Search

This research investigates how a price promotion on a fast-moving consumer good influences the sales of substitute products in a retail shelf or online display. An analysis of supermarket yogurt data finds that when nonpromoted products are strong substitutes for the promoted product, a 1% decrease in the price of the promoted product results in a.25% decrease in the sales of proximal products but no change in the sales of distal products—a negative promotion-proximity effect. However, when nonpromoted products are weak substitutes for the promoted product, a 1% decrease in the price of the promoted product results in a.10% increase in the sales of proximal products but no change in sales for distal products—a positive promotion-proximity effect. Subsequent studies show that these effects occur because a proximal strong substitute is more likely to enter a consideration set with the promoted product (negative promotion-proximity effect) and a proximal weak substitute is more likely to be seen and considered by a consumer who is not interested in the promoted product (positive promotion-proximity effect). [ABSTRACT FROM AUTHOR]

Consumers often set budgets with the goal to minimize their spending. Contrary to this traditional interpretation, our research suggests that budgets can take on a different psychological meaning depending on whether the budget is for a personal or gift purchase. Across 11 studies, we find that consumers aim to spend below their budgets for personal purchases (budget minimizing) but aim to spend the entirety of their budgets for gift purchases (budget maximizing). We differentiate budget maximizing from spending maximizing, showing that gift purchasers are more likely to prefer "at-budget" than "above-budget" purchases. We also show that gift purchasers have weaker savings goals than personal purchasers—a difference that mediates the effect on their budget-minimizing and -maximizing tendencies. We explore multiple reasons that could explain why savings goals are less prevalent among gift purchasers and find an upstream role for price consciousness, guilt, and perceived specialness. Finally, we find that consumers' preference for spending the entirety of their budgets on gifts was moderated by two separate factors: consumers' budget slack and salience. Our research adds to the literatures on mental budgeting, gift giving, and self-other decisions. [ABSTRACT FROM AUTHOR]

While budgeting in advance is seen as a good practice to control spending, this research shows that budgeting too early for a specific purchase may increase spending. We argue that as the temporal separation between budget setting and actual purchase increases, consumers become more willing to overspend because of what we term "budget depreciation." Consumers adapt to the reference point set by the budget such that, over time, the budgeted level becomes the status-quo spending. Thus, as more time passes, pain of payment from the budgeted amount decreases, and the willingness-to-spend increases. Across a secondary dataset of real estate purchases, one field study, and three experiments, we find evidence that consumers who set a budget in the distant (vs. near) past are more likely to overspend relative to their budget. The effect emerges for single purchase occasions rather than a category of purchases over multiple occasions. It emerges because of the hypothesized pain-of-payment process (e.g. effect is stronger among tightwads, who feel greater pain from spending; effect is mitigated under budget reassessment, which prevents pain adaptation). Our work contributes to the mental budgeting literature by invoking a role for temporal separation and draws a novel connection to prior work on payment depreciation. [ABSTRACT FROM AUTHOR]