The boomerang effect of zero pricing: when and why a zero price is less effective than a low price for enhancing consumer demand

Xiaomeng Fan, Fengyan Cindy Cai*, Galen V. Bodenhausen

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

Prior literature has demonstrated the power of zero pricing to boost consumer demand, but the current research shows a novel “boomerang effect”: a zero (vs. low, nonzero) price can lower demand when the offer comes with high incidental costs (e.g., the time cost in commuting to an offline class; the physical risk of getting a new vaccine). Five studies show that zero pricing, relative to low pricing, has a boosting (boomerang) effect on demand when incidental costs are low (high). The diverging effects of zero pricing on demand are explained by a dual-process model with a positive affective pathway and negative scrutiny pathway. Zero pricing triggers both positive affect and cognitive scrutiny of incidental costs; when incidental costs are high, the scrutiny pathway overrides the affective pathway and decreases demand. The finding has managerial implications as incidental costs often vary widely between marketing channels and over a product’s life cycle.

Original languageEnglish (US)
Pages (from-to)521-537
Number of pages17
JournalJournal of the Academy of Marketing Science
Volume50
Issue number3
DOIs
StatePublished - May 2022

Keywords

  • Cognitive scrutiny
  • Field study
  • Incidental costs
  • Low price
  • Zero price

ASJC Scopus subject areas

  • Business and International Management
  • Economics and Econometrics
  • Marketing

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