Research: "Double mental discounting" makes consumers spend more

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SAN FRANCISCO, Nov. 26 (Xinhua) -- Thousands of businesses offer enticing deals for consumers during this Black Friday, new research suggests that certain types of discounts may cause consumers to spend more than they realize, according to a report newly published in the Journal of Marketing Research.

When a single gain has strong associations with multiple costs, consumers often mentally deduct that gain from perceived costs multiple times.

The research paper, co-authored by Andong Cheng, an assistant professor of marketing at University of Delaware and Washington University in St. Louis Olin Business School associate professor Cynthia Cryder, explains that shoppers experience a "mental accounting phenomenon" when offered promotional credit.

For example, with some price promotions like spending 200 U.S. dollars now and receiving a 50 U.S. dollars gift card to spend in the future, consumers mentally deduct the value of the price promotion from the cost of the first purchase when they receive the promotion, as well as from the cost of the second purchase when they use the promotion.

Multiple mental deductions based on a single gain result in consumers' perceptions that their costs feel lower than they actually are, and can cause higher expenditures. This mental accounting phenomenon is referred to as "double mental discounting" driven by the extent to which gains feel associated with multiple purchases.

Cheng finally advised when a shopper receives promotional credit, "don't think of the initial purchase as cheaper" but take that money gained into account once the promotional credit actually being used.

According to industry research, businesses are about to load 14.5 billion U.S. dollars onto promotional credit offers in 2017, triple the amount from ten years ago and consumers redeem promotional credit 15 times as often as they redeem direct mail coupons. Enditem

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