Discounting in International Markets and the Face Value Effect: A Double-Edged Sword?

Lowe, Ben and Barnes, Bradley R. and Rugimbana, Robert (2012) Discounting in International Markets and the Face Value Effect: A Double-Edged Sword? Psychology and Marketing, 29 (3). pp. 144-156. ISSN 0742-6046. (The full text of this publication is not available from this repository)

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Official URL
http://dx.doi.org/10.1002/mar.20511

Abstract

Consumer response to price is often subjective and prone to systematic perceptual biases, such as the “face value” effect, whereby consumer perceptions of willingness to pay are systematically biased by the nominal value of a new currency. That is, prices presented in higher denomination currencies are perceived to be more expensive and prices presented in lower denomination currencies are perceived to be less expensive. The results from two separate experiments suggest that for high-price products, when a substantial enough discount is invoked, the face value effect can reverse and becomes a double-edged sword. While existing research implies that the face value effect becomes stronger for high-price products, the findings from this research suggest this is the case only when the product is not being promoted. The findings also reveal that the face value effect is robust for low-price products, even when there is a discount, providing further evidence of the effect in new contexts. Consistent with earlier research, this is because in real terms the discount for a low-price product is not perceived as substantial enough. The experiments also suggest that for high-price products, discounts framed as absolute amounts in higher denomination currencies are perceived to be more substantial than discounts framed as percentage amounts. These findings extend existing theory on the face value effect and have several important managerial implications for pricing management in international markets.

Item Type: Article
Subjects: H Social Sciences > H Social Sciences (General)
Divisions: Faculties > Social Sciences > Kent Business School > Marketing
Depositing User: Kasia Senyszyn
Date Deposited: 21 Oct 2011 10:34
Last Modified: 17 Apr 2014 15:13
Resource URI: http://kar.kent.ac.uk/id/eprint/28292 (The current URI for this page, for reference purposes)
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