The Price of “Free”-dom: Consumer Sensitivity to Promotions with Negative Contextual Influences SUCHARITA CHANDRAN VICKI G. MORWITZ* Past research has shown that monetary promotions (e.g., discounts) are more likely to be processed relative to and integrated with the original product price than are free promotions. We posit that because of this difference, free promotions are more focal and salient than monetary promotions. In a set of three experiments, we demonstrate that this salience results in free promotions being less susceptible than equivalent monetary discounts to negative contextual information on quality that can potentially lower purchase intentions. We show that this effect can be reversed when respondents focus on other pieces of information that diminish the salience of the free promotion.

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ree offers are a frequent form of promotion used for a variety of products and often take very different forms, such as a freebie with purchase (e.g., free lipstick with the purchase of cosmetics), a bundled offering (e.g., buy a computer and printer as one package), and free delivery/shipping. Despite the prevalence of such offers, little research has examined how consumers react to free promotions. In this article, we examine a strategic benefit that free promotions may offer over other types of promotions. Specifically, we show that free promotions are less sensitive to negative contextual information about quality (e.g., uncertain product quality due to poor manufacturing standards or buying used products). We believe that the reason for this is differences in how free promotions and equivalent mon-

etary discounts are processed. Since the monetary value of free promotions is often not explicit (even when it is available, it is often easy to ignore), it is relatively difficult for consumers to integrate such a value directly with price. Therefore, we expect that consumers are likely to process free promotions independent of price. In contrast, as the monetary value of discounts is usually explicit, it is easier for consumers to integrate discounts with price. Hence, we expect consumers to process discounts as part of price. We believe that this processing difference makes the free offer relatively more focal or salient than equivalent monetary promotions. When consumers see negative contextual information on quality that lowers the attractiveness of an offer, the salience of the free offer reduces the influence of the negative information compared to when an equivalent monetary discount is offered. Next, we review the literature and develop our hypotheses. We describe three studies that establish that purchase intentions for free price offers (vs. monetary discounts) are relatively invariant to negative quality information. We show that this invariance appears to be due to the salience of free promotions and that it can be reversed by increasing the salience of other decision factors. We conclude with a discussion of the theoretical and practical implications of our results.

*Sucharita Chandran ([email protected]) is assistant professor and Peter Paul Career Development Professor at Boston University, School of Management, 595 Commonwealth Avenue, Boston, MA 02215, and Vicki G. Morwitz ([email protected]) is professor of marketing and Robert Stansky Faculty Research Fellow, New York University, Stern School of Business, 40 West 4th Street, Suite 807, New York, NY 10012. The authors ¨ lku¨men for help with data collection thank Weimin Dong and Gu¨lden U and Emily Kunga and Andre Sim for help with content analysis. The authors are grateful to participants at the Society for Consumer Psychology conference in February 2000 in Austin, the seminar attendees at Baruch College in May 2003, and participants at the Association for Consumer Research conference in September 2005 in San Antonio for helpful comments made on earlier versions of this research. Finally the authors gratefully acknowledge the assistance of the editor, the associate editor, and the reviewers throughout the review process.

THEORETICAL FRAMEWORK Prospect theory (Kahneman and Tversky 1979) suggests that decisions are typically framed with respect to a reference point and that changes in such frames lead to inconsistencies in decision making (Gourville 1998; Tversky, Sattath, and Slovic 1988). Therefore, consumers may not react the same

Dawn Iacobucci served as editor and Stephen Nowlis served as associate editor for this article. Electronically published October 9, 2006

384 䉷 2006 by JOURNAL OF CONSUMER RESEARCH, Inc. ● Vol. 33 ● December 2006 All rights reserved. 0093-5301/2006/3303-0005$10.00

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way to a free promotional offer as they do to another monetarily equivalent promotion. Past research suggests that free promotions are more likely to be processed independent of price because their monetary value is often not provided or made salient, while monetary promotions like discounts are more readily integrated with price (Diamond and Sanyal 1990; Nunes and Park 2003). We suggest that this differential processing makes free promotions more salient or focal (Wilson et al. 2000) in decision making than equivalent monetary promotions and that this focalism affects consumers’ reactions to these promotions in the face of negative quality information.

Role of Contexual Information on Product Quality There is a rich literature that examines the relationship between price and product quality. The basic conceptual model (Monroe and Krishnan 1985) that examined this relationship suggests that, when a consumer’s perception of quality is greater than the perception of sacrifice, perceived value for the product will be positive (Dodds, Monroe, and Grewal 1991; Rao and Monroe 1989). There is much evidence to show that consumer preferences for and evaluations of price offers are influenced to a large extent by the decision context and situational cues available (Thaler 1985). Thus, perceptions of value are both multidimensional (Zeithaml 1988) and highly susceptible to context (Monroe, Della Bitta, and Downey 1977). This suggests that the form of price promotions can interact with quality information to shape consumers’ perceptions of value and affect preference and choice. Furthermore, these findings suggest that changing the relative salience of different cues can potentially change both information processing and preference.

Differential Encoding of Promotions and Sensitivity to Context A price promotion can be processed separately from the price or it can be integrated with price (Thaler 1985; Thaler and Johnson 1990). Research in this area suggests that, when the monetary value of a promotion is explicit and in the same metric as the price, consumers are likely to integrate it with price (Diamond and Sanyal 1990). Conversely, when the monetary value is not provided or is not highlighted, it is likely that consumers will view it as a separate entity from price. It follows that, when the promotion is nonmonetary (such as free shipping or a free gift), consumers are more likely to process it independent of price. Conversely, when the promotion is a price-off or a coupon, consumers can easily calculate the change in product costs and incorporate it into their value assessment. They are therefore more likely to integrate such promotions with price. Nunes and Park (2003) show that, when consumers are offered a nonmonetary benefit combined with a monetary transaction such as a free gift with purchase, because these are in different currencies, the nonmonetary benefit is difficult to value and convert into a common unit of measurement. Conversely, monetary promotions naturally make price the

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focal point and therefore promote “relativistic” processing. How do such differences in processing affect the evaluation of an offer in the face of negative information on quality? We suggest that, because free promotions are processed independent of price, they are relatively more salient compared to monetary discounts and may play a more focal role in the purchase decision. Research has shown that people give disproportionate weight to information that is salient (Taylor and Fiske 1978). Further, people are more likely to attend to highly salient information, and such information becomes more available, thereby exerting a bigger influence on judgment (Kahneman and Miller 1986; Kahneman and Tversky 1982). In the context of affective forecasting, Wilson et al. (2000) show that focused attention on one input to a judgment may lead to underweighting of other related inputs. How then does the difference in salience between free promotions and discounts affect processing of negative contextual information on product quality? Clearly, in both cases negative information about product quality reduces an offer’s attractiveness. However, we suggest that free promotions, because of their greater salience, are more immune to the impact of the negative information than are monetized promotions. Research has shown that people often focus on what is salient and available without making the effort to think about detailed alternative explanations or scenarios (Gilbert 1991; Wilson et al. 2000). We posit that this focus on salient aspects of the offer may be at the expense of focus on other decision factors, making it more difficult to account for the impact of the negative information while making a decision. Therefore, we expect that, for free promotions, consumers’ overall price evaluation will be less sensitive to negative contextual information than for monetary discount promotions. Therefore: H1: Purchase intentions of consumers who receive a monetary price promotion will be more sensitive to negative contextual information on product quality than will purchase intentions of consumers who receive an economically equivalent free promotion. This is based on the premise that the free promotion is highly salient, causing people to focus more on it and thereby to focus less on other factors that have a bearing on the decision. Therefore, when people who see free promotions are forced to consider other less salient or relatively inaccessible information, they should be induced to focus more on other decision inputs. This should reduce the relative salience of the free offer, thereby eroding the susceptibility of purchase intentions for free promotions to negative information on quality. Accordingly we hypothesize: H2: When consumers receiving free promotions are induced to consider other inputs to the decision context, their purchase intentions will be more sensitive to negative contextual information on product quality than the purchase intentions of those who are not induced to consider other inputs.

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Further, we should be able to detect the heightened focus on the free promotion and the relatively smaller focus on other factors such as negative information on quality by analyzing individuals’ thoughts on the reasons for their purchase decisions. Hence, H3a: Consumers who evaluate free promotions should recall more promotion-related thoughts than those who evaluate monetary discounts irrespective of the nature of information on quality. H3b: Consumers who evaluate monetary discounts will have a greater difference in the number of quality-related thoughts when faced with negative versus positive information on quality than consumers who evaluate free promotions. Our theorizing here is based on two key ideas. First, the heightened salience of free promotions (vs. monetary discounts) should be reflected in the larger number of thoughts recalled about promotions. Second, negative information on quality should be recalled more than positive information of a similar intensity. Research on the negativity effect suggests that negatively valenced events will have a greater impact on evaluation than positively valenced events of a similar nature (Ahluwalia 2002; Baumeister et al. 2001; Skowronski and Carlston 1989). Thus, the stronger impact of negative (vs. positive) information on quality should be readily detected in the thoughts of those individuals who see monetary discounts but should be less apparent in the thoughts of those who see free promotions on account of the heightened salience of free promotions. We test our hypotheses in three studies. The first study tests the basic free effect (hypothesis 1), the second tests both hypothesis 1 and whether this hypothesized effect can be reversed (i.e., tests hypothesis 2), and the third study seeks greater process evidence by testing hypotheses 3a and 3b.

STUDY 1: REDUCED SENSITIVITY TO QUALITY INFORMATION When evaluating promotional offers, consumers not only are concerned with getting the best price but also apply quality constraints (Rao and Monroe 1989). The economic benefits of offering a promotion may therefore be dampened by negative quality inferences. While we anticipate a negative response to a product of negative quality for discounts, we believe that the effect will be smaller for free promotions because of their greater salience.

Method Participants. Seventy-one undergraduate students at New York University participated for partial course credit. Stimuli and Design. We used a 2 (price condition [free and discount]) # 2 (quality information [positive, negative]) between-subjects design. Participants were asked to read a

scenario involving a senior attending their university who is preparing to take the Graduate Management Admission Test (GMAT). Participants were told the student has been using Kaplan’s GMAT textbook to prepare for the test and now is considering purchasing another guide for additional practice. He finds a suitable guide on sale, and it is a used one. Price discount was manipulated by showing participants in the free (discount) condition the following offer: the cost of the used book is $23.00 and shipping on this book is free of charge—value of free shipping was not given (discount on the book p $2.99; the cost of shipping is $2.99). Both groups were told that there are no taxes on the purchase and that the book ships in 1–3 days. The shipping cost (and the equivalent value for the discount) was based on a pretest conducted to determine the average amount people expect to pay for shipping for a used book. We manipulated quality by telling respondents that the student regularly shops for books online and has bought used books here several times. In the positive quality condition, they were told that, in this student’s experience, used books from this bookstore come in fairly good condition and no quality problems are expected. In the negative quality condition, they were told that, in the student’s experience, you can never tell if used books from this bookstore will be in good condition and he does not know what to expect in terms of the quality of this book.

Dependent Measures. Likelihood to purchase was measured using a seven-point scale where participants indicated how likely or unlikely it was that they would buy the used textbook on offer (1 p Definitely will not buy; 7 p Definitely will buy). Perceived quality of the book was measured using a two-item scale (r p 0.91): (i) The used textbook on offer here appears to be in Very poor quality (1)/Very good quality (7). (ii) The used textbook on offer here appears to be in Poor condition (1)/Good condition (7). Finally, we asked participants how much they normally would expect to pay for shipping in such a situation.

Results Manipulation and Confounding Checks. A 2 (price condition) # 2 (quality information) ANOVA with the perceived quality index as the dependent measure revealed a significant main effect of quality (F(1, 67) p 18.72, p ! .01; MPos p 4.97, MNeg p 4.00), but no other effects were significant. Thus our quality manipulation worked as intended. The perceived value of free shipping was not significantly different either from that expected in the discount condition or the stated value of $2.99, thereby ruling out any potential explanation that the free promotion was perceived to be more valuable than the monetary discount. Likelihood to Buy. A 2 (price condition) # 2 (quality) ANOVA with likelihood to buy as the dependent measure revealed significant main effects for price condition (F(1, 67) p 13.23, p ! .01) and quality (F(1, 67) p 12.42, p ! .01).

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Intentions to buy were higher in the free condition (MFree p 5.41) than in the discount condition (MDisc p 4.34). Intentions were also higher in the positive (MPos p 5.40) than in the negative quality condition (MNeg p 4.36). Consistent with hypothesis 1, the two-way interaction was also significant (F(1, 67) p 4.09, p ! .05; see fig. 1). As expected, mean intent to buy in the discount condition was significantly higher for positive (MPos p 5.16) than for negative perceived quality participants (MNeg p 3.53; F(1, 67) p 16.06, p ! .01). The contrast between positive (MPos p 5.63) and negative perceived quality participants in the free condition (MNeg p 5.19; F(1, 67) p 1.08, p 1 .10) was not significant, supporting hypothesis 1.

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Discussion As expected we found that differences in quality perceptions had a greater effect for participants who saw a monetary discount than for those who saw a free promotion, consistent with our expectation that free promotions enjoy greater insulation from the effects of negative quality information on account of their greater salience. We hypothesized that this pattern occurred because the free promotion is more salient than the monetary promotion, and therefore participants would focus more on the free promotion and less on quality information in the free promotion condition. However, one alternative explanation for this pattern of results is that participants in the discount and negative quality condition were the only ones who would be concerned about having to spend additional shipping money to return the book if the quality was unacceptable. In the next two studies we attempt to reverse the basic free effect and eliminate this potential explanation. We also address this in the final study, where the free good is not shipping costs. A second alternative explanation is that there was more variance in the value perceptions for participants in the free condition than for those in the discount condition. Although the average value perception of free shipping was no different than the discount, greater variance could still lead to the observed pattern of results. Therefore, in the next studies, we explicitly provide to participants the monetary value of the free promotion. Finally, it is possible that, in the negative quality condition, participants who saw a discount may have inferred that the reason the discount was being offered was because of negative product quality, while this inference is less likely for those who see free promotions. This might heighten the salience of negative quality information in the discount condition. However, if this is the main driver of the effect, then we should expect the same pattern of invariance to persist even when we reduce the salience of the free promotion in the next study. In the next study, our main goal is to demonstrate that, when the relative salience of the free promotion is reduced, then free promotions become as susceptible to the impact of negative quality information as monetary promotions. An additional goal is to rule out the potential alternative explanations described above.

STUDY 2: EASE OF RECALL OF DECISION INPUTS We extend our investigation of our proposed process explanation and show that the invariance of purchase intentions for free promotions to negative quality information can be reversed by reducing the relative salience of the free promotion. In this study, we manipulated the ease with which participants bring various decision inputs to mind by having them generate reasons to purchase the product. We expected that, when participants were asked to perform the easy task of recalling a few reasons for purchase, the free promotion would be highly salient and respondents’ focus on the free promotion would lead to greater invariance to negative quality information. Conversely, when respondents were asked to perform the relatively more difficult task of generating many reasons for purchase, they would be impelled to focus on several decision inputs, thereby reducing the salience of the free promotion and eroding its susceptibility to negative quality information.

Method Participants. One hundred and sixty-nine undergraduate students at Boston University participated for partial course credit. Stimuli and Design. We used a 2 (price condition [free and discount]) # 2 (contextual information on quality [negative and positive]) # 2 (ease of recall [easy, difficult]) between-subjects design. Participants were told that Company Z, a large and well-known company that makes computer peripherals and accessories, is introducing a new cordless

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mouse to the market, which they were considering buying. Next the information context was manipulated by assigning participants to one of two quality information conditions. Those in the negative quality information condition were told that “Company Z was recently featured on a TV program, Lou Dobbs Tonight on CNN, as having begun cost-cutting moves to outsource the production and assembly of new products to countries like China and India. The quality of the outsourced products is variable, as quality standards have not yet been established in the overseas manufacturing facilities. As a result consumers do not know what to expect in terms of quality.” Conversely, those in the positive quality information context were told that the company has resisted costcutting moves to outsource production and as a result the quality of these products is excellent. Next, participants saw a picture of the product and information on its features. Participants were then assigned to one of two promotion conditions: those in the discount condition were shown the product at a price of $33.99 with a special introductory discount of $5.99 (shipping and handling costs $5.99). Those assigned to the free condition were shown the product at a price of $39.99 with a special introductory offer of free shipping on purchase and were told shipping usually costs $5.99. Finally, we manipulated the salience of the different decision inputs by having participants generate reasons for why they might buy this product. Those assigned to the easy recall of reasons condition were asked to generate two reasons for the purchase, while those assigned to the difficult recall of reasons to purchase condition were asked to generate six reasons for the purchase. We expected that those who did the relatively easy task of generating two reasons for purchase would bring to mind reasons that were salient and easy to focus on, while those who did the more difficult task of generating six reasons to buy the product would bring to mind different decision inputs, not only the most salient ones (see Schwarz et al. [1991] for a detailed review). We expected that, when recall centered on the salient information such as the free promotion, it would provide insulation against negative quality information. However, when recall centered on different decision factors, it would blunt the salience of the free promotion, thereby making the free promotion condition susceptible to negative quality influences.

Dependent Measures. Likelihood to purchase was measured using the same seven-point scale as in study 1. Participants were also asked how difficult it was to generate reasons for purchase on a seven-point scale anchored at “Not at all hard” (1) and “Very hard” (7). Finally, quality perceptions were measured using seven-point scales anchored by “Strongly disagree” (1) and “Strongly agree” (7) agreement on the following statements: (i) According to the CNN program, the quality of the company’s new products including its cordless mice is variable and uncertain (reverse coded). (ii) According to the CNN program, consumers are certain that the products they buy from Company Z will be of high quality (r p 0.86).

Results Manipulation Checks. A 2 (price condition) # 2 (contextual information on quality) # 2 (ease of recall) ANOVA with the quality perception index as the dependent measure revealed a significant main effect of quality information (F(1, 161) p 344.74, p ! .01; MPos p 6.24, MNeg p 2.73), but no other effects were significant. Thus, our quality manipulation worked as intended. The same analysis with the difficulty of generating reasons as the dependent measure showed a significant main effect of ease of recall (F(1, 161) p 344.74, p ! .01; MEasy p 3.30, MDif f p 5.45) and no other significant effects, suggesting that our ease of recall manipulation also worked as intended. Likelihood to Buy. A 2 (price condition) # 2 (contextual information on quality) # 2 (ease of recall) ANOVA with likelihood to buy as the dependent measure revealed significant main effects for contextual information on quality (F(1, 161) p 23.16, p ! .01) and ease of recall (F(1, 161) p 31.09, p ! .01) but not for price condition (F(1, 161) p 2.94, p ! .09). Overall intentions to buy were higher in the positive quality information condition (MPos p 4.27) than in the negative quality information condition (MNeg p 3.08). Intentions were also higher in the easy (MEasy p 4.37) than in the difficult recall condition (MDif f p 2.99). Consistent with hypothesis 1, the two-way interaction between contextual information on quality and price condition was also significant (F(1, 161) p 5.74, p ! .05). As expected, mean intent to buy in the discount condition was significantly higher for positive (MPos p 4.36) than for negative information participants (MNeg p 2.58; F(1, 161) p 25.52, p ! .01). In the free condition, the contrast between positive (MPos p 4.19) and negative information participants (MNeg p 3.59; F(1, 161) p 2.98, p 1 .09) was not significant, supporting hypothesis 1. Consistent with hypothesis 2, the three-way interaction between price condition, ease of recall, and contextual quality information was significant (F(1, 161) p 3.96, p ! .05; see fig. 2). For those participants in the easy reasons task condition, we saw the pattern predicted by hypothesis 1. Those who saw a discount for the product indicated a higher likelihood to buy when contextual information on quality was positive (MPos p 5.36) than when it was negative (MNeg p 3.00; F(1, 161) p 23.29, p ! .01). In contrast, those who saw a free shipping offer showed no significant differences in likelihood to buy across positive (MPos p 4.65) and negative contextual information conditions (MNeg p 4.45; F(1, 161) ! 1). However, this pattern changed when the reasons task was difficult. Those who saw a discount for the product continued to indicate higher intentions to buy when contextual information on quality was positive (MPos p 3.35) than when it was negative (MNeg p 2.15; F(1, 161) p 5.59, p ! .05). However, participants who saw a free shipping offer also followed the same pattern as those who saw a discount in that they, too, indicated higher intentions to buy when

PRICE PROMOTIONS AND NEGATIVE CONTEXT FIGURE 2 EASE OF RECALL AS MODERATOR

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to factors that influenced their purchase decisions. We test this next.

STUDY 3: NATURE OF THOUGHTS In this study, we test the robustness of our effect by using a different kind of free promotion (a free gift with purchase), which helps to rule out a potential explanation that, in the negative quality condition, those who see a discount are worried about shipping costs in case of a product return. In addition, we gather additional support for our process explanation for the relative invariance of the free promotion to negative quality information. If, as we posit, a free promotion enjoys higher salience than a monetary discount, we should be able to detect this if we ask participants to list the important factors that influenced their purchase decision. We expect that the relative salience of the free promotion will manifest in more promotion-related thoughts for those in the free versus the monetary discount condition. Further, we expect that, because negative information in general has more impact on evaluation than similar positive information (Ahluwalia 2002; Baumeister et al. 2001; Skowronski and Carlston 1989), those in the monetary discount condition will provide more quality-related thoughts in the negative than the positive quality condition. This difference should be smaller for those in the free condition on account of the greater salience of the free promotion. contextual information on quality was positive (MPos p 3.73) than when it was negative (MNeg p 2.73; F(1, 161) p 4.27, p ! .05).

Discussion Consistent with our expectations, when recall of reasons for purchase was difficult, those who saw the free shipping offer behaved in the same fashion as those who saw a discount—they significantly lowered their purchase intents in the negative (vs. the positive) information context. We expect that this change in pattern speaks to the process by which this effect manifests. By making different decision factors focal in participants’ minds, the buffering capability that the salience of free promotions provides in accounting for negative contextual information is significantly reduced. Given the reduced salience of the free promotion in a negative context, reactions to free promotions mirror reactions to monetary discounts. This study also helps rule out possible alternative explanations that (i) participants’ concern about additional shipping costs for product return in the discount low-quality condition, (ii) uncertainty on the unknown value of the free shipping in study 1, and (iii) thoughts that discounts were being offered because of low product quality in the lowquality conditions were driving our results. A key goal of our next study is to provide greater support for the hypothesized process explanation. If salience is the reason for the apparent advantage free promotions enjoy, we should be able to detect this in participants’ thoughts related

Method Participants. Sixty-three students at New York University and 113 undergraduate students at Boston University participated for partial course credit. Stimuli and Design. We used a 2 (price condition [free and discount]) # 2 (contextual information on quality [negative and positive]) between-subjects design. Participants were told that they were shopping for a keyboard and were considering a keyboard made by Company A, a preeminent manufacturer of computer peripherals and accessories. Next we manipulated quality by having participants read an article purportedly from the Wall Street Journal about Company A. Those in the negative quality information condition were told that Company A has increasingly begun cost-cutting moves to outsource the production and assembly of products to developing countries like China and India. The quality of the products outsourced for manufacture is variable, as quality standards have not yet been established in the overseas manufacturing facilities. As a result, consumers do not know what to expect in terms of quality. Conversely, those in the positive quality information context were told that Company A has resisted cost-cutting moves to outsource the production and assembly of its products to developing countries like China and India. As a result, the quality of these products is excellent, as quality standards have been established in domestic manufacturing facilities. Consumers are certain of the quality of products that they buy. Next, participants were told that, as they shop at their

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electronics store, they see a keyboard made by company A. They were shown a picture of the keyboard and information about its features. Participants in the discount condition were shown the product with a price of $34.99. They were offered a discount of $10, thus bringing the net price of the keyboard to $24.99. Those assigned to the free condition were shown the product at a price of $34.99 and were offered a free mouse with the purchase of the keyboard. They were shown a picture of the mouse with some information on its features and were also told that this mouse usually costs $10.

Dependent Measures. Likelihood to purchase was measured using the same scale as in study 1. We next had participants list the most important factors that determined their purchase decision. Finally we asked participants to indicate how much they agree or disagree on a seven-point scale, anchored by “Strongly disagree” (1) and “Strongly agree” (7), with the statement that, according to the Wall Street Journal article, the quality of company A’s products is dependable.

Results Manipulation Check. A 2 (price condition) # 2 (contextual information on quality) ANOVA with the dependability of quality as the dependent measure revealed a significant main effect of quality information (F(1, 171) p 181.07, p ! .01), but no other effects were significant. We appear to have been successful in our manipulation of contextual information on quality, with participants in the positive condition having greater agreement that the article described company A’s products as being of dependable quality (MPos p 5.91) than those in the negative condition (MNeg p 3.11). Likelihood to Buy. A 2 (price condition) # 2 (contextual information on quality) ANOVA was run with likelihood to buy as the dependent measure. The results revealed main effects for contextual information on quality (F(1, 172) p 19.06, p ! .01; MPos p 5.28, MNeg p 4.27) and price condition (F(1, 172) p 4.90, p ! .05; MFree p 5.03, MDisc p 4.52). Consistent with hypothesis 1, the two-way interaction between contextual information on quality and price condition was also significant (F(1, 172) p 5.21, p ! .05). As expected, mean intent to buy in the discount condition was significantly higher for positive information participants (MPos p 5.29) than for negative information participants (MNeg p 3.75; F(1, 172) p 22.36, p ! .01). The contrast between positive (MPos p 5.27) and negative information participants in the free condition (MNeg p 4.79; F(1, 172) p 2.14, p 1 .14) was not significant, supporting hypothesis 1.

Nature of Thoughts Two independent coders, who were blind to the hypotheses, coded the open-ended thought listings of participants. Thoughts were classified into the following categories: (i) price—all that mentioned price, cost, and value; (ii) pro-

motion—all relating to the nature of the promotion (free or discount), savings from the promotion/sale, and so forth; (iii) product—relating to brand name, reputation, or features of the product; (iv) quality—relating to the quality manipulation (Wall Street Journal article), durability, reliability, or quality of the product. Interrater agreement was 84%, and disagreements were resolved through discussion. The dependent measures were the total number of thoughts listed, the total number of words listed, and the number of thoughts by category.1 The dependent measures were submitted to 2 (price condition) # 2 (information on quality) ANOVAs. The results revealed no significant effects for contextual information on quality, price condition, or their interaction for total number of thoughts (MTotT p 4.58) and total number of words (MTotW p 26.52). A similar analysis for thoughts by category revealed a main effect of price condition on the number of promotion-related thoughts (F(1, 172) p 4.31, p ! .05), but no other effects were significant. Those who saw a free promotion listed a significantly higher number of thoughts on the promotion (MFree p 1.20) than those who saw discounts (MDisc p 0.91), supporting hypothesis 3a. The interaction of price condition and information on quality was significant for number of quality-related thoughts (F(1, 172) p 6.62, p ! .05), but no main effects were significant. As expected, the number of thoughts on quality in the discount condition was significantly higher for negative (MNeg p 1.39) than for positive information participants (MPos p 0.87; F(1, 172) p 7.83, p ! .01) while these differences were not significant for participants in the free condition (F(1, 172) ! 1; MNeg p 0.95, MPos p 1.11), supporting hypothesis 3b.

Discussion As expected, we found that differences in information context had a greater effect on thoughts of participants who saw a monetary discount than thoughts of those who saw a free promotion. While those who saw a discount discriminated between positive and negative quality information contexts, participants who saw a free promotion did not. We expect that the free promotion is highly salient and the heightened focus on salient information reduces the focus on other decision factors such as information on negative quality. The reasons analysis provides some support for this process in that (i) the total number of thoughts across conditions is about the same, but the nature of the thoughts differs; (ii) participants in the discount condition focus more on quality when information is negative (vs. positive), but those in the free condition do not; (iii) this reduced focus of those in the free condition on negative quality information appears to be related to the fact that they are able to bring to mind more thoughts on the nature of the free promotion than those in the discount condition. We believe that this supports our notion that free promotions (vs. monetary discounts) are more likely to be pro1 Log transformed measures of number of thoughts (total, number of words, and by category) were also subjected to the same analyses. The results remain unchanged, and hypothesis 3 is supported.

PRICE PROMOTIONS AND NEGATIVE CONTEXT

cessed independent of price and this confers salience to the free promotion while the focus on other decision factors such as negative quality information is reduced.

GENERAL DISCUSSION Through a series of three experiments, we provide evidence that consumers are more sensitive to factors about quality that might lower consumers’ intentions to purchase for monetary discounts than for free promotions. We suggest that, because free promotions are more likely to be viewed independent of price, they are more salient than monetary promotions that are processed relative to product price. In study 2 we reverse the effect by showing that, when the relative salience of free promotions is reduced by changing the ease of recall of various decision inputs, the resilience of purchase intentions for free promotions to negative quality information is mitigated. Our process explanation on the relative salience of free promotions draws support from the reasons analysis in study 3, where those who saw free promotions had a significantly greater number of promotion-related thoughts than those who saw discounts. We expect that this heightened salience of free promotions confers a relative resilience against negative information on product quality. Again, the reasons analysis from study 3 is consistent with this explanation where those who saw discounts had a greater number of quality-related thoughts in the negative (vs. positive) information context while those who saw free promotions showed no differences in the number of quality-related thoughts across conditions. Further, the results from studies 2 and 3 suggest that, even when the monetary value of the free promotions is provided, free promotions appear to be evaluated independent of price because they are presented and understood in nonmonetary terms. In future research we plan to highlight the monetary value, or induce consumers to focus on the monetary value of free promotions. We expect that this will likely lead to “relativistic” processing and make reactions to free promotions similar to those to monetary promotions. Our thesis centers on the salience of free promotions. Why does processing independent of price confer salience? The content analysis of thought listings in study 4 gives us some insight into this. Participants seem to have more ways to think about the pros and cons of the free offer than the discount. Once the monetary discount is integrated into price, in effect it cuts off the ability to think independently about the promotion. The salience of the free offer results in a greater focus on this factor and a smaller focus on other factors. However, we do not have sufficient information to understand the precise mechanism by which this focus results in invariance to negative quality information. For instance, does the greater focus on the free promotion result in overweighting of the free promotion and underweighting of negative quality information, or is the free promotion overvalued and quality information undervalued? Our reasons analysis on listing the most important factors determining the decision is consistent with both of these ideas, but it does not allow us to separate them. In future research it would be interesting to disentangle the two possible effects of weighting and valuation. It would

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also be interesting to look at more direct methods to manipulate and measure salience. In our research we look at how this salience and the focus on the free promotion impairs the ability to account for negative quality information. However, we do not examine how this salience may affect processing of other pieces of information, and this may be a fruitful area of future research. Future research should also investigate whether there are differences in how different types of free promotions are processed. We used only two forms of free promotions—free shipping and a free gift. Although theoretically there is no reason to expect any difference in the pattern of results for other forms of free promotions (e.g., bundled offerings), one could argue that different forms of free promotions may be valued differently. Future research should also examine what other factors influence how promotions are processed. For instance, our results suggest that inducing individuals to focus on different aspects of the purchase through marketing communication may be one method of making them less price focused or more price focused, depending on the marketer’s objectives. Similarly, future research should examine whether free promotions lead to the same sort of insulating effect to other types of negative contextual information. In this article, we focused only on resistance to negative quality information. Future research should examine whether free promotions have different sensitivities than monetary promotions to other types of contextual information, such as fairness, store reputation, and so forth. The semantic labels marketers use to describe a promotion may also affect how it is processed. For example, in study 1 we found that consumers had higher purchase intentions when shipping and handling was being offered for free than when shipping and handling cost $2.99. In contrast, Morwitz, Greenleaf, and Johnson (1998) found that intentions were higher when shipping costs were separated from the product cost than when they were combined. This suggests that the semantic terms used to describe the promotions affect how they are processed and encoded. Saying that the shipping and handling is “free” may suggest independent processing from price and heightened salience, while saying that it is “included” might indicate that the offer should be integrated with price and result in reduced salience. This is consistent with other research on the effect of semantic cues on price information that shows not only that different semantic cues provide distinct kinds of price information but also that the relative effectiveness of those cues is a function of consumers’ information preferences in those decision contexts (Grewal, Marmorstein, and Sharma 1996; Sinha and Smith 2000). Future research should examine the impact of semantic labels for different kinds of promotions on how those promotions are processed.

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