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GENERAL INSTRUCTIONS

Read and respond to the questions provided below under “Specific Question Prompt Instructions”.  Your response must include references to the lecture, powerpoint, and/or text to ensure you have studied the material before you begin applying the material. See the rubric for guidelines regarding the exact manner in which you should reference the material. Your response must be ONE page in length and must be written in essay style consisting of paragraphs.  There is no need to refer to the question numbers in your response.  See the rubric for guidelines on how you will be graded with regard to length.  Find ONE article to support your answer to the questions, and refer to it ANYWHERE in your response and upload the article with your Word document. If you include a quotation, you must explain what your quotation means and why it is relevant. Refer to the rubric to see how you will be graded in reference to incorporating the article within the text of your response. Include a reference page in APA style for each submission. The articles must be 7 to 20 pages long, published within the last 10 years, and peer reviewed. See the rubric for specifics on how you will be graded.

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SPECIFIC QUESTION PROMPT INSTRUCTIONS

Framing Effects

Li, Sun, & Wang (2007) in their article “50% Off or Buy One Get One Free? Frame Preference as Function of Consumable Nature in Dairy Products,” provide an overview of a number of types of framing effects. With framing effects, the person is presented with two choices that will lead to the same result, but the wording of each option influence which one people are more likely to select. In their experiment, Li, Sun, & Wang (2007) found that the consumable nature of the item influence which deal the person was likely to perceive as being preferred. For low consumption items, participants preferred price promotions (e.g., 50% off of an item) while for high consumption items, the preferences was for extra-product promotions (e.g., the buy one get one free).

Framing Examples from Li, Sun, & Wang (2007):

Consumers, for an item that in the end would cost the same, were more accepting of forgoing a discount rather than accepting a surcharge.

Consumers were more likely to buy beef when it was labeled 75% lean versus when it was labeled 25% fat.

Consumers selected a price reduction in terms of a percentage or a dollar amount depending on the cost of the item. For more expensive items, consumers preferred the price reduction in dollars over a percentage because it seemed more significant. However, for inexpensive items, consumers prefer a price reduction stated in terms of percentage which appears larger.

Reference

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The Journal of Social Psychology

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147

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Please see attached article:

Li, Sun, & Wang 2007.pdf

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Questions:

What do framing effects tell us about people’s judgment and decision making abilities?

Why do you think frame effects occur?

Do you think knowing about framing effects will influence you future decisions?

The Journal of Social Psychology, 2007, 147(4), 413–421
Copyright © 2007 Heldref Publications
50% Off or Buy One Get One Free? Frame
Preference as a Function of Consumable
Nature in Dairy Products
SHU LI
YAN SUN
YONG WANG
Chinese Academy of Sciences
ABSTRACT. Previous studies on how framing differentially affects consumer perceptions
of value from equivalent deals indicate that perceptions of deal value from price-saving
versus extra-product promotions are moderated by the stock-up characteristic of the category. In this study, the authors explored the relationship between stock-up characteristic
and frame preference and the influence of the consumable nature of goods on frame
preference. An experiment involving 223 student participants showed that consumable
nature, but not stock-up characteristic, affected frame preference. The authors discuss
the implications of this finding for the study of information framing and how it impacts
consumer judgment and decision making.
Keywords: advertising, decision making, sales promotion
DIFFERENT REPRESENTATIONS of the same choice frequently do not yield
the same preferences. This concept of framing originated from Savage’s (1954)
and Raiffa’s (1968) analyses of the Allais problem, which describes how decision
makers tend to place a disproportionate weight on outcomes that are certain over
those that are only a possibility. Continuing in this line of research, Kahneman
and Tversky (1979) showed that a choice between a certain option (a “sure thing”)
and a risky option (a gamble) was affected by the wording of the options. Thaler
(1980) found that it was easier for consumers to forgo a discount than to accept
a surcharge, even when both decisions cost consumers the same amount. Levin
Shu Li began this research while teaching at Nanyang Technological University.
This study was partially supported by the Hundred Talents Program of the Chinese
Academy of Sciences and the National Natural Science Foundation of China (Grant
70632003). The authors thank Goh Chen Peng, Aileen Kwek Meei Huey, and Tan Hui Ping
for their help with the questionnaire scenarios and data collection.
Address correspondence to Shu Li, Center for Social and Economic Behavior, Institute of
Psychology, Chinese Academy of Sciences, Beijing, China; lishu@psych.ac.cn (e-mail).
413
414
The Journal of Social Psychology
(1987) and Levin and Gaeth (1988) evaluated the associative effects of various
ways of framing consumer information and showed that the consumers’ evaluations were more favorable toward beef labeled “75% lean” than that labeled “25%
fat.” Ganzach and Karsahi (1995) reported that a negatively framed message
about the loss incurred by using a check instead of a credit card produced higher
credit card utilization and charges than did a positively framed message about the
gains from using a credit card.
In analyzing how framing affects decisions in a retail price promotion, Grewal
and Marmorstein (1994) proposed the psychophysics-of-price heuristic. According to Grewal and Marmorstein, consumers show a “tendency to assess the utility
of price savings as a proportion of the item’s price” (p. 453). However, researchers
have proposed different theories to explain the effects of framing in other situations, such as windfall gains (Arkes, Joyner, & Pezzo, 1994) and risk preference.
Kahneman and Tversky (1979) proposed that the effect of framing on risk preference could be depicted by an S-shaped value function that is concave for gains,
convex for losses, and steeper for losses than for gains. More recently, Li (1998)
and Li and Xie (2006) explained risk preference through their equate-to-differentiate account, which claims that the mechanism governing decision making in risky
situations does not involve the maximization of some kind of mathematical expectation but, rather, relates to some generalization of dominance detection. According to the equate-to-differentiate model, framing influences choice by affecting
how decision makers perceive differences between possible outcomes.
Research on price promotions typically falls into one of two streams. The
first involves the consideration of consumer-background (or descriptor) variables
as possible moderators of the effect of price promotions on consumer behavior.
Research in this stream often correlates consumer background variables with
choice of promoted items. For example, DelVecchio (2005) reported that dealprone consumers were sensitive to the value of a promotion relative to other
available promotions in a condition of high absolute-dollar savings. Shirai and
Bettman (2005) demonstrated that both the expected length of time to the next
deal and the perceived price difference deviating from a consumer’s internal reference price influenced price evaluations.
The second stream of research focuses on how different means of price promotion affect consumer behavior. A decision frame refers to a decision maker’s perception of the behaviors, outcomes, and contingencies associated with a particular
choice. Chen, Monroe, and Lou (1998) found that, for high-priced items, consumers
saw a price reduction framed in dollar terms as more significant than one expressed
in percentage terms, and the opposite was true for low-priced products. Their rationale was that for a given percentage discount, the absolute value of the price reduction is higher for higher-priced products, whereas for a given absolute price discount,
the relative percentage reduction is higher for lower-priced products.
Research on the promotional framing of prices, known as deal semantics
(Berkowitz & Walton, 1980; Gourville, 1998; Grewal, Marmonstein, & Sharma,
Li, Sun, & Wang
415
1996; Lichtenstein, Burton, & Karson, 1991; Liefeld & Heslop, 1985), can be
classified under the second stream. In studying how consumers perceive the value
of transactions when they are presented with deals that are equivalent on a unitcost basis but worded differently, Sinha and Smith (2000) went beyond previous
accounts by focusing on category-specific variables rather than the main effects
of semantic cues on evaluations of equivalent deals. The stock-up characteristic
of the category—whether or not it can be accumulated and stored—influenced
how consumers in their study perceived the transaction value of price versus
extra-product promotions. Sinha and Smith found that the nature of products
influenced the perceived transaction value of two deal types—price promotions
(e.g., 50% off) and extra-product promotions (e.g., buy one get one free)—and
that straight price reductions (i.e., lowering the absolute price the consumer has
to pay) generally work better at encouraging purchases than do bonus-pack offerings, particularly in non-stock-up categories.
Litvack, Calantone, and Warshaw (1985) developed a taxonomy of stockup versus non-stock-up products, with items such as light bulbs and toothpaste
falling in the former category and products such as vinegar and milk falling
in the latter. A closer examination of the taxonomy suggests that consumable
nature—how quickly an item is used up and/or needs to be replaced—may
also serve as a moderator in the relationship between framing and consumers’
perceptions of prices. For example, a hammer falls into the stock-up category
because it is not readily perishable and thus it is easily stockpiled. According to
Litvack et al. and Sinha and Smith (2000), consumers are more likely to derive
higher transaction value from extra-product promotions (e.g., buy one get one
free) within stock-up categories than non-stock-up categories because they can
always save the additional amount for the future. However, in the case of a
durable, nonconsumable product such as a hammer, a price promotion (e.g., 50%
off) could be much more attractive than an extra-product promotion because it
is unlikely for a consumer to feel the need to possess (or purchase) more than
one hammer simultaneously.
Guided by such thinking, we designed the following experiment to examine
in further detail whether we could use stock-up characteristic and/or consumable
nature to predict consumer preferences across differently framed, yet equivalent,
promotions. We chose four products—powdered cheese, yogurt, powdered milk,
and fresh milk—as experimental stimuli. We picked these particular products
not only because they all fall under a single product category—dairy—but also
because they represent all four potential variations of stock-up characteristic and
consumption level (see Table 1).
On the basis of a pilot study, we selected, for the present study, fresh milk
and yogurt to represent non-stock-up categories (because of the higher risk of
perishability) and powdered milk and powdered cheese to represent stock-up categories. We considered powdered cheese and yogurt to have a low consumption
level because in Singapore, induced buying of these products, such as through
416
The Journal of Social Psychology
TABLE 1. Classification by Consumption Level and Stock-Up Characteristic
of the Four Dairy Products Chosen for the Study
Stock-up characteristic
Consumption level
High
Low
Stock-up
Non-stock-up
powdered milk
powdered cheese
fresh milk
yogurt
sales, does not lead to a higher rate of usage. We considered powdered milk and
fresh milk to have a high consumption level.
We proposed two hypotheses (H) for the present study.
H1: The difference in consumer perceptions of the transaction value of price promotions versus extra-product promotions will be significantly higher for the non-stockup items than for the stock-up items (see Sinha & Smith, 2000).
H2: Consumable nature will moderate the difference in consumer perceptions of deal
value from price versus extra-product promotions.
Method
Participants
Participants were 223 Singaporean students (125 women and 98 men) from
various disciplines at Nanyang Technological University. All participants were
volunteers.
Materials and Procedure
We prepared four hypothetical purchasing problems involving dairy-product
promotions at two different supermarkets: Supermarket 1 offered an extra-product promotion (buy one get one free) and Supermarket 2 offered a price promotion
(50% off). We presented two versions of the problems in questionnaire format
(see Appendix). We randomly assigned 103 participants to respond to Version
A of the questionnaire and 120 participants to respond to Version B. We asked
participants to indicate their promotion preferences by circling a number on a
7-point Likert-type scale ranging from 1 (definitely buy from Supermarket 1) to
7 (definitely buy from Supermarket 2).
Design
The four dairy products in the above purchasing problems can be identified
and distinguished from each other by crossing two variables: (a) consumption
Li, Sun, & Wang
417
level (low, powdered cheese and yogurt; high, powdered milk and fresh milk)
and (b) stock-up characteristic (stock-up, powdered milk and powdered cheese;
non-stock-up, fresh milk and yogurt). Thus, the experimental design was a 2 (Low
Consumption Level vs. High Consumption Level) × 2 (Stock-Up Characteristic
vs. Non-Stock-Up Characteristic) mixed design, with consumption level as the
between-subjects factor and stock-up characteristic as the within-subjects factor.
Results
Figure 1 shows mean scores for promotion preferences (rated on the aforementioned 7-point Likert-type scale) as a function of the stock-up characteristic
and consumable nature of the dairy products in this study. An analysis of variance
(ANOVA) showed a main effect of the consumable nature on the rated preference, with participants more likely to choose the price promotion (50% off) for
the low-consumption-level items (powdered cheese and yogurt) and the extraproduct promotion (buy one get one free) for the high-consumption-level items
(powdered milk and fresh milk), F(1, 221) = 9.190, p < .01, η2 = .04. Participants’ Low Consumption Level High Consumption Level Promotional Preference 7 6 5 4 3 2 1 Stock-up Non-stock-up Stockup Characteristic of Dairy Products FIGURE 1. Mean scores of promotional preference as a function of the stockup characteristic (stock-up vs. non-stock-up) and consumable nature (low consumption level vs. high consumption level) of dairy products. Lower scores indicate preference for the buy one get one free promotion; higher scores indicate preference for the 50% off promotion; a score of 4 indicates no preference. 418 The Journal of Social Psychology preferences for the two deals did not vary between the stock-up and non-stock-up categories, F(1, 221) = 0.943, p = .33, η2 = .004. Moreover, there was no significant two-way interaction, F(1, 221) = 1.231, p = .27, η2 = .006. Discussion The results of the present study indicate that participants differentially perceived the two monetarily equivalent deals and that the cause of these differences was the consumable nature of the product category, not the stock-up characteristic. Thus, the results support H2 but not H1. In that we saw differences in participants’ choices between the two promotional framing conditions, our results contradict the principle of descriptive invariance (Tversky, Sattath, & Slovic, 1988), which holds that individuals’ decisions and preferences should not change solely because their options are described differently. Retailers’ increased use of promotions in recent years (Promotion Marketing Association, 2004) makes the study of consumers’ perceptions of promotional framing of price more noteworthy. Sinha and Smith (2000) found that the nature of framing appears to differentially affect consumer perceptions of value from equivalent deals and that stock-up characteristics moderate consumer perceptions of deal value from price versus extra-product promotions. In the present study, we found, somewhat surprisingly, no support for the role of the stock-up characteristic in moderating perceptions of transaction value from different deal types. It is worth noting that Sinha and Smith’s experiment examined three types of promotional offers: (a) price promotions (e.g., 50% off), (b) volume or extraproduct promotions (e.g., buy one get one free), and (c) mixed promotions involving a price discount on an extra product (e.g., buy two get 50% off). However, in the present experiment, we replicated a portion of Sinha and Smith’s design without examining the mixed promotion. We decided to omit the mixed promotion because although it is common in the United States, where Sinha and Smith conducted their study, it is not used by Singaporean supermarkets and thus may have sounded odd to our student subject pool. Both price and extra-product promotions are frequently used to attract consumers and induce them to buy products. In particular, extra-product promotions speed up clearance sales (in terms of unit transactions) more than do price promotions. However, the marketing implication of the present finding is that extra-product promotions may not work better in selling off excess stock in certain cirumstances. If the excess stock is of a low consumable nature (such as optical glasses and rubber bath mats), then adopting a 50% off promotion may help sell off excess stock faster than would adopting a buy one get one free promotion. If, however, the excess stock has a high usage rate (such as contact lenses and bath tissue), then using a buy one get one free promotion may work better in accelerating consumers’ purchase decisions. Thus, it is advisable that retailers take the consumable nature of goods into account when deciding what promotional deals to use. Li, Sun, & Wang 419 Because extra-product promotions involve offering consumers an additional amount of the product for no additional price, other theories related to consumable nature, such as diffusion of innovations or psychology of waste, also may explain people’s differential preferences across equivalent promotions. Arkes (1996) proposed the concept of a psychology of waste to suggest that the appearance of wastefulness is sufficiently aversive to motivate people to make choices that are contrary to their own economic self-interest. Moreover, cultural differences in how people view waste or thrifty innovation (e.g., Lumpkin, Hawes, & Darden, 1986) may also factor into their decision-making processes. For example, Wu (1983) categorized the Chinese as hardworking, thrifty, self-reliant, and risk-taking. Such culture-rooted values may affect the role of deal framing on consumers’ responses. By considering how these variables relate to consumable nature, future researchers can further our understanding of how framing information influences the way in which people evaluate deals that are actually monetarily the same. AUTHOR NOTES Shu Li is a professor at the Center for Social and Economic Behavior, Institute of Psychology, Chinese Academy of Sciences. His research interests are in the area of behavioral decision making. Yan Sun is a doctoral candidate at the Institute of Psychology, Chinese Academy of Sciences. His current research is on risky and intertemporal decisions, and he is also interested in decision-making bias in consumer behavior. Yong Wang is an associate professor at the Center for Social and Economic Behavior, Institute of Psychology, Chinese Academy of Sciences. His research interests are in the area of consumer decision making and brand choice. REFERENCES Arkes, H. R. (1996). The psychology of waste. Journal of Behavioral Decision Making, 9, 213–224. Arkes, H. R., Joyner, C. A., & Pezzo, M. V. (1994). The psychology of windfall gains. Organizational Behavior and Human Decision Processes, 59, 331–347. Berkowitz, E. N., & Walton, J. R. (1980). Contextual influences on consumer price responses: An experimental analysis. Journal of Marketing Research, 17, 349–358. Chen, S. S., Monroe, K. B., & Lou, Y. (1998). The effects of framing price promotion messages on consumers’ perceptions and purchase intentions. Journal of Retailing, 74, 353–372. DelVecchio, D. (2005). Deal-prone consumers’ response to promotion: The effects of relative and absolute promotion value. Psychology and Marketing, 22, 373–391. Ganzach, Y., & Karsahi, N. (1995). Message framing and buyer behavior: A field experiment. Journal of Business Research, 32, 11–17. Gourville, J. T. (1998). Pennies-a-day: The effect of temporal reframing on transaction evaluation. Journal of Consumer Research, 24, 395–408. Grewal, D., & Marmorstein, H. (1994). Market price variation, perceived price variation, and consumers’ price search decisions for durable goods. Journal of Consumer Research, 21, 452–460. Grewal, D., Marmorstein, H., & Sharma, A. (1996). Communicating price information through semantic cues: The moderating effects of situation and discount size. Journal of Consumer Research, 23, 148–155. 420 The Journal of Social Psychology Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47, 263–291. Levin, I. P. (1987). Associative effects of information framing. Bulletin of the Psychonomic Society, 25, 85–86. Levin, I. P., & Gaeth, G. J. (1988). How consumers are affected by the framing of attribute information before and after consuming the product. Journal of Consumer Research, 15, 374–378. Li, S. (1998). Can the conditions governing the framing effect be determined? Journal of Economic Psychology, 19, 133–153. Li, S., & Xie, X. F. (2006). A new look at the “Asian disease” problem: A choice between the best possible outcomes or between the worst possible outcomes? Thinking and Reasoning, 12, 129–143. Lichtenstein, D. R., Burton, S., & Karson, E. J. (1991). The effect of semantic cues on consumer perceptions of reference price ads. Journal of Consumer Research, 18, 155–173. Liefeld, J., & Heslop, L. A. (1985). Reference prices and deception in newspaper advertising. Journal of Consumer Research, 11, 868–876. Litvack, D. S., Calantone, R. J., & Warshaw, P. R. (1985). An examination of short-term retail grocery price effects. Journal of Retailing, 61, 9–25. Lumpkin, J. R., Hawes, J. M., & Darden, W. R. (1986). Shopping patterns of the rural consumer: Exploring the relationship between shopping orientations and outshopping. Journal of Business Research, 14, 63–81. Promotion Marketing Association. (2004, April 1). Study reveals 2003 consumer promotion expenditures double consumer advertising (Press Release). Retrieved August 6, 2007, from http://www.pmalink.org/press_releases/default.asp?p=pr_04012004 Raiffa, H. (1968). Decision analysis: Introductory lectures on choices under uncertainty. Reading, MA: Addison-Wesley. Savage, L. J. (1954). The foundations of statistics. New York: Wiley. Shirai, M., & Bettman, J. R. (2005). Consumer expectations concerning timing and depth of the next deal. Psychology and Marketing. 22, 457–472. Sinha, I., & Smith, M. F. (2000). Consumers’ perceptions of promotional framing price. Psychology and Marketing, 17, 257–275. Thaler, R. (1980). Toward a positive theory of consumer choice. Journal of Economic Behavior and Organization, 1, 39–60. Tversky, A., Sattath, S., & Slovic, P. (1988). Contingent weighting in judgment and choice. Psychological Review, 95, 371–384. Wu, Y.-L. (1983). Chinese entrepreneurs in Southeast Asia. American Economic Review, 73, 112–117. Received February 4, 2006 Accepted July 11, 2006 Note. Participants were asked to rate their purchasing preferences on a 7-point Likert-type scale ranging from 1 (definitely buy from Supermarket 1) to 7 (definitely buy from Supermarket 2). Version B Problem 1 Suppose you are buying powdered milk. Below are two promotions in two supermarkets: Supermarket 1: Buy 1 tin of 1-kg powdered milk, get another 1-kg tin free. Supermarket 2: 50% off 1 tin of 1-kg powdered milk. Problem 2 Suppose you are buying fresh milk. Below are two promotions in two supermarkets: Supermarket 1: Buy a 1-liter carton, get another 1-liter carton free. Supermarket 2: 50% off a 1-liter carton. Version A Problem 1 Suppose you are buying 100% grated powdered cheese (250 g). Below are two promotions in two supermarkets: Supermarket 1: Buy a packet of powdered cheese (250 g), get another packet (250 g) free. Supermarket 2: 50% off a packet of powdered cheese (250 g). Problem 2 Suppose you are buying yogurt (500 g). Below are two promotions in two supermarkets: Supermarket 1: Buy a carton (500 g), get another carton (500 g) free. Supermarket 2: 50% off a carton (500 g). APPENDIX Purchasing Problems Involving Dairy Product Promotions Li, Sun, & Wang 421 ���������� � � ����������������������������������� � ������������������������������������������� ���������������������������������������������������� ��������������������������������������������������� ������������������������������������������������� ������������������������������������������������ ���������������������������������������������������� ��������������������������������������������� ����������������������������������� ����������������������������� ���������������������� �� � � � � ��������� ���������������������������������������������������� �������������������������������������������������� � ��������������������� �������������������������������������� ����������������������������������� ��������������������������� �� � � � � ��������� �������������������������������������������������� �������������������������������������������������� � ��������������������� �������������������������������������� ��������������������������������� �� � � � � ��������� ���������������������������������������������������� �������������������������������������������������� � ��������������������� �������������������������������������� ��������������������������������� �� � � � � ������������������� ���������������������� ��������������������������� ���������������������������� ���������������������������� ��������������� �������������������� �������������������������� ������������������������� �������������� ������������������ ��������� ���������������������������������������������������� �������������������������������������������������� � ��������������������� �������������������������������������� ��������������������������� ����������������������������� �� ��������� � ��������������������������������������������������� � �������������������������������������������������� � ��������������������� � �������������������������������������� �������������������������������� ��������������� ��������������� � ���������� ��������������������������� ����������������������������� � ���� � ���� �� � � � � �������� ��������������������������������������������� ����������� ������������������ ��������� ������������������ ��������� ���������������������������������������������������� �������������������������������������������������� � ��������������������� �������������������������������������� ���������� �� � � � � ��������� �������������������������������������������������� ������������������������������������������������ � ��������������������� �������������������������������������� ���������������� ������� ��������������� ��������������� � ������� �������������������������������������������������������������������������������������������� ����� Purchase answer to see full attachment

  
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