Price-denomination effect: Choosing to pay with denominations that are the same as the product prices

Building on past research on judgment anchoring, we investigate the effect of price information on consumers’ choice of denomination when making a purchase. Across seven experiments, including two in the field (N = 4,020), we find that people tend to purchase with denominations that are the same as the product prices. They use larger denominations for higher priced products that are priced at the value of the denomination held, and smaller denominations for lower priced products that are priced at the value of the smaller denomination held. The effect is not explained by storage or purchase convenience. We propose the “price-denomination effect” is driven by consumers anchoring on product price and then choosing the denomination that matches the anchor. The effect replicates across participants from different continents (United States, Europe, and Africa) and samples (online panelists, and actual consumers), as well as prices in different currencies (United States $, €, and Nigerian Naira). We further demonstrate that people’s preference for denominations also affects the choice of the form of payment used: cash versus card. Consumers are more likely to use cash (vs. card) when product price is exactly the same as a denomination held. We conclude with a discussion of theoretical and practical implications

Choose\ua0as\ua0many\ua0as\ua0you wish:\ua0Consumer\ua0satisfaction\ua0and\ua0purchase\ua0rate\ua0increase\ua0when\ua0choice\ua0from\ua0large assortments\ua0is\ua0flexible\ua0as\ua0opposed\ua0to\ua0constrained

Five studies across a range of domains show that consumers who can choose as many alternatives as they wish (\u201cflexible choice\u201d), report more positive affective states and purchase more than those who have to choose a pre-defined quantity of products (\u201cconstrained\u201d choice). The benefits of choice \u201cflexibility\u201d are stronger in large than small assortments, and are replicated in field and laboratory settings: when people chose cookies after a meal in a restaurant, possible dating partners on a simulated dating website, energy bars from descriptions, and soaps for personal use. The findings have theoretical implications for advancing choice-overload research, as well as practical implications for retailers and assortment designers. Counter to traditional recommendations that satisfaction and purchases improve by \u201coffering less,\u201d our studies show that offering more can still lead to satisfied consumers, as long as consumers are free to choose as much or as little as they wish.&nbsp

Choose as much as you wish: Freedom cues in the marketplace help consumers feel more satisfied with what they choose and improve customer experience

Consumer satisfaction and customer experience are key predictors of an organization’s future market growth, long-term customer loyalty, and profitability but are hard to maintain in marketplaces with abundance of choice. Building on self-determination theory, we experimentally test a novel intervention that leverages consumer need for autonomy. The intervention is a message called a “freedom cue” (FC) which makes it salient that consumers can “choose as much as they wish.” A 4-week field experiment in a sporting gear store establishes that FCs lead to greater consumer satisfaction compared to when the store displays no FC. A large (N = 669) preregistered process-tracing experiment run with a consumer panel and a global e-commerce company shows that FCs at point-of-sale improve consumer satisfaction and customer experience compared to an equivalent message that does not make freedom to choose any amount salient. Perceived freedom mediates the effect. FCs do not change the time spent or clicks on the website overall but do change the focus of the choice process. FCs lead to greater focus on what is chosen than on what is not chosen. We discuss practical implications for organizations and future research in consumer choice

How much choice is "good enough"? Moderators of information and choice overload

In today’s world, people face an abundance of information and a great number of choices both in important domains, such as health care, retirement, and education, and in less important domains, such as the choice of breakfast cereal or chocolate. Choice overload and information overload have strong negative effects on many important decision- making aspects such as processing and using information, the motivation to act, the quality of choices, and post- choice feelings, which are discussed in Chapter 43 in this volume in more detail. However, small choice and information sets are not always optimal either. Several variables– – such as information usage, decision accuracy, motivation to choose, and satisfaction with choice are “inverted- U” functions of the amount of information and the number of choice alternatives available. In other words, choosing from sets of an intermediate size usually brings more net benefits to the decision maker than choosing from large or small choice sets (Grant & Schwartz, 2011; Reutskaja & Hogarth, 2009; Shah & Wolford, 2007). Indeed, in line with the assumptions of bounded rationality, intermediate sizes are preferable when they do not entail the same high, cognitively unmanageable load that large sets do, and simultaneously possess the benefits of variety that small sets lack. However, exactly how much choice is enough, or, as Herbert A. Simon would say, “good enough”? The size of the intermediate set is not always clear or universal, and is often influenced by a variety of factors. The aim of this chapter is to set out the factors which most affect and moderate the experience of too much choice, influencing feelings of how much is “enough.” Broadly, there are two categories of moderators: one pertaining to the choice environment and one pertaining to the characteristics of the decision making actor. This division is in line with Simon’s scissors analogy (Simon, 1990), which views bounded rationality as the interplay between the two blades: the context or choice environment, on the one hand, and the capabilities and characteristics of decision makers ,on the other

Balancing the freedom–security trade-off during crises and disasters

During crises and disasters, such as hurricanes, terrorist threats, or pandemics, policymakers must often increase security at the cost of freedom. Psychological science, however, has shown that the restriction of freedom may have strong negative consequences for behavior and health. We suggest that psychology can inform policy both by elucidating some negative consequences of lost freedom (e.g., depression or behavioral reactance) and by revealing strategies to address them. We propose four interlocking principles that can help policymakers restore the freedom–security balance. Careful consideration of the psychology of freedom can help policymakers develop policies that most effectively promote public health, safety, and well-being when crises and disasters strike

Price-denomination effect: Choosing to pay with denominations that are the same as the product prices

Building on past research on judgment anchoring, we investigate the effect of price information on consumers’ choice of denomination when making a purchase. Across seven experiments, including two in the field (N = 4,020), we find that people tend to purchase with denominations that are the same as the product prices. They use larger denominations for higher priced products that are priced at the value of the denomination held, and smaller denominations for lower priced products that are priced at the value of the smaller denomination held. The effect is not explained by storage or purchase convenience. We propose the “price-denomination effect” is driven by consumers anchoring on product price and then choosing the denomination that matches the anchor. The effect replicates across participants from different continents (United States, Europe, and Africa) and samples (online panelists, and actual consumers), as well as prices in different currencies (United States $, €, and Nigerian Naira). We further demonstrate that people’s preference for denominations also affects the choice of the form of payment used: cash versus card. Consumers are more likely to use cash (vs. card) when product price is exactly the same as a denomination held. We conclude with a discussion of theoretical and practical implications