Delaware Professor Warns Consumers About Store Promotional Credit
Despite the proliferation and ease-of-access eCommerce presents, many consumers still opt to wait in lines for hours, navigate packed parking lots, and push through herds of consumers to get Black Friday discounts. Thanks to research from Adnong Cheng, Assistant Professor of Marketing at the University of Delaware’s Alfred Lerner College of Business and Economics, bargain-hunters may be able to change their thinking and save more money—or rather, save any money at all.
In a paper in the Journal of Marketing Research titled, “Double Mental Discounting: When a Single Price Promotion Feels Twice as Nice,” Cheng warned consumers of the flawed thinking that can result from store credit.
“Let’s say you went to Ann Taylor Loft, you bought a sweater for $50 and received $10 of Loft credit to spend in the future. This purchase feels like it’s only $40 instead of $50. And then later, you spend the $10 on another shirt and feel like the shirt is free, because you’ve only been spending that merchandise credit instead of more money out of your pocket,” Cheng explains.
The consumer’s thinking in this situation is flawed, as they are factoring the single store credit into the cost of two separate items. Additionally, many people do not fully utilize their store credit, but operate under the mind set that they will.
In one of the studies, Cheng and co-author Cynthia Cryder, an Assistant Professor at the Washington University in St. Louis Olin Business School, cited an ice cream store gave certain customers a $3 discount, and other’s a $3 promotional credit. Consumers with the promotional credit bought more ice cream than those who received a discount, as they felt the night to come back to the store to utilize their credit. This is a phenomenon Cheng and Cryder referred to as “double mental discounting.” Consumers fallaciously applied their discount to two purchases.
Cheng advised consumers: “When you receive promotional credit, don’t think of the initial purchase as cheaper. Only take the money gained into account once you’re actually able to use the promotional credit.”