Framing Online Promotions: Shipping Price Inflation and Deal Value Perceptions

Purpose: This research seeks to examine differences in perceived shipping charge inflation associated with online promotions presented as reducing base product price, reducing shipping surcharge, or reducing all-inclusive price and its impact on deal values for shipping charge skeptics and non-skeptics. Design/methodology/approach: Drawing from research on multi-component pricing and mental accounting, a laboratory experiment investigates if shipping charge skeptics differ in their perceptions of shipping charge inflation for different presentations of online promotions from non-skeptics, and if they differ in perceived deal value of economically equivalent promotions presented as reduced product price, reduced shipping charge promotion, or reduced all-inclusive price for high and low priced items with small or large shipping fees at retail websites. Findings: Analyses show that shipping charge skeptics differ from non-skeptics in their perceptions of shipping charge inflation and deal values for different online promotions only when the surcharge is large relative to the base price. Reduced price promotions are most attractive for high-priced items with low surcharge but least attractive for large surcharge sizes. For large surcharge sizes, shipping charge skeptics prefer reduced all-inclusive price promotions to reduced shipping promotions, while non-skeptics prefer reduced shipping promotions to reduced all-inclusive price promotions. Research limitations/implications: The results suggest that the effectiveness of various promotion frames at online stores differ based on base price, surcharge size, and consumer skepticism of shipping charge. Robustness of the results obtained at different levels of discount sizes need investigation. Practical implications: Online retailers that have to charge high shipping fees can use promotions to shift the referent price component used by consumers to calculate savings and mitigate perceptions of shipping or base price inflation. For equivalent dollar savings, retailers can use reduced shipping charge promotions to communicate higher deal values to shipping charge non-skeptic consumers than reduced base price or reduced all-inclusive promotions. Originality/value: This research examines how consumer perceptions of deal values differ, even though objective savings and financial outlay is the same, when promotions are presented as reducing product price versus surcharge