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Abstract
Existing research has investigated the pennies-a-day strategy of reframing an aggregate expense as a per
day expense (Nagle & Holden, 1995; Price 1995; Gourville 1998). This paper extends this research by
considering the incremental impact on compliance of explicitly comparing the cost of a transaction to a specific
petty cash expense (e.g., a cup of coffee). We show that in the presence of a per day framing of price (e.g., $1
per day), an explicit comparison provides little added value. However, we also show that in the presence of an
aggregate framing of price (e.g., $350), an explicit comparison to a petty cash expense is sufficient to generate
a pennies-a-day perspective. We conclude that it is not the per day framing, per se, which drives penniesa-day effectiveness, but the petty cash comparisons that such a framing either implicitly or explicitly generates.
Key words: Pennies-a-day strategy, pricing, temporal framing, consumer choice
Introduction
For the past several years, Jennifer Convertibles has been running print ads that promote
their sleeper sofas. One recent ad claims If you can afford this, and shows a
McDonalds-style lunch priced at $3.99 a day, then you can afford this and shows a
sofabed and loveseat priced at $1.68 a day. Upon reading the fine print, one finds that
the true cost of the offering is $999, payable (after finance charges) in 24 monthly
installments of $49.95 each, for an effective price of about $1.68 per day. Ads similar
in spirit have been employed by Saab, which encourages us to find our own road and
points out that we can do so either by renting a canoe for $19 a day or by leasing a Saab
automobile for $14 a day, and by Kellogg, which informs us that for less than the cost
of a postage stamp, you can address a bowl of Kelloggs Corn Flakes.
These ads employ a variation of what Gourville (1998) describes as a pennies-a-day
(PAD) pricing strategy, characterized by the reframing of a target transaction from an
aggregate expense to a per day expense (also see Nagle and Holden 1995; Price
1995). An example of such a strategy includes the charitable organization which reframes
a $100 donation as 27 a day to encourage compliance. Across several studies, Gourville (1998) finds that a per day framing systematically fosters a favorable comparison to
petty cash types of expenses and shows that such a comparison is often sufficient to
reduce the perceived cost of the target transaction.
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The Jennifer, Saab and Kellogg ads raise several interesting questions with regard to
this pennies-a-day strategy, however. First, these ads do more than just reframe an otherwise aggregate expense as a per day expense. They take the process a step further and
explicitly encourage consumers to consider a specific petty cash expense (e.g., a
McDonalds-style lunch). However, if the simple framing of a transaction as a per day
expense is sufficient to naturally foster a comparison to petty cash expenses, as suggested
by Gourville (1998), what incremental benefit is there to explicitly providing a comparison for consumers to consider?
Second, the use of a per day pricing strategy to promote items as diverse as sofas, cars
and cereals calls into questions the bounds of PAD effectiveness. Is a per day framing
sufficient to reduce the perceived cost of any product, or might PAD effectiveness be
sensitive to the characteristics of the product being promoted? We will take one cut at this
question by testing the relationship between one particular product characteristici.e., the
natural rate of product consumptionand PAD effectiveness.
In addressing these questions, this article explores how the use of either an implicit
comparison, via a simple per day price framing, or an explicit comparison can impact a
consumers perception of product affordability. In doing so, we demonstrate that it is not
the per day framing, per se, which drives PAD effectiveness, but the comparisons that
either implicitly or explicitly accompany such a framing. Finally, we show that a PAD
strategy is not universally effective, but rather, dependent upon the characteristics of the
promoted product.
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To account for this effectiveness, Gourville proposes that consumers follow a two-step
decision making process of (1) comparison retrieval and (2) transaction evaluation when
assessing the expense of a target transaction. He argues that within the first step of this
process the temporal framing of price can systematically influence the nature of the
comparison expenses a consumer retrieves, with an aggregate framing fostering the
retrieval of large infrequent expenses (e.g., new suits, vacations) and a per day framing
fostering the retrieval of petty cash expenses (e.g., snacks, lottery tickets). Subsequently,
within the second step, the consumer assess the palatability of a target transaction in the
context of these retrieved expenses, with the petty cash expenses resulting from the per
day framing typically proving more palatable than the large infrequent expenses resulting
from the aggregate framing. It is important to note, however, that Gourville (1998) also
finds evidence that a per day framing can prove ineffective or even counter-effective
under certain conditions. He speculates that this ineffectiveness occurs when consumers
reject the implied petty cash comparison as appropriate for the specific target transaction.
2. Hypotheses
2.1 The role of explicit comparisons in PAD effectiveness
To date, research has investigated the effect of a simple temporal price framing (i.e.,
without an accompanying explicit comparison) on transaction compliance. This past research suggests that the framing a transaction as a per day expense implicitly promotes
comparisons to petty cash expenses. In the present research, we are interested in the
potential additional role of explicit comparisons on transaction compliance. In particular, we are interested in the following questions.
First, what role is played by an explicit comparison to a specific petty cash expense
when it accompanies an otherwise simple per day price framing, as in the case of the
Jennifer, Kelloggs and Saab ads? If a consumer is predisposed to consider petty cash
expenses in response to the per day framing, as suggested by Gourville (1998), the
provision of the explicit comparison should be redundant. Therefore, relative to an ad that
only contains a per day price framing, an ad which contains both a per day framing and
an explicit petty cash comparison should not alter compliance. We capture this thinking in
the following hypothesis:
H1: In the presence of a per day price framing, the addition of an explicit comparison
to a petty cash expense will not significantly alter transaction compliance.
Second, what is the role of an explicit comparison to a petty cash expense in the
absence of a per day price framing? Imagine a charitable request for $300. In the
absence of an explicit comparison, such a request has been shown to evoke comparisons
to large infrequent expenses and lead to relatively low transaction compliance (Gourville
1998). Now imagine the same $300 request additionally framed as less than the cost
of a years worth of morning coffees. The request is still an aggregate request for $300,
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but now with an explicit comparison to an ongoing petty cash expense. If PAD effectiveness is due to the comparisons one considers, the explicit comparison to a years worth of
morning coffees may be sufficient to impact compliance, in spite of the otherwise aggregate framing of price. This is reflected in the following hypothesis:
H2: In the absence of a per day price framing, an explicit comparison to a petty cash
expense will impact compliance as if a per day framing had been provided.
Taken together, these hypotheses suggest that either a per day price framing or an
explicit comparison is sufficient to foster a petty cash perspective. More generally, they
suggest that it is not the per day framing, per se, which drives PAD effectiveness, but the
petty cash comparisons that either implicitly or explicitly accompany such a framing.
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3.1 Method
Subjects. Subjects for this study were 128 students at University of Chicago who were the
recruited via flyers posted on campus and who were paid five dollars for their participation.
Stimuli. This study consisted of two questionnaires filled out in sequence. The first
questionnaire presented a series of print ads which subjects were asked to evaluate on the
five perceived value dimensions. The second questionnaire asked subjects to assess their
rate of consumption for the advertised products as well as their familiarity with and
opinions about those products.
Questionnaire 1. The first questionnaire consisted of eight print ads that subjects were
told were mock-ups of actual magazine ads. Each showed a product being offered, some
details about that product and a specific pricing claim. All but one of the ads were filler
ads and were identical across subjects. The remaining ad was the target ad and was
manipulated across subjects. To eliminate order effects, this target ad was always the
fourth ad presented and was always preceded by the same filler ad.
Following each of the eight ads, subjects answered five questions about how good a
value they perceived the particular product offering to be. These five perceived value
questions were: (1) How attractive do you find this particular deal?, (2) Does this product
offering represent a poor value or a good value for the money?, (3) How affordable is the
product being offered?, (4) How seriously would you consider this particular brand?, and
(5) Do you think this ad will be effective at improving sales for this product?. Subjects
responded on 9-point Likert scales. Upon completion, subjects returned this first questionnaire and were given the second.
Questionnaire 2. The second questionnaire asked four questions about each of the products presented in Questionnaire 1. Subjects were shown each of the eight ads again and
were asked (1) Do people tend to consume the advertised product on a lump sum or an
ongoing basis?, (2) How familiar are you with prices in the advertised product category?,
(3) How familiar are you with the advertised brand? and (4) How favorable an impression
do you have of the advertised brand?. Subjects responded to all four questions on 9-point
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Likert scales. Question 1 was included as a manipulation check, while Questions 2, 3 and
4 were included as potential covariates.1
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4. Results
4.1 Manipulation check
Hypothesis 3 of this study involved the difference in PAD effectiveness across products
consumed on an ongoing basis versus a lump sum basis. Thus, it was important to
establish that the target stimuli were perceived as intended. In Questionnaire 2, each
subject was asked to rate the consumption pattern of the target product on a 9-point Likert
scale (1Lump Sum, 9Ongoing). Using these ratings as the dependent variable, a 2
(Consumption Rate) x 2(2) (Product nested within Consumption Rate) ANOVA was
conducted, revealing the intended main effect for Consumption Rate (F(1,2) 2131.60,
p .0005) and the intended lack of effect for Product (F 1). Subjects mean ratings
were significantly higher for the two Ongoing Consumption products (Xcellular 6.8;
Xgym 6.9) than they were for the two Lump Sum Consumption products (Xplane 2.4;
Xinn 2.2). This result suggests that Consumption Rate was successfully manipulated.
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Table 1. Mean Perceived Value scores by Consumption Rate, Product, Temporal Frame and existence of
Explicit Comparison.
Consumption Rate:
Ongoing
Product:
Cellular
Temporal Frame:
Explicit Comparison:
a
b
No:
Yes:
PAD
Aggr.
6.63b
5.83
4.45
5.68
Lump Sum
Gym
Plane
Country Inn
PAD
Aggr.
PAD
Aggr.
PAD
Aggr.
5.85
5.95
4.83
6.33
3.68
5.50
6.30
5.35
3.28
4.25
6.30
4.20
Aggr. Aggregate.
Number of subjects in each of 16 conditions 8.
tions were averaged into a single Perceived Value score (Cronbachs Alpha .89), with
higher scores indicating a better value than lower scores. Mean Perceived Value scores
across all subjects are shown in Table 1.
These scores were analyzed in a 2 (Consumption Rate) x 2(2) (Product nested within
Consumption Rate) x 2 (Frame) x 2 (Explicit Comparison) ANOVA. In this ANOVA,
Product (nested within Consumption Rate) was not significant as either a main effect
(F(2,112) 1.51, p .20) or in any higher order interaction (all ps .35).
Consistent with Hypothesis 3, the ANOVA revealed a significant Consumption Rate x
Frame interaction (F(1,2) 23.23, p .05). For the Ongoing Consumption products,
subjects mean Perceived Value scores were higher under the PAD framings than under the
Aggregate framings (XOngoing/PAD 6.06 vs. XOngoing/Aggr. 5.32). But for the Lump
Sum Consumption products, they were lower under the PAD than under the Aggregate
framings (XLump/PAD 4.18 vs. XLump/Aggr. 5.54).
This two-way interaction, however, was qualified by a significant three-way interaction
of Consumption Rate x Frame x Explicit Comparison (F(1,2) 178.99, p .01), as
shown in Figure 2. In the No Comparison condition, the differential effects of temporal
framing were quite pronounced. For the Ongoing Consumption products, subjects mean
Perceived Value scores were significantly higher under the PAD than under the Aggregate
framing (XOngoing/PAD/NoComp 6.24 vs. XOngoing/Aggr./NoComp 4.64; F(1,2) 85.22, p
.05). For the Lump Sum Consumption products, they were significantly lower under the
PAD framing (XLump/PAD/NoComp 3.48 vs. XLump/Aggr./NoComp 6.30; F(1,2) 265.67,
p .005). As per a planned contrast, this interaction was significant (F(1,2) 325.92, p
.005).
However, in contrast to the strong effects observed under the No Comparison conditions, the differential effect of temporal framing on Perceived Value disappeared when
comparisons were provided. In the Comparison condition, Perceived Value scores were
virtually identical under the PAD and Aggregate framings for both the Ongoing (XOngoing/
PAD/Comp 5.89 vs. XOngoing/Aggr./Comp 6.00; F 1) and the Lump Sum Consumption
products (XLump/PAD/Comp 4.88 vs. XLump/Aggr./Comp 4.78; F 1). These effects of
explicit comparisons are reviewed in detail below.
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GOURVILLE
the addition of an explicit comparison did not significantly alter subjects Perceived Value
scores relative to when no explicit comparison was provided (XOngoing/PAD/NoComp 6.24
vs. XOngoing/PAD/Comp 5.89; F(1,2) 4.08, p .15). But for the Lump Sum Consumption products, subjects Perceived Value scores significantly increased when an explicit
petty cash comparison was provided (XLump/PAD/NoComp 3.48 vs. XLump/PAD/Comp
4.88; F(1,2) 65.25, p .05).
Thus, for the Ongoing Consumption productsproducts for which a PAD-framing was
expected to generate an acceptable comparison to prototypical petty cash expensesit
appears that the addition of an explicit petty cash comparison truly was redundant. However, for the Lump Sum Consumption productsproducts for which a PAD-framing was
expected to generate an unacceptable comparison to prototypical petty cash expenses
the addition of an explicit comparison did provide some incremental value. This result
deserves attention in future research.
In Hypothesis 2, we predicted that in the absence of a per day framing (i.e., in the
presence of an aggregate framing), an explicit comparison would impact compliance as
if a per day framing had been provided. As shown by the dashed lines in Figure 3, this
hypothesis held both for the Ongoing Consumption products, where the addition of the
explicit comparison significantly increased subjects Perceived Value scores (XOngoing/
Aggr./NoComp 4.64 vs. XOngoing/Aggr./Comp 6.00; F(1,2) 61.80, p .02), and for the
Lump Sum Consumption products, where the explicit comparison significantly decreased
subjects Perceived Value scores XLump/Aggr./NoComp 6.30 vs. XLump/Aggr./Comp 4.78;
F(1,2) 77.42, p .02).
Thus, in support of Hypothesis 2, it appears that the provision of an explicit comparison
to a petty cash expense was sufficient to foster a petty cash perspective for both
Ongoing and Lump Sum Consumption products.
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of an explicit comparison to an ad which already contained a per day framing did prove
beneficial for lump sum consumption products. This unexpected result in intriguing and
deserves further attention. Perhaps the use of an explicit comparison provides some
credibility to an otherwise unacceptable per day price framing. And finally, in the presence of an aggregate framing, the use of an explicit petty cash comparison (e.g., a years
worth of morning coffees) was shown to induce a PAD perspective. This result is interesting in that these ads clearly presented the total cost of the transaction, yet still influenced compliance by manipulating the types of comparable expenses subjects considered.
As for limitations to this research, we should note a potential confound in the current
research.4 While care was taken to match the Ongoing and Lump Sum Consumption
products on a variety of dimensions (e.g., price, service-based), these products may have
varied systematically on other important dimensions. For instance, cellular service and
health club membership may have been viewed as utilitarian goods while airline travel and
weekend vacations may have been viewed as luxury goods. This potential confound
should be controlled for in future research.
In conclusion, the present research lends support to the claim that consumers follow a
comparison-based decision making process when evaluating temporally framed product
offerings. In particular, the current research shows that either an implicit comparison, via
a simple per day price framing, or an explicit petty cash comparison can induce a PAD
perspective and impact a consumers perception of product affordability. In doing so, we
conclude that a simple per day framing is neither necessary nor sufficient to positively
impact consumer choice. Rather, an explicit petty cash comparison can be as impactful as
a per day framing at influencing compliance, while the valence of that influence will
depend upon the consumption characteristics of the product being promoted.
Acknowledgments
The author thanks John Deighton, Steve Hoch, Editor Robert Meyer and an anonymous
reviewer for their constructive comments on this paper.
Notes
1. None of these potential covariates had any significant effects and, therefore, are excluded from the analyses
reported.
2. A complete set of the target stimuli are available from the author upon request.
3. For subjects in the Comparison conditions, two petty cash comparisons were employedones morning
coffee or an afternoon snack drink. The specific petty cash comparison employed did not prove to be
significant in any of the analyses conducted (all ps .15). Therefore, all data were collapsed across the
coffee and snack drink comparisons in the analyses reported.
4. We thank a reviewer for raising this issue.
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