Do price promotions lead to lost customers? the impact of perceived control, psychological ownership, and psychological distance on promotional credit

Abstract

Promotional credit is a unique price promotion that requires more than one purchase to realize savings and is valid until redemption or expiry of credit. This thesis focuses on the impact of (a) restrictions on promotional credit redemption, (b) purchase channels where customers receive the promotional credit, and (c) the non-redemption/expiry (slippage) of credit on consumers' purchase preferences. In Essay 1, through ten experimental studies and one natural field experiment, we find that customers' psychological ownership over promotional credit increases with increased perceived control over how they can redeem the promotional credit, leading to increased repurchase intention. We show that psychological ownership and perceived promotion fairness, together, fully mediate the effect of perceived control on repurchase intention. While customers normally prefer immediate price promotions over equivalent promotional credit, we find that psychological ownership reverses this preference. Expectedly, post-slippage, customers' repurchase intention significantly decreases compared with successful redemption. However, high ownership feeling attenuates slippage's negative effect as the customers take responsibility for slippage; in contrast, when the customers perceive that the marketer is primarily responsible for slippage, post-slippage repurchase intention decreases with increased ownership. Post slippage promotion fairness perception and consumer anger serially mediate the effect of ownership feeling on post-slippage repurchase intention. In Essay 2, through seven experimental studies and a single paper meta-analysis, we find that receiving promotional credit in online purchase channels increases the repurchase intention compared to receiving the same credit in physical purchase channels. Customers perceive promotional credit received in online channels as psychologically closer than offline promotional credit. We show that psychological distance to the credit and perceived control serially mediate the effect of the purchase channel on repurchase intention. We also find that, as the validity period of promotional credit increases, the positive online channel effect (vs. offline) on repurchase intention diminishes. Redemption restrictions and increased customer preference towards physical channels moderate the positive online channel effect (vs. offline) on repurchase intention. This thesis contributes to the literature on price promotion, shopping channels, psychological ownership, and psychological distance. Further, the thesis has significant managerial implications regarding promotional credit promotion design.