Can a price discount Backfire? effects of the juxtaposition of Add-On fees and price discounts on consumer evaluations

Abstract

It is common to find add-on fees (e.g., convenience fee, resort fee, shipping fee) as well as a price discount in the same offer. This research examines the joint effects of add-on fees and price discounts and demonstrates that some price discounts may backfire. The rationale is that when a price discount is similar in magnitude to the add-on fee, it is likely to trigger attribution processes that make salient the negativity associated with the add-on fee. Initial studies show that the magnitude of the price discount matters in negatively impacting perceptions of add-on fee, and adversely impacts overall evaluations. Subsequent studies examine serial mediation effects and identify moderators of theoretical and practical interest. Across six studies, this research illustrates a novel and non-intuitive finding that the presence of a price discount alongside an add-on fee may negatively impact fairness evaluations and purchase intentions.