Final Price Neglect in Multi-Product Promotions: How Non-Integrated Price Reductions Promote Higher-Priced Products.

Price reductions take either an integrated form (e.g. a discount shown directly on the price tag) or a non-integrated form (e.g. a discount contained in a coupon sent to consumers and thus separate from the price tag). This research examines how non-integrated versus integrated promotions influence choices among vertically differentiated products. Under an integrated promotion (e.g. $10 off) applicable to multiple products (e.g. original list prices: $50 vs. $30), consumers directly compare these products' post-promotion final prices displayed on their price tags (after a reduction of $10: $40 vs. $20). In contrast, under a non-integrated promotion of the same monetary value, consumers simply compare these products' original list prices ($50 vs. $30) and neglect their post-promotion final prices, which require calculations. The list prices ($50 vs. $30; relative to the final prices: $40 vs. $20) as a basis for price comparison reduce the perceived price difference between these products. Consequently, a non-integrated promotion (compared to an integrated promotion) increases consumers' choice of higher-priced products. A series of experiments (N  = 5,187) demonstrate this effect and support the final price neglect mechanism. Furthermore, although attenuated, this effect still emerges for price reductions of a smaller magnitude or in a percent-off format. [ABSTRACT FROM AUTHOR]