The impact of consumer expectations and familiarity on deceptive pricing in advertising: a view from drip pricing practice

Abstract

Drip pricing practice, which involves promoting a seemingly low initial price and then introducing add-on price components without upfront disclosures, is commonly seen as a deceptive advertising practice that can lead to negative associations. Here, we provide an alternative perspective by investigating that whether consumers form positive or negative opinions about drip pricing depends on their expectation of encountering it and their overall familiarity with this practice. That is, this research reveals that when consumers’ general familiarity with drip pricing is low, higher expectations of drip pricing create greater perceptions of price fairness and purchase intentions. Moreover, our findings indicate that higher consumer expectations of drip pricing lead to positive attributions and evaluations of the detailed pricing information, resulting in higher perceptions of price fairness, which, in turn, increases purchase intentions. Further, we show that when consumers have high expectations of encountering drip pricing, they evaluate ­pricing information more positively and deception less harshly, resulting in greater purchase intentions than when they do not expect it.

Keywords:

• Deceptive pricing in advertising
• deceptive advertising
• drip pricing
• consumer expectations
• price granularity
• price fairness perceptions

Disclosure statement

The authors declare that there is no conflict of interest.

Data availability statement

The data produced in the course of this study are not accessible for public dissemination.

Notes

1 As our independent variables are categorical, the coefficients for the indirect paths signify the disparity in effects between the two pricing conditions. Therefore, a positive coefficient of 0.43 from PGPI to price fairness perceptions indicates that the variation in price fairness perceptions, resulting from a one-unit increase in PGPI, between the high and low expectations of drip conditions, amounts to 0.43.

2 We also analyzed the high expectations of drip condition by changing PGPI to covariate and perceptions of deception as the independent variable and keeping everything else the same. We found that the total indirect effect was not significant (B = .00, CI= -.05 to .08) for deception as expected.

3 Similar to the first model, we conducted another mediation analysis for the low expectations of drip condition by changing perceived deception to covariate and PGPI as the independent variable and keeping everything else the same. We found that the total indirect effect was not significant (B = .1, CI= -.12 to .35) for PGPI again.

Additional information

Funding

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