One of the most common forms of promotion utilized by marketers is price discounts. The use of discounts has increased over the years, for example the number of coupons distributed between 1976 and 2000 nearly quadrupled (Darke & Chung, 2005, p. 35). Researchers disagree about whether discounts undermine perceptions of product quality or lead to increases in perceptions of value. Another tactic used is everyday-low-price-claims (EDLPs), which have been found to convey value while maintaining the perception of product quality. Some retailers offer free gifts, or premiums, which are highly valued. In the present analysis framing effects in marketing will be examined from an industrial/organizational psychological perspective (Levy, 2009, p. 118).
According to Transaction utility theory (TUT; Thaler, 1985, p. 203) discounts provide acquisition utility and transaction utility, in that they lower the amount paid, and the perceived merits of the deal reach beyond the economic outcomes (Darke & Chung, 2005, p. 36). In Transaction utility theory, framing perspective is used by manipulating the discount frame while holding the selling price constant. Doing so varies the transaction utility, while holding acquisition utility constant. In other words, the same amount of money is spent.
When consumers are uncertain of the quality of a product, they tend to use price as an indicator (Darke & Chung, 2005, p. 36). If a product is discounted and unfamiliar, they are more likely to make negative-price quality inferences. Darke and Chung assert that it is also possible for negative quality inferences to undermine the discount value via transaction utility. Transaction utility is a function of the expected price relative to the selling price, according to TUT. The authors hypothesized that negative quality inferences would actually restrict discount frames from increasing deal value when the discount was created by a lower selling ...