the bag mouth, the sleep bag can be used as a quilt. In addition, two sleeping bags can be pieced together. The promotion advertisement of sleeping bag for the experiential purchase group is introduced as follows. The SD sleeping bag is designed in an envelope way, and you can turn over freely without any restraint. The liner uses the pongee which is skin-friendly and breathable. If keeping your clothes, you still feel soft and comfortable for a whole night.

In view of the actual price of the sleeping bag, the price is finally determined to be 124 yuan according to the the market price and average online price, 31% off sale now on, that is, 38.44 yuan cheaper than the original price.

3.1.2. Method

The experiment is carried out by a two-factor between subject design of 2 (purchase type: material purchase vs experiential purchase) ×2 (discount type: absolute discount vs relative discount). A total of 192 participants are recruited for experiment, and 177 are valid with the exception of unfinished questionnaires and invalid subjects aware of the experiment purpose. Among them, 91 are male, accounting for 51.412%, as well as 86 are female, accounting for 48.588%. As the experiment begins, the participants are told that they are going for a spring outing, and they should firstly buy sleeping bags for their accommodation. Coincidentally, the sleeping bags are on sale by merchants, and they are popular in this season. In order to manipulate the purchase types, the participants in the material purchase group are asked to read the advertisement about the material function of sleeping bag, while the participants in the experiential purchase group are asked to read the advertisement about the experiential function of sleeping bag. Similarly, with regard to the manipulation of discount presentations, in the relative discount group, the original price of the sleeping bag is 124 yuan, but now, 31% off sale due to the promotion. In the absolute discount group, the original price of the sleeping bags is 124 yuan, 38.44 yuan off for promotion. After the participants read the promotion advertisement and price discount, they are invited to answer the corresponding questions.

Firstly, according to the research of Van and Gilovich (2003), the participants are invited to experience the material purchase, and they should answer what purchase type they have experienced? (1 = pure material purchase, 9 = pure experiential purchase).

Then, the preferences of participants for the promotion discount presentations are investigated, including the attitude to promotion advertisement, product evaluation and product purchase intention. Finally, the participants complete the demographics and get the remuneration.

3.1.3. Results

Manipulation Check: In the experiential purchase group, the participants think that their purchase is the experiential purchase (M_experiential=4.956, SD=1.551), which is greatly higher than those in the material purchase group (M_Material=3.251, SD=2.015; F(1, 175)=39.953, p<0.001). Furthermore, the judgment for the purchase type by whether experiential purchase group or material purchase is significantly different from the median value 4.5. The results are shown in Table 1.

Table 1. An overview of the experiment results in this work

Note: 9-point Likert scale (Material = 1, Experiential = 9); *** p < 0.001

Attitude to promotion advertisement, product evaluation and product purchase intention: The results show that the preference of participants on the absolute discount promotion in the material purchase group (M_Absolute=4.901, SD=1.354) is greatly higher than those selecting the relative discount promotion (M_Relative=3.755, SD=1.191; F(1, 85)=17.469, p<0.001). Moreover, with a higher evaluation for the sleeping bag(M_Absolute=5.222, SD=1.038 vs. M_Relative=4.397, SD=1.222; F(1, 85)=11.569, p=0.001). More importantly, the subjects prefer to purchase the sleeping bags with the absolute discount promotion (M_Absolute=4.695, SD=1.495), compared to those in the relative discount promotion (M_Relative=3.336, SD=1.238; F(1, 85)=21.159, p<0.001). However, in the experiential purchase group, the participants have a higher preference on the absolute discount promotion (M_Relative=5.204, SD=1.223) than those selecting the relative discount promotion (M_Absolute=4.232, SD=1.417; F(1, 88)= 12.031, p<0.001), Moreover, with a higher evaluation for the sleeping bag (M_Relative=5.077, SD=1.232vs. M_Absolute =4.305, SD=1.423; F(1, 88)=7.506, p=0.007). Similarly, the participants are more likely to purchase the sleeping bag in the relative discount promotion (M_Relative=4.428, SD=1.501) than in the absolute discount promotion (M_Absolute=3.179, SD=1.096; F(1, 88)=20.568, p<0.001). Then, the difference are shown in Figure 1.

Figure 1. Comparison of differences in attitude to the promotion advertisement, product evaluation and product purchase intention of subjects for different discount presentations.

3.2. Study 2

3.2.1. Experiment 2

The aim of Experiment 2 is to investigate the moderating effect of influence of purchase type on the discount presentations preference, that is, the consumers adopt different thinking modes for decisions. In the experiment, the thinking modes of subjects are not directly manipulated. The reason is that if the thinking modes of participants are changed, the cognition of consumers would be maladjusted, and thus the selection preference is not true. Here, the cognitive load degree is used to indirectly control the different thinking modes of subjects. This is because as adopting the systematic thinking mode, the individual needs adequate cognitive resources to make effective decisions. When using cognitive load, the individual has not enough cognitive resources for systemic thinking, and thus turning to heuristic thinking mode. In contrast, as the consumers have enough cognitive resources, they can select either the heuristic thinking mode or systematic thinking mode. So the thinking mode hinges on the purchase context of the individual. As such, when the merchants present many purchase clues, the consumers would adopt all the clues to make an optimal decision, ascribed to the decision-making maximization of consumers. In this case, the consumers use a systematic thinking mode to analyze all available clues, so as to help them make optimal decisions.

3.2.2. Method

Experiment 2 is performed through a multi-factor intergroup design of 2 (purchase type: material purchase vs. experiential purchase) ×2 (discount type: absolute discount vs. relative discount) ×2 (cognitive load: high vs. low). A total of 360 participants are recruited for experiment, and 347 are valid with the exception of unfinished questionnaires and invalid subjects aware of the experiment purpose (Mage=22.715, SD=5.223). Among them, 171 are male, accounting for 49.28%, and the left are female.

Firstly, the participants are told that there are two unrelated tasks in the experiment, aiming to test their memory ability and evaluation ability of advertisement promotion. Simultaneously, the memory tasks are used to manipulate the different cognitive load states. In the high cognitive load group, the subjects are asked to remember a sequence composed of eight letters and numbers (for example, R36E4CRH). However, in the low cognitive group, the participants are asked to remember a sequence composed of two letters and numbers (for example, R3). They must remember the sequence within 20 seconds, and they could recall the sequence as accurately as possible at the end of the experiment (Kwan et al., 2017).

Then, the participants are invited to evaluate the promotion advertisements. In the material purchase group, a merchant is promoting an earphone of last quarter in vogue, and its promotion advertisement is presented to the subjects, as shown in Appendix A. Whereas, in the experiential group, the participants are told that there will be a concert at XX concert hall, and now the tickets are sold at a discount. Simultaneously, the promotion advertisement is displayed to the participants, as shown in Appendix A. The price discount information of products are illustrated in the promotion advertisement. In the relative discount group, the original price of products is 395 yuan, but now 20% off sale. Likewise, in the absolute discount group, the original price of the products is 395 yuan, and now 316 yuan. After reading the promotion advertisement, the participants are invited to finish the questionnaires with three parts.

Firstly, the subjects should answer the question: Do you like the discount presentations in the promotion advertisement? and finish the seven-point scale ranging from 1 (dislike very much ) to 7 (like very much).

Secondly, in order to make different thinking modes of subjects in different cognitive load groups effectively manipulated, the differences of two thinking modes are explained before the participants complete the items of manipulating thinking modes, so as to correctly distinguish systematic thinking mode and heuristic thinking mode. The item in the questionnaire is What thinking mode do you adopt in the evaluation process? (1=pure heuristic thinking mode, 9=pure systematic thinking mode).

Next, the participants are invited to finish the manipulation test items, including the True or False items of discount presentations (referring to experiment 1A) as well as True or False items of purchase types (What kind of purchase do you think this time?) (1=pure material purchase, 9=pure experiential purchase) (Nicolao et al., 2009). Finally, the participants are asked to recall the sequence composed of a series of letters and numbers and fill in the demographics.

3.2.3. Results

Manipulation check for discount type vs. purchase type: In the absolute discount group (original price 395 yuan, and now 316 yuan), the proportion of participants in favor of absolute discount (MAbsolute=5.145, SD=1.207) is much higher than that of participants in favor of relative discount (MRelative=2.887, SD=1.797; F(1, 342)=187.141, p<0.001). Similarly, in the relative discount group (original price 395 yuan, and 20% off sale now on), the proportion of participants in favor of relative discount (MRelative=4.905, SD=1.542) is much higher than that of participants in favor of absolute discount (MAbsolute=3.019, SD=1.375; F(1, 348)=145.834, p<0.001). The results suggest that the manipulation for discount type is successful. The proportion of participants in the concert tickets group in favor of experiential purchase (MExperiential=5.562, SD=1.974) is significantly higher than that of subjects in the music headphone group (MMaterial=3.499, SD=1.763; F(1, 345)=105.448, p<0.001). Furthermore, the judgment for the purchase type by whether material purchase group (F(1, 346)=20.992, p<0.001) or experiential purchase (F(1, 344)=18.254, p<0.001) is significantly different from the median value 4.5. The results show that the manipulation for discount type is successful.

Thinking mode: The thinking modes of subjects are not directly manipulated but manipulated by cognitive load. Therefore, this test needs to verify whether the thinking modes of subjects are different in the high and low cognitive load groups. As can be seen from the results, the number of subjects adopting the systematic thinking mode in the low cognitive load group (MSystematic=5.291, SD=2.114) is larger than that of subjects in the high cognitive load group (MHeuristic=3.724, SD=1.901; F(1, 345)=24.445, p<0.001). Furthermore, the judgment for the thinking mode by whether high cognitive load group (F(1, 344)=8.218, p<0.001) or low cognitive load group (F(1, 346)=7.331, p<0.001) is significantly different from the median value 4.5.

The results suggest that the subjects are more likely to adopt the systematic thinking mode in the low cognitive load group, while they are more likely to adopt the heuristic thinking mode in the high cognitive load group due to lack of cognitive resources.

Preference on discount presentations of promotion advertisement: The results are as follows. The third-order interaction effect of purchase type, discount presentation and cognitive load is significant (F (1, 345)=5.472, P =0.015). The interaction effect between purchase type and discount presentation is significant (F (1, 345)=12.379, P <0.001). Likewise, the interaction effect between discount presentation and cognitive load is significant (F (1, 345) =12.379, P<0.001). However, the interaction effect between purchase type and cognitive load is not significant (F (1, 345)=1.876, P=0.178). On the basis of further analysis, the interaction effect between purchase type and discount presentation is significant (F (1, 172)=18.926, P <0.001) under low cognitive load. As such, when the product on sale is music headphone, the preference of subjects on the absolute discount presentation (M_Absolute=4.664, SD=1.450) is greatly higher than that on the relative discount presentation (M_Relative=2.772, SD=1.678; F (1, 86) =31.901, p<0.001).

However, as the concert ticket is promoted, the preference margin of subjects about the relative discount presentation (M_Relative=4.218, SD=1.973) is significantly higher than that about the absolute discount presentation (M_Absolute=3.471, SD=1.739; F(1, 84)=3.457, p=0.066). This verifies the main effect of this paper.

However, under high cognitive load, whether the promotional produts are the headphones (M_{Headphone-absolute}=4.435, SD=1.562 vs. M_{Headphone-relative}=2.711, SD=1.701; F(1, 84)=23.999, p<0.001) or concert tickets (M_{Ticket-absolute} = 4.192, SD=1.449 vs. M_{Ticket-relative}= 3.451, SD=1.373; F (1, 85)=5.997, p=0.016), the preference margin of subjects on the absolute discount is much higher than that about relative discount, as exemplified in Figure 2. As such, the hypothesis 2 is verified. We also summarized the experiment results in Table 1 to give a better overview of the obtained data in our work.

Figure 2. Preference of subjects on the different discount presentations under different cognitive load states.

4. Discussion and implications

4.1. General discussion

This paper studies the difference in the preferences on discount presentations under different purchase contexts, and verifies the boundary conditions of matching effect. Two experiments are carried out, and then the conclusions are as follows:

(1) As the consumers implement the material purchase, they prefer the promotion advertisement in an absolute discount way, rather than in a relative discount way. However, as for the experiential purchase of consumers, they prefer the promotion advertisement in a relative discount way.

(2) There exists the moderating effect for matching effect between purchase type and discount way. Namely, only the consumers adopt the systematic thinking mode would the matching effect between purchase type and discount way be considered. But when adopting the heuristic thinking decision mode, the consumer would take the most obvious price clue as the main basis of decision. Therefore, from the perspective of evaluability of price, the consumers prefer absolute discounts.

4.2. Theoretical Contributions

Theoretically, this study introduces the decision-making process of purchase types to the specific promotion context, and then analyzes the mental mechanism states and boundary conditions of consumers before decision under different discount promotions. Thus, our results rich the literatures related to the purchase type and discount way, providing useful guidance to promote products through discount presentations or distribution pricing strategies.

Firstly, this paper expands the research on the difference in the expected utility of purchase type via comparing the material purchase with experiential purchase, which is paid less attention to (Kumar & Gilovich, 2016; Dunn & Weidman, 2015). The research efforts have been focused on the influences of different purchase types on the happiness and different influence mechanisms, and there are few studies on the expected utility of purchase types (Dai, Chan, & Mogilner, 2019).

Secondly, the comparison between the absolute calculation and relative calculation is introduced to the consumption context, i.e., promotion context. Because the consumers often compare the two calculation modes in daily life, less studies are conducted on the advantages and disadvantages of two calculation modes as well as their applications in promotion contexts (Yan, 2019). Here, the calculation comparison is applied in the discount promotion contexts, thus extending the application paradigm of calculation comparison.

In addition, the results of our paper have a certain practical significance. In the past, products were commonly distributed through retails, and the merchants mostly adopt the absolute discount, but this mode could result in the illusion of value loss for consumers. Given that the product price could be equivalent to the value, the direct price reduction reflects the value decrease, which may not be suitable for high-end or experiential purchase. The reason is that the experiential purchase focuses particularly on the enjoyable value, so the direct price reduction of absolute discount could make the experience perception decrease. Furthermore, due to the lower evaluability and comparability of experiential purchase, the computability of absolute discount could not be effectively presented in the comparison process of different experiential purchases.

4.3. Practical Implications

It is concluded in this paper that the merchant can adopt different discount ways according to the consumption type. As such, the merchant promoting via material purchase could attract more attention with the absolute discount mode. Whereas, for the experiential purchase, the price promotions, including the entertainment tickets such as Disney, Fangte and zoo tickets, or the special tour route experience from the tourism website can adopt the relative discount presentations. Moreover, the conclusions of this paper all correspond to their applicable contexts. In this regard, the information on PC is detailed and rich, as well as their application contexts are relatively stable. This is conducive to comprehensive information comparison and in-depth rational thinking (Kahneman, 2011), thus triggering the systematic thinking mode of consumers. Hence, our conclusions can be effectively used for merchants on PC to design promotion discount strategies.

Furthermore, under the traditional offline purchase, the higher search cost often limits the consumers to search for information, resulting in limited information of products. So the offline consumers make effective decisions in dependence on the heuristic clue as shopping.

However, for the online purchase, the consumers can obtain a large amount of product information with a lower cost (Häubl & Trifts, 2000). Moreover, the consumers are less interfered by shopping places and sales personnel during the decision-making process. Therefore, their decision-making is rational, as well as they can independently judge and make a decision by rich product information in the purchase process. In this regard, they are more likely to make a rational decision with a systematic thinking mode. Our results are of great practical significance for merchants to implement the discount presentation and distribution pricing strategies on PC.

4.4. Limitations and future research

In this paper, there are still limitations to be further studied in future. There is a matching effect between purchase type and discount way, and its boundary conditions has been revealed. However, the mediating mechanism of the matching effect is not discussed, and still remains to be addressed further. Besides, customers can buy products through multiple distribution channels, during which the advertising methods may affect, rather than the discount presentation types. It is also an interesting direction to dig into.

Appendix