- Email: [email protected]
Shipping charges and shipping-charge skepticism: Implications for direct marketers’ pricing formats
SHIPPING CHARGES AND SHIPPINGCHARGE SKEPTICISM: IMPLICATIONS FOR DIRECT MARKETERS’ PRICING FORMATS ROBERT M. SCHINDLER, MAUREEN MORRIN, AND NADA NASR BECHWATI
T
he purpose of this research is to develop a theoretical framework for
understanding consumer response to direct marketers’ pricing formats based on shoppers’ perceptions of fairness. As part of this effort, we introduce an indi-
ROBERT M. SCHINDLER is Associate Professor, School of Business, Rutgers University–Camden, NJ; e-mail: [email protected]
vidual difference variable we call shipping-charge skepticism. An experiment is conducted (n ⫽ 189) to examine whether offers are more appealing when ship-
MAUREEN MORRIN
ping charges are bundled into a single price or partitioned out separately from is Associate Professor, School of
a base product price. We demonstrate that when an external reference price is available, shipping-charge skeptics prefer direct marketers’ offers more in a
Business, Rutgers University–Camden, NJ; e-mail: [email protected]
bundled price format, whereas non-skeptics prefer them more in an unbundled price format. Implications and areas for future research are discussed.
NADA NASR BECHWATI is Assistant Professor, Marketing Department, Bentley College,
© 2005 Wiley Periodicals, Inc. and Direct Marketing Educational Foundation, Inc.
Waltham, MA; JOURNAL OF INTERACTIVE MARKETING VOLUME 19 / NUMBER 1 / WINTER 2005 Published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/dir.20030
e-mail: [email protected]
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INTRODUCTION
PAST RESEARCH
With the continued growth of retailing via e-commerce as well as via more traditional direct marketing vehicles such as catalogs, a major decision facing direct marketers is how to present shipping and handling charges to potential customers. Some customers complain about what they perceive to be the unfair and sneaky nature of shipping and handling policies used by a large number of direct marketers (Gomolski, 2001). Shipping and handling charges, moreover, are considered a main reason why online shoppers abandon their shopping carts and discontinue the purchase process (Campanelli, 2002; Foster, 1999). The purpose of this research is to better understand how consumers respond to direct marketers’ pricing formats. Direct marketers have some latitude in determining how to state the price of their offers. For example, if the total charge for a particular item offered in a catalog is $80, the seller has the option of either breaking out the price into two components (e.g., $65 as base price for the product and $15 for shipping) or stating the price simply as $80 (with no shipping charges). Examination of several Web sites and catalogs indicates that some marketers apply the first practice (i.e., unbundled pricing) while others opt for the latter (i.e., bundled pricing). Which approach is likely to result in greater consumer liking for the offers?
A considerable amount of prior research has examined the issue of product and service bundling, that is, whether sellers should price a multi-component item consisting of several products or services together or separately (e.g., Gaeth, Levin, Chakraborty, & Levin, 1991; Venkatesh & Mahajan, 1993; Yadav & Monroe, 1993). While economic theory suggests that bundling may be advantageous for firms, empirical tests have found mixed results (Chakravarti, Krish, & Srivastava, 2002; Drumwright, 1992; Heath, Chatterjee, & France, 1995; Johnson, Herrmann, & Bauer 1999). Moreover, some aspects of this stream of research may be less applicable in the domain of direct marketing, since shipping charges are not typically perceived by consumers as simply a price for an added product or service that provides benefits (such as a rental car in a vacation package). Instead, shipping charges may be viewed quite differently by various consumer segments. Some consumers may view shipping charges in a more negative light, either as a nuisance, or worse, as an unfair source of profit for the seller. Other consumers may consider shipping charges as a fair charge to cover the cost of product delivery. Thus, the “price” charged by a seller for shipping may be processed differently than the “price” charged for the product being sold because of differing perceptions of fairness regarding these price components.
Information from the Direct Marketing Association indicates that “free shipping and handling” is the most effective purchase incentive for both catalog purchasers and non-purchasers (Direct Marketing Association, 2000, p. 63). Does this suggest that direct marketers should generally utilize bundled pricing formats, that is, roll shipping and handling costs into the price of products sold? The present research examines this issue from a theoretical perspective based on consumers’ perceptions of fairness. In particular, we address the following question: Under what conditions should shipping and handling charges (hereafter referred to as simply shipping charges) be listed separately from the base price of the product rather than combined into a single bundled price in order to maximize consumer liking of an offer? We will show that consumers’ overall degree of skepticism toward shipping charges plus the presence or absence of an external reference price are key variables for consideration.
There is some empirical evidence in the context of direct marketing that suggests partitioned pricing may be advantageous. Morwitz, Greenleaf, and Johnson (1998) compared consumer reactions to a bundled price ($82.90) with that to a price with partitioned shipping charges ($69.95 plus $12.95 for shipping and handling). They found that using partitioned pricing can lead to recall of lower total product costs, and concluded that direct marketers should “divide and prosper”—that is, use partitioned pricing—to maximize sales. However, these authors found no overall difference in demand for offers with bundled versus unbundled price formats. The seminal Morwitz et al. (1998) paper creates interesting avenues for further research to tease apart how individual differences among consumers interact with their perceptual and inferential processes to determine their reactions to price formats. Below we develop a theoretical framework to help predict the conditions under which bundled versus unbundled price formats will result in greater liking among consumers.
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CONCEPTUAL FRAMEWORK To understand consumer preferences for offers with one shipping price format versus another in a direct marketing context, we propose a conceptual framework based on the value function proposed by Kahneman and Tversky (1979, 1984) in their prospect theory. In this theory, the value of a perceived loss decreases as a negatively accelerated function of the size of the loss. In the context of a commercial transaction, we consider this value function to describe what has been termed “the pain of paying” (Prelec, Lowenstein, & Zellermeyer 1998). As a consequence of the concave nature of this value function, partitioning a price into a base price plus a smaller component price will generally increase the pain of paying and will decrease the attractiveness of the offer. Thus, the general prediction of prospect theory is that bundled prices should always be less painful. However, research carried out since the development of prospect theory has provided evidence that the buyer’s
perceptions of the seller’s profits influence the buyer’s feelings about the price. In their work on perceived fairness, Kahneman, Knetsch, and Thaler (1986) found that a price increase that was perceived as only covering the seller’s increased costs was seen as more acceptable to buyers than one that was perceived as increasing the seller’s profits. Similarly, Bolton, Warlop, and Alba (2003) found that increasing the consumer’s perceptions of a seller’s costs increases the degree to which the consumer judges the seller’s offer to be fairly priced. We draw from this evidence that the slope of prospect theory’s value function for the pain of paying an amount to a seller will depend on the consumer’s perception of the profit implications for the seller. Kahneman et al. (1986) have used the term “reference profit” to describe the profit to which the seller is perceived to be entitled. If the buyer perceives a seller’s price as contributing appropriately to the seller’s reference profit, then the pain of paying that price is represented by the profit-contributing value function indicated by the solid line in Figure 1. If Value
Losses
Bundled Base price price
Shipping charge
0
Gains
Vno-profit shipping charge
Value function for loss perceived as just covering seller costs
Vprofit-contributing shipping charge
Vbase Vbase + Vno-profit shipping charge
Value function for loss perceived as contributing to seller's reference profit
Vbundled
Vbase + Vprofit-contributing shipping charge
FIGURE 1 Predicted Effects of Perceived Seller Shipping-Charge Profit on Preference for Bundled Versus Partitioned Shipping Charges
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the buyer perceives the price as contributing to a level of profits lower than the reference profit, then paying that price will be less painful and the value function for that price will be less steep. The extreme form of this relation is when the price is perceived as only covering the seller’s costs and not contributing at all to the seller’s profit. The lower degree of pain for this situation is described by the less steep noprofit value function indicated by the dotted line in Figure 1. We presume that a product’s base price will generally be perceived as contributing appropriately to reference profits, and so the pain of paying the base price will be described by the profit-contributing value function. A shipping charge, on the other hand, may be perceived in alternative ways. One possibility is that the shipping charge is perceived as contributing to the seller’s profits in the same way as does the base price. In this situation, partitioning a price into a base price and a shipping charge will reduce the offer’s attractiveness to the buyer, in accord with the predictions of prospect theory. The concave nature of the value function will cause the shipping charge to cause more pain than will be saved by reducing the bundled price to the base price. Formally, if Vbundled is the value of the bundled price (which of course is lower as the pain of paying is higher), Vbase is the value of the base price, and Vprofit-contributing shipping charge is the value of the partitioned shipping charge, then
shipping charges as just covering shipping costs. Formally, Vbase ⫹ Vno-profit shipping charge ⬎ Vbundled To summarize, our conceptual framework predicts that whether a buyer prefers bundled or partitioned shipping charges will depend in part on the buyer’s view concerning the seller’s profits. If the buyer perceives shipping charges as a component price not fundamentally different than the base price, then the buyer would feel less pain with one price rather than two (i.e., bundled rather than unbundled). However, if the buyer perceives the shipping charge to be in fact what its name suggests—nothing more than the costs that must be incurred by the seller to get the product to the buyer—then the buyer would feel less pain if the offer is presented with shipping charges partitioned from the base price (i.e., unbundled rather than bundled).
FACTORS AFFECTING PERCEIVED SHIPPING-CHARGE PROFIT
Vbase ⫹ Vprofit-contributing shipping charge ⬍ Vbundled
If it is the buyer’s perception of shipping-charge profitability and thus fairness that determines whether shipping charges should be partitioned or bundled into the base price, then what are the factors that determine these perceptions? In this study, we examine two such factors: the degree of consumers’ shipping-charge skepticism and the presence or absence of external reference prices.
Another possibility is that the shipping charge is perceived by buyers as doing no more than covering the seller’s actual shipping costs and not contributing to the seller’s profits. In this situation, the noprofit value function (the dotted line in Figure 1) would describe the pain of paying this component of the offering’s price. Because the no-profit value function is less steep than the profit-contributing value function, the pain of paying the shipping charge would be relatively low. In fact, we posit it to be so low as to not only neutralize, but actually reverse the otherwise more painful aspect of having to incur a second loss. Thus, partitioning an offering’s price into a base price plus a shipping charge would increase the offer’s appeal to customers who perceive
The first factor we investigate is consumer skepticism regarding shipping charges. In recent years, interest has grown in the topic of consumer skepticism, particularly since the publication of the Persuasion Knowledge Model (PKM; Friestad & Wright, 1994, 1995). This model suggests consumers’ beliefs about marketers’ persuasion attempts influence how they respond to marketers’ communication efforts. Consumers are thus thought to draw on their knowledge of marketers’ motives and strategies when interpreting, for example, advertising campaigns. To date, studies in this area of research have focused almost exclusively on consumer skepticism toward advertisements (Boush, Friestad, & Rose, 1994; Ford, Smith, & Swasy, 1990; Hardesty,
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Carlson, & Bearden, 2002; Obermiller & Spangenberg, 1998, 2000). Advertising skeptics are those who tend to disbelieve ad claims (e.g., Obermiller & Spangenberg, 1998, 2000) and mistrust advertisers’ motives (e.g., Boush et al., 1994). Ad skeptics have been found to evaluate advertised offers more negatively than non-skeptics (Obermiller & Spangenberg, 1998).
Shipping-charge skeptics, we predict, will evaluate direct marketers’ offers more negatively than will non-skeptics. This result is expected based on their negative attitudes toward shipping charges, and it would be in agreement with prior work on advertising skepticism, which has found that advertising skeptics evaluate advertised offerings more negatively than do non-skeptics.
Extending this line of research, we investigate the notion that some consumers may be highly skeptical of direct marketers’ offers due to their underlying beliefs regarding the perceived fairness of shipping charges. We thus conceive of shipping charge skepticism as one component of consumers’ persuasion knowledge. As Hardesty et al. (2002, p. 1) note, persuasion knowledge encompasses consumers’ beliefs about marketers’ motives, strategies and tactics. Consumers often feel the need to defend themselves from persuaders’ tactics (Koslow, 2000). This explains why consumers typically discount the value of grocers’ price cuts (Liefeld & Heslop, 1985; Zaichowsky & Sadlowsky, 1991). For similar reasons, we believe consumers’ beliefs about the profit motives underlying shipping fees charged by direct sellers also fall within the Persuasion Knowledge framework. If some consumers tend to believe that shipping charges are used as a means to enhance sellers’ revenues and profits rather than simply as a means for getting the product to the consumer, this will impact their evaluations of such offers.
H1: Shipping-charge skeptics will evaluate direct marketers’ offers more negatively than will nonskeptics.
We propose that some shoppers are highly skeptical of any shipping charges and view them as a firm’s sneaky strategy to make additional profits (Gomolski, 2001). Such consumers do not generally believe that having products shipped to their door is a service worth paying for. Because of their negative attitudes toward the idea of paying for shipping, such shoppers may consider shipping charges distasteful, as they are perceived as contributing to the seller’s profit and as not being worth their cost. For these consumers, direct marketers’ offers will generally not be perceived as fair offerings providing high levels of value due largely to their perceptions of unfairness related to shipping charges. We refer to shoppers possessing these attitudes as shippingcharge skeptics.
The second factor that we propose will affect fairness perceptions is the presence or absence of external reference prices. An external reference price provides consumers with a perceptual cue that can impact how they process an offer’s price. For example, if consumers are shown a direct marketer’s offer for a lamp costing $65 plus $15 shipping, and they are also told that similar products are sold in stores for $65, then this $65 external reference price becomes a perceptual cue upon which consumers will anchor their assessments of what the product is worth. For shippingcharge skeptics provided with such a cue, an unbundled price format will make more salient the unfairness of the separate shipping charge because this charge, which is perceived as an additional source of profit, is listed separately. Thus, we expect that shipping charge skeptics’ preference for unbundled prices will emerge when an external reference price is available because it focuses their processing on the amount of the shipping charge above and beyond the product’s value. Similarly, we expect that non-skeptics’ preference for unbundled prices will emerge when there is an external reference price available because it focuses their processing on the separateness of the shipping charge part of the offer’s price, which non-skeptics view as a fair passing along of the seller’s costs. Without such a perceptual anchor, that is, when there is no external reference price with which to confidently assess the product’s value, then consumers, both skeptics and non-skeptics alike, will assess the $65 plus $15 (i.e., unbundled) format in a manner similar to the $80 (bundled) format. Both formats will be seen as costing $80, in accord with traditional economic theory, which suggests there should be no
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difference in preferences by price format. We therefore predict that when there are no external reference prices available to consumers, price format will have no impact on preferences for a direct marketer’s offer, but when there are external reference prices available, they will. To summarize, we expect that when an external reference price is present, shipping-charge skeptics will prefer offers more in a bundled price format, whereas non-skeptics will prefer them more in an unbundled price format. Shipping-charge skeptics, who tend to view shipping charges as unfair sources of profit for direct marketers, will like an offer less when shipping charges are made salient via a partitioning strategy. For these consumers, partitioning a shipping charge from a base price increases the total pain of paying. Because they do not believe that the shipping charges are really only a passing along of costs, partitioned shipping charges make them feel the added pain of paying two prices rather than only one, especially when they know that the shipping charges are above and beyond the value of the product (i.e., the external reference price). The pain of paying for shippingcharge skeptics in this situation will therefore be lessened when shipping charges are bundled into a single offer price. On the other hand, non-skeptics, who tend to interpret shipping charges as just covering the seller’s costs of getting the ordered items to the consumer’s doorstep, will feel less pain of paying the shipping charge when they can more accurately assess the offer’s value, and thus would prefer an unbundled price format over a single bundled price. H2: In the absence of an external reference price, the price format will not impact preferences of either shipping-charge skeptics or non-skeptics for a direct marketer’s offering. H3a: In the presence of an external reference price, shipping-charge skeptics will prefer a direct marketer’s offering more in a bundled price format. H3b: In the presence of an external reference price, non-skeptics will prefer a direct marketer’s offering more in an unbundled format. These hypotheses were tested in an experiment described below.
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METHOD Respondents and Design The respondents were 189 adults whose average age was 38 years (range: teens to above 70); 56% were female. The experiment consisted of a 2 (price format: bundled, unbundled) ⫻ 2 (reference price: not provided, provided) full-factorial, between-subjects design. The price format factor was manipulated by displaying a picture of a lamp in one of two ways: with a price of $80 and no shipping charge (bundled), or with a price of $65 and a $15 shipping charge (unbundled). Thus, in all conditions, the amount of money required to obtain the product displayed was kept constant. A survey of a variety of Web sites revealed that shipping charges on products with a price of $65 averaged around $15. The external reference price factor was manipulated by providing no information about the prices of other similar lamps available in retail stores (reference price not provided), or by providing a $65 reference price for the lamp (reference price provided; please see Appendix A for examples). A pre-test (n ⫽ 37) was run on the liking of the lamp used in the stimuli in comparison to 11 other lamps to insure avoidance of ceiling and floor effects. In the main experiment, respondents were randomly assigned in about equal numbers to one of the four conditions.
Procedure Respondents were recruited at a large science museum in a major metropolitan area over several weekends. As the museum-goers filed past a table in a main hallway, they were approached by a researcher who asked if they would be willing to fill out a short questionnaire in order to receive a small gift of their choice (usually a toy for an accompanying child). After agreeing to participate, the respondent read and agreed to a consent form, then completed a booklet. On the first page, respondents viewed a full-color picture of a table lamp accompanied by descriptive information and responded to several five-point Likert items regarding their reactions to the specific catalog offer. Following that, they responded to several fivepoint Likert items concerning their general attitude toward shipping charges and their views and experience regarding direct marketing. Later questions checked the manipulations and obtained some demographic information. It took approximately five to
10 minutes for respondents to complete the questionnaire. They then received a sheet of paper that contained debriefing information and explained the objectives of the survey in more detail.
Measures Liking of the Offer. To obtain a measure of the respondents’ liking of the offer, a principal components factor analysis was run on three five-point Likert items that measured their reaction to the catalog offer (e.g., “I would consider buying this lamp from this catalog”). The factor analysis showed that the three-item scale was unidimensional, with the largest eigenvalue (2.32) accounting for 77.3% of the variance. The mean of these three items was calculated and used as the main dependent measure (please see Appendix B for the items). The three-item scale had a coefficient alpha of 0.85. Shipping-Charge Skepticism. The items making up this scale were designed to tap into two related facets of shipping-charge skepticism: (1) a belief that firms that sell through catalogs try to make a profit on the shipping fees they charge (e.g., “I believe that most firms that sell through catalogs try to make a profit on shipping charges”) and (2) a general dislike of having to pay such charges (e.g., “It really bothers me to have to pay shipping charges for products I order”). We generated the scale items to measure not only a dislike of having to pay shipping charges, which, by itself could reflect simply frugality or another consumer trait, but also beliefs about direct sellers’ ulterior profit motives. Prior research in the area of advertising skepticism has similarly measured not only disbelief of ad claims but also mistrust of advertiser motives (Boush et al., 1994). Thus, the shipping charge skepticism scale includes dislike of paying as well as measures of consumers’ perceptions of unfair profits made from the offer and the shipping charges as a source of unfair profits. To create the scale, a principal components factor analysis was run on five items that measured these aspects of shipping-charge skepticism (please see Appendix B for the items). The factor analysis showed that the five-item scale was unidimensional, with the largest eigenvalue (2.09) accounting for 41.8% of the variance. These five items were summed to
form the shipping-charge skepticism scale, which had a coefficient alpha of 0.65. Covariates. Two items that measured the degree to which respondents liked the style of the lamp offered and the degree to which it would fit with their home decor were combined for use as a covariate in the analysis. These two items were highly correlated (r ⫽ .76, p ⬍ .0001). Respondent age and gender were also used as covariates.
RESULTS Manipulation Checks Price Format. To check whether respondents correctly processed our manipulation of price format, they were asked about the amount of the shipping charges stated for the lamp. They were given five choices including the correct ones. Respondents’ answers varied significantly across the conditions (2(4) ⫽ 160.12, p ⬍ .0001). Overall, 80.5% of the respondents correctly answered the question. External Reference Price. To check whether respondents correctly processed our manipulation of external reference price, they were asked what price had been stated for similar lamps in local stores. They were given five choices including the correct ones. Respondents’ answers varied across the conditions (2(4) ⫽ 133.03, p ⬍ .0001). Overall, 85.9% of the respondents correctly answered the question.
Main Results First, a median split on the shipping-charge skepticism scale was used to produce high and low shipping-charge skepticism groups (t(186) ⫽ 18.12, p ⬍ .0001, XSkeptics ⫽ 20.3, X Non-skeptics ⫽ 14.2). Then, an analysis of variance (ANOVA) was conducted on consumer liking of the offer as a function of price format (bundled, unbundled), shipping-charge skepticism (high, low), reference price (provided, not provided), the covariates (like lamp style, gender, age), and all possible interactions among the fixed factors (F(10, 171) ⫽ 9.74, p ⬍ .0001, R-squared ⫽ .36). Price Format. There was no statistically significant main effect of price format (F(1, 171) ⫽ 1.07, p ⫽ .30).
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Thus, in the aggregate, neither bundled nor unbundled offers were more preferred. This result is in accord with the Morwitz et al. (1998) null findings regarding demand. Shipping-Charge Skepticism. There was a statistically significant main effect of shipping-charge skepticism (F(1, 171) ⫽ 26.19, p ⬍ .0001, eta-squared ⫽ .13). Overall, shipping-charge skeptics liked the offers less than the non-skeptics (X Skeptics ⫽ 1.81, X Non-skeptics ⫽ 2.47), in support of H1. In addition, respondents’ scores on the shipping-charge skepticism scale were negatively correlated with the degree to which they reported shopping often from catalogs (r ⫽ ⫺.25, p ⬍ .001) and shopping often on the Internet (r ⫽ ⫺.23, p ⬍ .002). This result provides additional validation of the shipping-charge skepticism scale. External Reference Price. There was a statistically significant main effect of external reference price (F(1, 171) ⫽ 4.58, p ⬍ .05, eta-squared ⫽ .03). Overall, respondents liked the offer more when no external reference price was provided (X No Reference ⫽ 2.28 vs. X Reference ⫽ 2.00). This result, as well as the findings concerning the main effects of price format and shipping-charge skepticism, are qualified by the higher-order interactions. Interactions. The two-way interaction between price format and shipping-charge skepticism was statistically significant (F(1, 171) ⫽ 5.94, p ⬍ .05, etasquared ⫽ .03). Non-skeptics preferred the offer more in an unbundled rather than bundled format (X Non-skeptics,Bundled ⫽ 2.24 vs. X Non-skeptics,Unbundled ⫽ 2.70, p ⬍ .01). Price format had no impact on preferences among the shipping-charge skeptics (X Skeptics,Bundled ⫽ 1.90 vs. X Skeptics,Unbundled ⫽ 1.72, p ⫽ .35). These results are qualified by the higher-order three-way interaction. The three-way interaction among price format, shipping-charge skepticism, and external reference price was statistically significant (F(1, 171) ⫽ 5.96, p ⬍ .05, eta-squared ⫽ .03). This result indicates that when there is no external reference price provided, price format has no impact on liking of the offer among shipping-charge skeptics (X Skeptics,Bundled ⫽ 1.84 vs. X Skeptics,Unbundled ⫽ 2.08, p ⫽ .43) and non-skeptics (X Non-skeptics,Bundled ⫽ 2.48 vs. X Non-skeptics,Unbundled ⫽ 2.72, p ⫽ .30), in support of H2.
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However, when an external reference price is provided, shipping-charge skeptics prefer the bundled offer (X Skeptics,Bundled ⫽ 1.97 vs. X Skeptics,Unbundled ⫽ 1.36, p ⫽ .015), whereas non-skeptics prefer the unbundled offer (X Non-skeptics,Bundled ⫽ 2.01 vs. X Non-skeptics,Unbundled ⫽ 2.68, p ⫽ .01), in support of H3a and H3b, respectively. This result can be seen graphically in Figure 2.
DISCUSSION In this research, we demonstrate that whether or not bundling is “better,” in terms of consumer appeal, depends on an individual difference variable that we call shipping-charge skepticism, as well as on the availability of external reference price cues. The results indicate that without an external reference price, consumers are indifferent to price format. Neither bundled nor unbundled price formats have an overall advantage. However, when an external reference price is available, preferences for price formats do emerge. Shipping-charge skeptics then prefer the offer more in a bundled price format, whereas nonskeptics prefer it more in an unbundled format. We argue that when there is an external reference price available, partitioned shipping charges create in shipping-charge skeptics the uncomfortable feeling that they are paying two profit-generating prices rather than one, and they may further feel that the seller’s attempts to claim otherwise is sneaky and unfair. Shipping-charge skeptics thus like an offer less when the seller’s price is unbundled, when an external reference price exists. Non-skeptics, conversely, prefer the unbundled offering over the bundled offering when an external reference price exists in the market. This is because, for non-skeptics, it is considered “only fair” for a seller to pass along to the consumer the costs of delivering the product, and thus such a component price is less painful to pay than a typical profit-generating price. How do our results compare with those of Morwitz et al. (1998), who found a difference in memory but not in demand for the different price formats? In their study they found no differences in demand among consumers for a product with a bundled versus unbundled price format. We first note that in the main Morwitz et al. (1998) experiment, the level of shipping charges utilized in their study was 18.5%, fairly comparable to our unbundled price format condition (23.1%), and
3.00
2.68
Liking of offer
2.50
2.01 2.00 1.97
1.50 1.36
1.00 Bundled
Unbundled Shipping-Charge Skeptics
Non-Skeptics
FIGURE 2 Liking of the Offer With an External Reference Price Provided
therefore this aspect of the stimuli is unlikely to account for any differences in results. The Morwitz et al. study included an external reference price but did not measure shipping-charge skepticism. What we found is that it is the interaction of these two variables that elucidates consumers’ preferences for price format. Thus, the main effects of our study are in accord with the findings of Morwitz et al. (1998), yet our shipping-charge skepticism measure allows us to tease out differences in consumer price format preferences. We provide some additional insight into shipping-charge skeptics’ attitudes and behavior by noting that they tend to evaluate direct marketers’ offers more negatively than do non-skeptics, and they are less likely to shop often via catalogs and the Internet.
Implications The ability of our conceptual framework to account for the pattern of consumer preference by price format
suggests that prospect theory is not violated in this type of pricing situation. The apparent discrepancy between the prospect theory prescription to “bundle losses” and the empirical evidence for “divide and conquer” (Morwitz et al., 1998) can be explained by considering the degree to which the consumer perceives the loss as fair. Recognizing that the value function for losses is also a function of perceived differences from reference profit integrates Kahneman et al.’s (1986) principle of dual entitlement into a prospect theory framework and provides a foundation for further work on understanding the consumer’s “pain of paying.” The present set of results also has several managerial implications. First, it is clear that shipping-charge skeptics evaluate direct marketers’ offers more negatively than do non-skeptics. As a result, direct marketers who want to appeal to this group will have to pay special attention to minimizing perceptions of
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unfairness in relation to shipping charges. In particular, in an environment where customers are not aware of product prices, shipping-charge skeptics consistently value the worth of direct marketers’ offerings lower than do non-skeptics. For skeptics in such an environment, price format is not an issue and thus would not be a means for marketers to increase an offer’s appeal. However, in an environment where customers are aware of product prices, shippingcharge skeptics’ evaluation of direct marketers’ offers is higher when the offers are priced in a bundled format, as it minimizes the salience of the shippingcharge part of the total price. Another approach to minimizing skepticism regarding shipping charges would be to provide a clear explanation and rationale for how such charges are calculated, so that potentially skeptical consumers can better understand the costs involved in direct sellers’ efforts. Non-skeptics, on the other hand, tend to prefer direct marketers’ offers more if the price is in an unbundled format, whenever external reference prices are available. Thus, when targeting current customers or potential customers known to be avid users of direct mail, offers should be provided with shipping charges listed separately. Non-skeptics do not necessarily assume that shipping charges are sources of profits for the seller and thus hold them in a sort of separate mental account that is seen as more fair as it represents merely the passing along of costs. Thus, the present research suggests managers need to be cognizant of the role of consumer perceptions of the profitability and thus fairness of shipping charges via a previously unconsidered individual difference variable (shipping-charge skepticism) to understand and predict how consumers will respond to their offers.
Future Research Issues The present findings suggest several future avenues of research regarding how consumers evaluate shipping charges and assess their fairness. It would be of interest to determine just how widespread skepticism toward shipping charges is, and how stable a construct it is. Moreover, what types of experiences and socialization processes contribute toward its development, and is it amenable to change? What firm practices should be curbed to minimize continued skepti-
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cism on the part of consumers? It would be equally important to develop more fully a scale that captures the various facets of the interesting phenomenon of shipping-charge skepticism uncovered in the present research. Since recent research found some overlap between skepticism toward advertising and skepticism toward salespeople (Obermiller & Spangenberg, 2000), the question arises as to whether a broader, trait-based concept of marketplace skepticism exists and warrants investigation. It would also be interesting to see whether degree of shipping-charge skepticism is related to other constructs such as consumer self-confidence or self-efficacy beliefs regarding the degree to which one can protect oneself from being deceived by marketers (Bearden, Hardesty, & Rose, 2001). A related question to address is: how should shipping charges be calculated to maximize consumer perceptions of fairness? Although 90% of catalogers who charge consumers for shipping do so on the basis of order value (Direct Marketing Association, 2000, p. 75), it is possible that consumer perceptions could be enhanced by instead calculating shipping charges on the basis of a product’s weight, the number of items purchased from a vendor, or simply as a flat rate. Another area for research concerns the issue of when the shipping charges are presented to the consumer and how timing affects perceptions of fairness. It is possible that the predictions of prospect theory within the theoretical framework outlined here might dominate in situations where the pricing elements involved are presented simultaneously to the consumer. However, alternative outcomes might arise when some pricing elements are presented temporally later in the evaluation process (e.g., when shipping charges are presented only after item selection, as often occurs on Web sites). The anchoring-and-adjustment concept, for example, suggests consumers might generally prefer an offer with a partitioned price format if they overweight the base price and use it as an anchor to mentally discount the later appearing shipping charges so that the total cost is revised downward toward the anchor (Tversky & Kahneman, 1974; Yadav, 1994). Our study has highlighted the role of perceived profitability in the consumer’s evaluation of shipping-
charge fairness and indicated the importance of this factor for price bundling/partitioning decisions. The theoretical framework set forth here also further extends the applicability of prospect theory by reconciling results of prior research that had previously appeared contradictory. Future research as outlined above will enhance the theory development process in this domain.
REFERENCES Bearden, W.O., Hardesty, D.M., & Rose, R.L. (2001, June). Consumer Self-Confidence: Refinements in Conceptualization and Measurement. Journal of Consumer Research, 28, 121–134. Bolton, L.E., Warlop, L., & Alba, J.W. (2003, March). Consumer Perceptions of Price (Un)Fairness. Journal of Consumer Research, 29, 474–491. Boush, D.M., Friestad, M., & Rose, GM. (1994). Adolescent Skepticism toward TV Advertising and Knowledge of Advertiser Tactics. Journal of Consumer Research, 21(1), 165–175. Campanelli, M. (2002, February). Who Pays to Get it There? Net Profits: Your Site’s Shipping and Handling Charges Can Make or Break an Online Sale. Entrepreneur, 30(2), 34–36. Chakravarti, D., Krish, R., Paul, P., & Srivastava, J. (2002). Partitioned Presentation of Multicomponent Prices: Evaluation, Choice and Underlying Processing Effects. Journal of Consumer Psychology, 12(3), 215–229. Direct Marketing Association. (2000). Statistical Fact Book (22nd ed.). New York: Direct Marketing Association. Drumwright, M.E. (1992). A Demonstration of Anomalies in Evaluations of Bundling. Marketing Letters, 3, 311–321. Ford, G.T., Smith, D.B., & Swasy, J.L. (1990). Consumer Skepticism of Advertising Claims: Testing Hypotheses from Economics of Information. Journal of Consumer Research, 16(4), 433–441. Foster, E. (1999, November 8). The Gripe Line: Shipping and Handling: The Big Surprise on Your E-Commerce Shopping Bill. InfoWorld, 21(45), p. 101. Friestad, M., & Wright, P. (1994, June). The Persuasion Knowledge Model: How People Cope With Persuasion Attempts. Journal of Consumer Research, 21, 1–31. Friestad, M., & Wright, P. (1995, June). Persuasion Knowledge: Lay People’s and Researchers’ Beliefs About the Psychology of Advertising. Journal of Consumer Research, 22, 62–74. Gaeth, G.J., Levin, I.P., Chakraborty, G., & Levin, A.M. (1991). Consumer Evaluation of Multi-Product Bundles: An Information Integration Analysis. Marketing Letters, 2, 47–57.
Gomolski, B. (2001, January 22). E-Business Matters: Shipping and Handling Costs Leave a Bad Taste on the Lips of E-Shoppers. InfoWorld, 23(4), 72. Hardesty, D.M., Carlson, J.P., & Bearden, W.O. (2002). Brand Familiarity and Invoice Price Effects on Consumer Evaluations: The Moderating Role of Skepticism Toward Advertising. Journal of Advertising, 31(2), 1–15. Heath, T.B., Chatterjee, S., & France, K.R. (1995, June). Mental Accounting and Changes in Price: The Frame Dependence of Reference Dependence. Journal of Consumer Research, 22, 90–97. Johnson, M.D., Herrmann, A., & Bauer, H.H. (1999). The Effects of Price Bundling on Consumer Evaluations of Product Offerings. International Journal of Research in Marketing, 16, 129–142. Kahneman, D., Knetsch, J.L., & Thaler, R. (1986, September). Fairness as a Constraint on Profit Seeking: Entitlements in the Market. The American Economic Review, 76, 728–741. Kahneman, D., & Tversky, A. (1979, March). Prospect Theory: An Analysis of Decision Under Risk. Econometrica, 47, 263–291. Kahneman, D., & Tversky, A. (1984, April). Choices, Values, and Frames. American Psychologist, 39, 341–350. Koslow, S. (2000, Winter). Can the Truth Hurt? How Honest and Persuasive Advertising Can Unintentionally Lead to Increased Consumer Skepticism. The Journal of Consumer Affairs, 34(2), 245–268. Liefeld, J., & Heslup, L.A. (1985). Reference Prices and Deception in Newspaper Advertising. Journal of Consumer Research, 11(4), 868–876. Morwitz, V.G., Greenleaf, E.A., & Johnson, E.J. (1998, November). Divide and Prosper: Consumers’ Reactions to Partitioned Prices. Journal of Marketing Research, 35, 453–463. Obermiller, C., & Spangenberg, E.R. (1998). Development of a Scale to Measure Skepticism Toward Advertising. Journal of Consumer Psychology, 7(2), 159–186. Obermiller, C., & Spangenberg, E.R. (2000). On the Origin and Distinctness of Skepticism Toward Advertising. Marketing Letters, 11(4), 311–322. Prelec, D., Lowenstein, G., & Zellermeyer, O. (1998). Closet Tightwads: Compulsive Reluctance to Spend and the Pain of Paying. Presented as part of a special session, Perceived Pain and Pleasure: Preferences for Experience-Structure and Characteristics. In J.W. Alba & J.W. Hutchinson (Eds.), Advances in Consumer Research (Vol. 25, p. 23). Provo, UT: Association for Consumer Research. Tversky, A., & Kahneman, D. (1974, September). Judgment Under Uncertainty: Heuristics and Biases. Science, 185, 1124–1131. Venkatesh, R., & Mahajan, V. (1993). A Probabilistic Approach to Pricing a Bundle of Products or Services. Journal of Marketing Research, 30, 494–508.
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Yadav, M.S. (1994, September). How Buyers Evaluate Product Bundles: A Model of Anchoring and Adjustment. Journal of Consumer Research, 21, 342–353. Yadav, M.S., & Monroe, K.B. (1993). How Buyers Perceive Savings in a Bundled Price: An Examination of a
APPENDIX A
Bundle’s Transaction Value. Journal of Marketing Research, 30, 350–358. Zaichkowsky, J.L., & Sadlowsky, D.P. (1991). Misperceptions of Grocery Advertising. The Journal of Consumer Affairs, 25(1), 98–109.
EXAMPLES OF STIMULI USED IN STUDY (BUNDLED, REFERENCE PRICE; UNBUNDLED, NO REFERENCE PRICE)
Assume you just moved into a new home and you need to buy a table lamp. You see the following in a popular home furnishing catalog:
Assume you just moved into a new home and you need to buy a table lamp. You see the following in a popular home furnishing catalog:
• Silver-tone finish
• Silver-tone finish
• 22 inches tall
• 22 inches tall
• Price: $80
• Price: $65
• No shipping charges
• Shipping charges: $15
You have seen similar lamps at local stores for $65.
APPENDIX B
SCALES Liking of the Offer (scale alpha ⫽ .85)
Item 1. This catalog offer seems to be a good value. 2. I would consider buying this lamp from this catalog. 3. If I bought this lamp from this catalog, I would be satisfied with what I’d be paying.
Factor Loading
Item-Total Correlation
.87 .86 .90
.71 .69 .77
Alpha if Item Deleted .80 .82 .75
(Continued)
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Shipping Charge Skepticism (scale alpha ⫽ .65) Item 1. I believe that most firms that sell through catalogs try to make a profit on shipping charges. 2. $65 (plus $15 shipping) is too much to pay to get this lamp.a 3. This seller is making too much profit on this lamp offer. 4. It really bothers me to have to pay shipping charges for products I order. 5. Delivery of products to my door is a service worth paying for.b
a
Stated price adjusted per condition.
b
Item reverse-coded.
Factor Loading
Item-Total Correlation
Alpha if Item Deleted
.57
.34
.62
.68 .60 .76
.43 .37 .52
.58 .61 .53
.61
.36
.62
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53
T
he purpose of this research is to develop a theoretical framework for
understanding consumer response to direct marketers’ pricing formats based on shoppers’ perceptions of fairness. As part of this effort, we introduce an indi-
ROBERT M. SCHINDLER is Associate Professor, School of Business, Rutgers University–Camden, NJ; e-mail: [email protected]
vidual difference variable we call shipping-charge skepticism. An experiment is conducted (n ⫽ 189) to examine whether offers are more appealing when ship-
MAUREEN MORRIN
ping charges are bundled into a single price or partitioned out separately from is Associate Professor, School of
a base product price. We demonstrate that when an external reference price is available, shipping-charge skeptics prefer direct marketers’ offers more in a
Business, Rutgers University–Camden, NJ; e-mail: [email protected]
bundled price format, whereas non-skeptics prefer them more in an unbundled price format. Implications and areas for future research are discussed.
NADA NASR BECHWATI is Assistant Professor, Marketing Department, Bentley College,
© 2005 Wiley Periodicals, Inc. and Direct Marketing Educational Foundation, Inc.
Waltham, MA; JOURNAL OF INTERACTIVE MARKETING VOLUME 19 / NUMBER 1 / WINTER 2005 Published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/dir.20030
e-mail: [email protected]
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INTRODUCTION
PAST RESEARCH
With the continued growth of retailing via e-commerce as well as via more traditional direct marketing vehicles such as catalogs, a major decision facing direct marketers is how to present shipping and handling charges to potential customers. Some customers complain about what they perceive to be the unfair and sneaky nature of shipping and handling policies used by a large number of direct marketers (Gomolski, 2001). Shipping and handling charges, moreover, are considered a main reason why online shoppers abandon their shopping carts and discontinue the purchase process (Campanelli, 2002; Foster, 1999). The purpose of this research is to better understand how consumers respond to direct marketers’ pricing formats. Direct marketers have some latitude in determining how to state the price of their offers. For example, if the total charge for a particular item offered in a catalog is $80, the seller has the option of either breaking out the price into two components (e.g., $65 as base price for the product and $15 for shipping) or stating the price simply as $80 (with no shipping charges). Examination of several Web sites and catalogs indicates that some marketers apply the first practice (i.e., unbundled pricing) while others opt for the latter (i.e., bundled pricing). Which approach is likely to result in greater consumer liking for the offers?
A considerable amount of prior research has examined the issue of product and service bundling, that is, whether sellers should price a multi-component item consisting of several products or services together or separately (e.g., Gaeth, Levin, Chakraborty, & Levin, 1991; Venkatesh & Mahajan, 1993; Yadav & Monroe, 1993). While economic theory suggests that bundling may be advantageous for firms, empirical tests have found mixed results (Chakravarti, Krish, & Srivastava, 2002; Drumwright, 1992; Heath, Chatterjee, & France, 1995; Johnson, Herrmann, & Bauer 1999). Moreover, some aspects of this stream of research may be less applicable in the domain of direct marketing, since shipping charges are not typically perceived by consumers as simply a price for an added product or service that provides benefits (such as a rental car in a vacation package). Instead, shipping charges may be viewed quite differently by various consumer segments. Some consumers may view shipping charges in a more negative light, either as a nuisance, or worse, as an unfair source of profit for the seller. Other consumers may consider shipping charges as a fair charge to cover the cost of product delivery. Thus, the “price” charged by a seller for shipping may be processed differently than the “price” charged for the product being sold because of differing perceptions of fairness regarding these price components.
Information from the Direct Marketing Association indicates that “free shipping and handling” is the most effective purchase incentive for both catalog purchasers and non-purchasers (Direct Marketing Association, 2000, p. 63). Does this suggest that direct marketers should generally utilize bundled pricing formats, that is, roll shipping and handling costs into the price of products sold? The present research examines this issue from a theoretical perspective based on consumers’ perceptions of fairness. In particular, we address the following question: Under what conditions should shipping and handling charges (hereafter referred to as simply shipping charges) be listed separately from the base price of the product rather than combined into a single bundled price in order to maximize consumer liking of an offer? We will show that consumers’ overall degree of skepticism toward shipping charges plus the presence or absence of an external reference price are key variables for consideration.
There is some empirical evidence in the context of direct marketing that suggests partitioned pricing may be advantageous. Morwitz, Greenleaf, and Johnson (1998) compared consumer reactions to a bundled price ($82.90) with that to a price with partitioned shipping charges ($69.95 plus $12.95 for shipping and handling). They found that using partitioned pricing can lead to recall of lower total product costs, and concluded that direct marketers should “divide and prosper”—that is, use partitioned pricing—to maximize sales. However, these authors found no overall difference in demand for offers with bundled versus unbundled price formats. The seminal Morwitz et al. (1998) paper creates interesting avenues for further research to tease apart how individual differences among consumers interact with their perceptual and inferential processes to determine their reactions to price formats. Below we develop a theoretical framework to help predict the conditions under which bundled versus unbundled price formats will result in greater liking among consumers.
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CONCEPTUAL FRAMEWORK To understand consumer preferences for offers with one shipping price format versus another in a direct marketing context, we propose a conceptual framework based on the value function proposed by Kahneman and Tversky (1979, 1984) in their prospect theory. In this theory, the value of a perceived loss decreases as a negatively accelerated function of the size of the loss. In the context of a commercial transaction, we consider this value function to describe what has been termed “the pain of paying” (Prelec, Lowenstein, & Zellermeyer 1998). As a consequence of the concave nature of this value function, partitioning a price into a base price plus a smaller component price will generally increase the pain of paying and will decrease the attractiveness of the offer. Thus, the general prediction of prospect theory is that bundled prices should always be less painful. However, research carried out since the development of prospect theory has provided evidence that the buyer’s
perceptions of the seller’s profits influence the buyer’s feelings about the price. In their work on perceived fairness, Kahneman, Knetsch, and Thaler (1986) found that a price increase that was perceived as only covering the seller’s increased costs was seen as more acceptable to buyers than one that was perceived as increasing the seller’s profits. Similarly, Bolton, Warlop, and Alba (2003) found that increasing the consumer’s perceptions of a seller’s costs increases the degree to which the consumer judges the seller’s offer to be fairly priced. We draw from this evidence that the slope of prospect theory’s value function for the pain of paying an amount to a seller will depend on the consumer’s perception of the profit implications for the seller. Kahneman et al. (1986) have used the term “reference profit” to describe the profit to which the seller is perceived to be entitled. If the buyer perceives a seller’s price as contributing appropriately to the seller’s reference profit, then the pain of paying that price is represented by the profit-contributing value function indicated by the solid line in Figure 1. If Value
Losses
Bundled Base price price
Shipping charge
0
Gains
Vno-profit shipping charge
Value function for loss perceived as just covering seller costs
Vprofit-contributing shipping charge
Vbase Vbase + Vno-profit shipping charge
Value function for loss perceived as contributing to seller's reference profit
Vbundled
Vbase + Vprofit-contributing shipping charge
FIGURE 1 Predicted Effects of Perceived Seller Shipping-Charge Profit on Preference for Bundled Versus Partitioned Shipping Charges
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the buyer perceives the price as contributing to a level of profits lower than the reference profit, then paying that price will be less painful and the value function for that price will be less steep. The extreme form of this relation is when the price is perceived as only covering the seller’s costs and not contributing at all to the seller’s profit. The lower degree of pain for this situation is described by the less steep noprofit value function indicated by the dotted line in Figure 1. We presume that a product’s base price will generally be perceived as contributing appropriately to reference profits, and so the pain of paying the base price will be described by the profit-contributing value function. A shipping charge, on the other hand, may be perceived in alternative ways. One possibility is that the shipping charge is perceived as contributing to the seller’s profits in the same way as does the base price. In this situation, partitioning a price into a base price and a shipping charge will reduce the offer’s attractiveness to the buyer, in accord with the predictions of prospect theory. The concave nature of the value function will cause the shipping charge to cause more pain than will be saved by reducing the bundled price to the base price. Formally, if Vbundled is the value of the bundled price (which of course is lower as the pain of paying is higher), Vbase is the value of the base price, and Vprofit-contributing shipping charge is the value of the partitioned shipping charge, then
shipping charges as just covering shipping costs. Formally, Vbase ⫹ Vno-profit shipping charge ⬎ Vbundled To summarize, our conceptual framework predicts that whether a buyer prefers bundled or partitioned shipping charges will depend in part on the buyer’s view concerning the seller’s profits. If the buyer perceives shipping charges as a component price not fundamentally different than the base price, then the buyer would feel less pain with one price rather than two (i.e., bundled rather than unbundled). However, if the buyer perceives the shipping charge to be in fact what its name suggests—nothing more than the costs that must be incurred by the seller to get the product to the buyer—then the buyer would feel less pain if the offer is presented with shipping charges partitioned from the base price (i.e., unbundled rather than bundled).
FACTORS AFFECTING PERCEIVED SHIPPING-CHARGE PROFIT
Vbase ⫹ Vprofit-contributing shipping charge ⬍ Vbundled
If it is the buyer’s perception of shipping-charge profitability and thus fairness that determines whether shipping charges should be partitioned or bundled into the base price, then what are the factors that determine these perceptions? In this study, we examine two such factors: the degree of consumers’ shipping-charge skepticism and the presence or absence of external reference prices.
Another possibility is that the shipping charge is perceived by buyers as doing no more than covering the seller’s actual shipping costs and not contributing to the seller’s profits. In this situation, the noprofit value function (the dotted line in Figure 1) would describe the pain of paying this component of the offering’s price. Because the no-profit value function is less steep than the profit-contributing value function, the pain of paying the shipping charge would be relatively low. In fact, we posit it to be so low as to not only neutralize, but actually reverse the otherwise more painful aspect of having to incur a second loss. Thus, partitioning an offering’s price into a base price plus a shipping charge would increase the offer’s appeal to customers who perceive
The first factor we investigate is consumer skepticism regarding shipping charges. In recent years, interest has grown in the topic of consumer skepticism, particularly since the publication of the Persuasion Knowledge Model (PKM; Friestad & Wright, 1994, 1995). This model suggests consumers’ beliefs about marketers’ persuasion attempts influence how they respond to marketers’ communication efforts. Consumers are thus thought to draw on their knowledge of marketers’ motives and strategies when interpreting, for example, advertising campaigns. To date, studies in this area of research have focused almost exclusively on consumer skepticism toward advertisements (Boush, Friestad, & Rose, 1994; Ford, Smith, & Swasy, 1990; Hardesty,
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Carlson, & Bearden, 2002; Obermiller & Spangenberg, 1998, 2000). Advertising skeptics are those who tend to disbelieve ad claims (e.g., Obermiller & Spangenberg, 1998, 2000) and mistrust advertisers’ motives (e.g., Boush et al., 1994). Ad skeptics have been found to evaluate advertised offers more negatively than non-skeptics (Obermiller & Spangenberg, 1998).
Shipping-charge skeptics, we predict, will evaluate direct marketers’ offers more negatively than will non-skeptics. This result is expected based on their negative attitudes toward shipping charges, and it would be in agreement with prior work on advertising skepticism, which has found that advertising skeptics evaluate advertised offerings more negatively than do non-skeptics.
Extending this line of research, we investigate the notion that some consumers may be highly skeptical of direct marketers’ offers due to their underlying beliefs regarding the perceived fairness of shipping charges. We thus conceive of shipping charge skepticism as one component of consumers’ persuasion knowledge. As Hardesty et al. (2002, p. 1) note, persuasion knowledge encompasses consumers’ beliefs about marketers’ motives, strategies and tactics. Consumers often feel the need to defend themselves from persuaders’ tactics (Koslow, 2000). This explains why consumers typically discount the value of grocers’ price cuts (Liefeld & Heslop, 1985; Zaichowsky & Sadlowsky, 1991). For similar reasons, we believe consumers’ beliefs about the profit motives underlying shipping fees charged by direct sellers also fall within the Persuasion Knowledge framework. If some consumers tend to believe that shipping charges are used as a means to enhance sellers’ revenues and profits rather than simply as a means for getting the product to the consumer, this will impact their evaluations of such offers.
H1: Shipping-charge skeptics will evaluate direct marketers’ offers more negatively than will nonskeptics.
We propose that some shoppers are highly skeptical of any shipping charges and view them as a firm’s sneaky strategy to make additional profits (Gomolski, 2001). Such consumers do not generally believe that having products shipped to their door is a service worth paying for. Because of their negative attitudes toward the idea of paying for shipping, such shoppers may consider shipping charges distasteful, as they are perceived as contributing to the seller’s profit and as not being worth their cost. For these consumers, direct marketers’ offers will generally not be perceived as fair offerings providing high levels of value due largely to their perceptions of unfairness related to shipping charges. We refer to shoppers possessing these attitudes as shippingcharge skeptics.
The second factor that we propose will affect fairness perceptions is the presence or absence of external reference prices. An external reference price provides consumers with a perceptual cue that can impact how they process an offer’s price. For example, if consumers are shown a direct marketer’s offer for a lamp costing $65 plus $15 shipping, and they are also told that similar products are sold in stores for $65, then this $65 external reference price becomes a perceptual cue upon which consumers will anchor their assessments of what the product is worth. For shippingcharge skeptics provided with such a cue, an unbundled price format will make more salient the unfairness of the separate shipping charge because this charge, which is perceived as an additional source of profit, is listed separately. Thus, we expect that shipping charge skeptics’ preference for unbundled prices will emerge when an external reference price is available because it focuses their processing on the amount of the shipping charge above and beyond the product’s value. Similarly, we expect that non-skeptics’ preference for unbundled prices will emerge when there is an external reference price available because it focuses their processing on the separateness of the shipping charge part of the offer’s price, which non-skeptics view as a fair passing along of the seller’s costs. Without such a perceptual anchor, that is, when there is no external reference price with which to confidently assess the product’s value, then consumers, both skeptics and non-skeptics alike, will assess the $65 plus $15 (i.e., unbundled) format in a manner similar to the $80 (bundled) format. Both formats will be seen as costing $80, in accord with traditional economic theory, which suggests there should be no
SHIPPING-CHARGE SKEPTICISM AND PRICING FORMATS
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difference in preferences by price format. We therefore predict that when there are no external reference prices available to consumers, price format will have no impact on preferences for a direct marketer’s offer, but when there are external reference prices available, they will. To summarize, we expect that when an external reference price is present, shipping-charge skeptics will prefer offers more in a bundled price format, whereas non-skeptics will prefer them more in an unbundled price format. Shipping-charge skeptics, who tend to view shipping charges as unfair sources of profit for direct marketers, will like an offer less when shipping charges are made salient via a partitioning strategy. For these consumers, partitioning a shipping charge from a base price increases the total pain of paying. Because they do not believe that the shipping charges are really only a passing along of costs, partitioned shipping charges make them feel the added pain of paying two prices rather than only one, especially when they know that the shipping charges are above and beyond the value of the product (i.e., the external reference price). The pain of paying for shippingcharge skeptics in this situation will therefore be lessened when shipping charges are bundled into a single offer price. On the other hand, non-skeptics, who tend to interpret shipping charges as just covering the seller’s costs of getting the ordered items to the consumer’s doorstep, will feel less pain of paying the shipping charge when they can more accurately assess the offer’s value, and thus would prefer an unbundled price format over a single bundled price. H2: In the absence of an external reference price, the price format will not impact preferences of either shipping-charge skeptics or non-skeptics for a direct marketer’s offering. H3a: In the presence of an external reference price, shipping-charge skeptics will prefer a direct marketer’s offering more in a bundled price format. H3b: In the presence of an external reference price, non-skeptics will prefer a direct marketer’s offering more in an unbundled format. These hypotheses were tested in an experiment described below.
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METHOD Respondents and Design The respondents were 189 adults whose average age was 38 years (range: teens to above 70); 56% were female. The experiment consisted of a 2 (price format: bundled, unbundled) ⫻ 2 (reference price: not provided, provided) full-factorial, between-subjects design. The price format factor was manipulated by displaying a picture of a lamp in one of two ways: with a price of $80 and no shipping charge (bundled), or with a price of $65 and a $15 shipping charge (unbundled). Thus, in all conditions, the amount of money required to obtain the product displayed was kept constant. A survey of a variety of Web sites revealed that shipping charges on products with a price of $65 averaged around $15. The external reference price factor was manipulated by providing no information about the prices of other similar lamps available in retail stores (reference price not provided), or by providing a $65 reference price for the lamp (reference price provided; please see Appendix A for examples). A pre-test (n ⫽ 37) was run on the liking of the lamp used in the stimuli in comparison to 11 other lamps to insure avoidance of ceiling and floor effects. In the main experiment, respondents were randomly assigned in about equal numbers to one of the four conditions.
Procedure Respondents were recruited at a large science museum in a major metropolitan area over several weekends. As the museum-goers filed past a table in a main hallway, they were approached by a researcher who asked if they would be willing to fill out a short questionnaire in order to receive a small gift of their choice (usually a toy for an accompanying child). After agreeing to participate, the respondent read and agreed to a consent form, then completed a booklet. On the first page, respondents viewed a full-color picture of a table lamp accompanied by descriptive information and responded to several five-point Likert items regarding their reactions to the specific catalog offer. Following that, they responded to several fivepoint Likert items concerning their general attitude toward shipping charges and their views and experience regarding direct marketing. Later questions checked the manipulations and obtained some demographic information. It took approximately five to
10 minutes for respondents to complete the questionnaire. They then received a sheet of paper that contained debriefing information and explained the objectives of the survey in more detail.
Measures Liking of the Offer. To obtain a measure of the respondents’ liking of the offer, a principal components factor analysis was run on three five-point Likert items that measured their reaction to the catalog offer (e.g., “I would consider buying this lamp from this catalog”). The factor analysis showed that the three-item scale was unidimensional, with the largest eigenvalue (2.32) accounting for 77.3% of the variance. The mean of these three items was calculated and used as the main dependent measure (please see Appendix B for the items). The three-item scale had a coefficient alpha of 0.85. Shipping-Charge Skepticism. The items making up this scale were designed to tap into two related facets of shipping-charge skepticism: (1) a belief that firms that sell through catalogs try to make a profit on the shipping fees they charge (e.g., “I believe that most firms that sell through catalogs try to make a profit on shipping charges”) and (2) a general dislike of having to pay such charges (e.g., “It really bothers me to have to pay shipping charges for products I order”). We generated the scale items to measure not only a dislike of having to pay shipping charges, which, by itself could reflect simply frugality or another consumer trait, but also beliefs about direct sellers’ ulterior profit motives. Prior research in the area of advertising skepticism has similarly measured not only disbelief of ad claims but also mistrust of advertiser motives (Boush et al., 1994). Thus, the shipping charge skepticism scale includes dislike of paying as well as measures of consumers’ perceptions of unfair profits made from the offer and the shipping charges as a source of unfair profits. To create the scale, a principal components factor analysis was run on five items that measured these aspects of shipping-charge skepticism (please see Appendix B for the items). The factor analysis showed that the five-item scale was unidimensional, with the largest eigenvalue (2.09) accounting for 41.8% of the variance. These five items were summed to
form the shipping-charge skepticism scale, which had a coefficient alpha of 0.65. Covariates. Two items that measured the degree to which respondents liked the style of the lamp offered and the degree to which it would fit with their home decor were combined for use as a covariate in the analysis. These two items were highly correlated (r ⫽ .76, p ⬍ .0001). Respondent age and gender were also used as covariates.
RESULTS Manipulation Checks Price Format. To check whether respondents correctly processed our manipulation of price format, they were asked about the amount of the shipping charges stated for the lamp. They were given five choices including the correct ones. Respondents’ answers varied significantly across the conditions (2(4) ⫽ 160.12, p ⬍ .0001). Overall, 80.5% of the respondents correctly answered the question. External Reference Price. To check whether respondents correctly processed our manipulation of external reference price, they were asked what price had been stated for similar lamps in local stores. They were given five choices including the correct ones. Respondents’ answers varied across the conditions (2(4) ⫽ 133.03, p ⬍ .0001). Overall, 85.9% of the respondents correctly answered the question.
Main Results First, a median split on the shipping-charge skepticism scale was used to produce high and low shipping-charge skepticism groups (t(186) ⫽ 18.12, p ⬍ .0001, XSkeptics ⫽ 20.3, X Non-skeptics ⫽ 14.2). Then, an analysis of variance (ANOVA) was conducted on consumer liking of the offer as a function of price format (bundled, unbundled), shipping-charge skepticism (high, low), reference price (provided, not provided), the covariates (like lamp style, gender, age), and all possible interactions among the fixed factors (F(10, 171) ⫽ 9.74, p ⬍ .0001, R-squared ⫽ .36). Price Format. There was no statistically significant main effect of price format (F(1, 171) ⫽ 1.07, p ⫽ .30).
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Thus, in the aggregate, neither bundled nor unbundled offers were more preferred. This result is in accord with the Morwitz et al. (1998) null findings regarding demand. Shipping-Charge Skepticism. There was a statistically significant main effect of shipping-charge skepticism (F(1, 171) ⫽ 26.19, p ⬍ .0001, eta-squared ⫽ .13). Overall, shipping-charge skeptics liked the offers less than the non-skeptics (X Skeptics ⫽ 1.81, X Non-skeptics ⫽ 2.47), in support of H1. In addition, respondents’ scores on the shipping-charge skepticism scale were negatively correlated with the degree to which they reported shopping often from catalogs (r ⫽ ⫺.25, p ⬍ .001) and shopping often on the Internet (r ⫽ ⫺.23, p ⬍ .002). This result provides additional validation of the shipping-charge skepticism scale. External Reference Price. There was a statistically significant main effect of external reference price (F(1, 171) ⫽ 4.58, p ⬍ .05, eta-squared ⫽ .03). Overall, respondents liked the offer more when no external reference price was provided (X No Reference ⫽ 2.28 vs. X Reference ⫽ 2.00). This result, as well as the findings concerning the main effects of price format and shipping-charge skepticism, are qualified by the higher-order interactions. Interactions. The two-way interaction between price format and shipping-charge skepticism was statistically significant (F(1, 171) ⫽ 5.94, p ⬍ .05, etasquared ⫽ .03). Non-skeptics preferred the offer more in an unbundled rather than bundled format (X Non-skeptics,Bundled ⫽ 2.24 vs. X Non-skeptics,Unbundled ⫽ 2.70, p ⬍ .01). Price format had no impact on preferences among the shipping-charge skeptics (X Skeptics,Bundled ⫽ 1.90 vs. X Skeptics,Unbundled ⫽ 1.72, p ⫽ .35). These results are qualified by the higher-order three-way interaction. The three-way interaction among price format, shipping-charge skepticism, and external reference price was statistically significant (F(1, 171) ⫽ 5.96, p ⬍ .05, eta-squared ⫽ .03). This result indicates that when there is no external reference price provided, price format has no impact on liking of the offer among shipping-charge skeptics (X Skeptics,Bundled ⫽ 1.84 vs. X Skeptics,Unbundled ⫽ 2.08, p ⫽ .43) and non-skeptics (X Non-skeptics,Bundled ⫽ 2.48 vs. X Non-skeptics,Unbundled ⫽ 2.72, p ⫽ .30), in support of H2.
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However, when an external reference price is provided, shipping-charge skeptics prefer the bundled offer (X Skeptics,Bundled ⫽ 1.97 vs. X Skeptics,Unbundled ⫽ 1.36, p ⫽ .015), whereas non-skeptics prefer the unbundled offer (X Non-skeptics,Bundled ⫽ 2.01 vs. X Non-skeptics,Unbundled ⫽ 2.68, p ⫽ .01), in support of H3a and H3b, respectively. This result can be seen graphically in Figure 2.
DISCUSSION In this research, we demonstrate that whether or not bundling is “better,” in terms of consumer appeal, depends on an individual difference variable that we call shipping-charge skepticism, as well as on the availability of external reference price cues. The results indicate that without an external reference price, consumers are indifferent to price format. Neither bundled nor unbundled price formats have an overall advantage. However, when an external reference price is available, preferences for price formats do emerge. Shipping-charge skeptics then prefer the offer more in a bundled price format, whereas nonskeptics prefer it more in an unbundled format. We argue that when there is an external reference price available, partitioned shipping charges create in shipping-charge skeptics the uncomfortable feeling that they are paying two profit-generating prices rather than one, and they may further feel that the seller’s attempts to claim otherwise is sneaky and unfair. Shipping-charge skeptics thus like an offer less when the seller’s price is unbundled, when an external reference price exists. Non-skeptics, conversely, prefer the unbundled offering over the bundled offering when an external reference price exists in the market. This is because, for non-skeptics, it is considered “only fair” for a seller to pass along to the consumer the costs of delivering the product, and thus such a component price is less painful to pay than a typical profit-generating price. How do our results compare with those of Morwitz et al. (1998), who found a difference in memory but not in demand for the different price formats? In their study they found no differences in demand among consumers for a product with a bundled versus unbundled price format. We first note that in the main Morwitz et al. (1998) experiment, the level of shipping charges utilized in their study was 18.5%, fairly comparable to our unbundled price format condition (23.1%), and
3.00
2.68
Liking of offer
2.50
2.01 2.00 1.97
1.50 1.36
1.00 Bundled
Unbundled Shipping-Charge Skeptics
Non-Skeptics
FIGURE 2 Liking of the Offer With an External Reference Price Provided
therefore this aspect of the stimuli is unlikely to account for any differences in results. The Morwitz et al. study included an external reference price but did not measure shipping-charge skepticism. What we found is that it is the interaction of these two variables that elucidates consumers’ preferences for price format. Thus, the main effects of our study are in accord with the findings of Morwitz et al. (1998), yet our shipping-charge skepticism measure allows us to tease out differences in consumer price format preferences. We provide some additional insight into shipping-charge skeptics’ attitudes and behavior by noting that they tend to evaluate direct marketers’ offers more negatively than do non-skeptics, and they are less likely to shop often via catalogs and the Internet.
Implications The ability of our conceptual framework to account for the pattern of consumer preference by price format
suggests that prospect theory is not violated in this type of pricing situation. The apparent discrepancy between the prospect theory prescription to “bundle losses” and the empirical evidence for “divide and conquer” (Morwitz et al., 1998) can be explained by considering the degree to which the consumer perceives the loss as fair. Recognizing that the value function for losses is also a function of perceived differences from reference profit integrates Kahneman et al.’s (1986) principle of dual entitlement into a prospect theory framework and provides a foundation for further work on understanding the consumer’s “pain of paying.” The present set of results also has several managerial implications. First, it is clear that shipping-charge skeptics evaluate direct marketers’ offers more negatively than do non-skeptics. As a result, direct marketers who want to appeal to this group will have to pay special attention to minimizing perceptions of
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unfairness in relation to shipping charges. In particular, in an environment where customers are not aware of product prices, shipping-charge skeptics consistently value the worth of direct marketers’ offerings lower than do non-skeptics. For skeptics in such an environment, price format is not an issue and thus would not be a means for marketers to increase an offer’s appeal. However, in an environment where customers are aware of product prices, shippingcharge skeptics’ evaluation of direct marketers’ offers is higher when the offers are priced in a bundled format, as it minimizes the salience of the shippingcharge part of the total price. Another approach to minimizing skepticism regarding shipping charges would be to provide a clear explanation and rationale for how such charges are calculated, so that potentially skeptical consumers can better understand the costs involved in direct sellers’ efforts. Non-skeptics, on the other hand, tend to prefer direct marketers’ offers more if the price is in an unbundled format, whenever external reference prices are available. Thus, when targeting current customers or potential customers known to be avid users of direct mail, offers should be provided with shipping charges listed separately. Non-skeptics do not necessarily assume that shipping charges are sources of profits for the seller and thus hold them in a sort of separate mental account that is seen as more fair as it represents merely the passing along of costs. Thus, the present research suggests managers need to be cognizant of the role of consumer perceptions of the profitability and thus fairness of shipping charges via a previously unconsidered individual difference variable (shipping-charge skepticism) to understand and predict how consumers will respond to their offers.
Future Research Issues The present findings suggest several future avenues of research regarding how consumers evaluate shipping charges and assess their fairness. It would be of interest to determine just how widespread skepticism toward shipping charges is, and how stable a construct it is. Moreover, what types of experiences and socialization processes contribute toward its development, and is it amenable to change? What firm practices should be curbed to minimize continued skepti-
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cism on the part of consumers? It would be equally important to develop more fully a scale that captures the various facets of the interesting phenomenon of shipping-charge skepticism uncovered in the present research. Since recent research found some overlap between skepticism toward advertising and skepticism toward salespeople (Obermiller & Spangenberg, 2000), the question arises as to whether a broader, trait-based concept of marketplace skepticism exists and warrants investigation. It would also be interesting to see whether degree of shipping-charge skepticism is related to other constructs such as consumer self-confidence or self-efficacy beliefs regarding the degree to which one can protect oneself from being deceived by marketers (Bearden, Hardesty, & Rose, 2001). A related question to address is: how should shipping charges be calculated to maximize consumer perceptions of fairness? Although 90% of catalogers who charge consumers for shipping do so on the basis of order value (Direct Marketing Association, 2000, p. 75), it is possible that consumer perceptions could be enhanced by instead calculating shipping charges on the basis of a product’s weight, the number of items purchased from a vendor, or simply as a flat rate. Another area for research concerns the issue of when the shipping charges are presented to the consumer and how timing affects perceptions of fairness. It is possible that the predictions of prospect theory within the theoretical framework outlined here might dominate in situations where the pricing elements involved are presented simultaneously to the consumer. However, alternative outcomes might arise when some pricing elements are presented temporally later in the evaluation process (e.g., when shipping charges are presented only after item selection, as often occurs on Web sites). The anchoring-and-adjustment concept, for example, suggests consumers might generally prefer an offer with a partitioned price format if they overweight the base price and use it as an anchor to mentally discount the later appearing shipping charges so that the total cost is revised downward toward the anchor (Tversky & Kahneman, 1974; Yadav, 1994). Our study has highlighted the role of perceived profitability in the consumer’s evaluation of shipping-
charge fairness and indicated the importance of this factor for price bundling/partitioning decisions. The theoretical framework set forth here also further extends the applicability of prospect theory by reconciling results of prior research that had previously appeared contradictory. Future research as outlined above will enhance the theory development process in this domain.
REFERENCES Bearden, W.O., Hardesty, D.M., & Rose, R.L. (2001, June). Consumer Self-Confidence: Refinements in Conceptualization and Measurement. Journal of Consumer Research, 28, 121–134. Bolton, L.E., Warlop, L., & Alba, J.W. (2003, March). Consumer Perceptions of Price (Un)Fairness. Journal of Consumer Research, 29, 474–491. Boush, D.M., Friestad, M., & Rose, GM. (1994). Adolescent Skepticism toward TV Advertising and Knowledge of Advertiser Tactics. Journal of Consumer Research, 21(1), 165–175. Campanelli, M. (2002, February). Who Pays to Get it There? Net Profits: Your Site’s Shipping and Handling Charges Can Make or Break an Online Sale. Entrepreneur, 30(2), 34–36. Chakravarti, D., Krish, R., Paul, P., & Srivastava, J. (2002). Partitioned Presentation of Multicomponent Prices: Evaluation, Choice and Underlying Processing Effects. Journal of Consumer Psychology, 12(3), 215–229. Direct Marketing Association. (2000). Statistical Fact Book (22nd ed.). New York: Direct Marketing Association. Drumwright, M.E. (1992). A Demonstration of Anomalies in Evaluations of Bundling. Marketing Letters, 3, 311–321. Ford, G.T., Smith, D.B., & Swasy, J.L. (1990). Consumer Skepticism of Advertising Claims: Testing Hypotheses from Economics of Information. Journal of Consumer Research, 16(4), 433–441. Foster, E. (1999, November 8). The Gripe Line: Shipping and Handling: The Big Surprise on Your E-Commerce Shopping Bill. InfoWorld, 21(45), p. 101. Friestad, M., & Wright, P. (1994, June). The Persuasion Knowledge Model: How People Cope With Persuasion Attempts. Journal of Consumer Research, 21, 1–31. Friestad, M., & Wright, P. (1995, June). Persuasion Knowledge: Lay People’s and Researchers’ Beliefs About the Psychology of Advertising. Journal of Consumer Research, 22, 62–74. Gaeth, G.J., Levin, I.P., Chakraborty, G., & Levin, A.M. (1991). Consumer Evaluation of Multi-Product Bundles: An Information Integration Analysis. Marketing Letters, 2, 47–57.
Gomolski, B. (2001, January 22). E-Business Matters: Shipping and Handling Costs Leave a Bad Taste on the Lips of E-Shoppers. InfoWorld, 23(4), 72. Hardesty, D.M., Carlson, J.P., & Bearden, W.O. (2002). Brand Familiarity and Invoice Price Effects on Consumer Evaluations: The Moderating Role of Skepticism Toward Advertising. Journal of Advertising, 31(2), 1–15. Heath, T.B., Chatterjee, S., & France, K.R. (1995, June). Mental Accounting and Changes in Price: The Frame Dependence of Reference Dependence. Journal of Consumer Research, 22, 90–97. Johnson, M.D., Herrmann, A., & Bauer, H.H. (1999). The Effects of Price Bundling on Consumer Evaluations of Product Offerings. International Journal of Research in Marketing, 16, 129–142. Kahneman, D., Knetsch, J.L., & Thaler, R. (1986, September). Fairness as a Constraint on Profit Seeking: Entitlements in the Market. The American Economic Review, 76, 728–741. Kahneman, D., & Tversky, A. (1979, March). Prospect Theory: An Analysis of Decision Under Risk. Econometrica, 47, 263–291. Kahneman, D., & Tversky, A. (1984, April). Choices, Values, and Frames. American Psychologist, 39, 341–350. Koslow, S. (2000, Winter). Can the Truth Hurt? How Honest and Persuasive Advertising Can Unintentionally Lead to Increased Consumer Skepticism. The Journal of Consumer Affairs, 34(2), 245–268. Liefeld, J., & Heslup, L.A. (1985). Reference Prices and Deception in Newspaper Advertising. Journal of Consumer Research, 11(4), 868–876. Morwitz, V.G., Greenleaf, E.A., & Johnson, E.J. (1998, November). Divide and Prosper: Consumers’ Reactions to Partitioned Prices. Journal of Marketing Research, 35, 453–463. Obermiller, C., & Spangenberg, E.R. (1998). Development of a Scale to Measure Skepticism Toward Advertising. Journal of Consumer Psychology, 7(2), 159–186. Obermiller, C., & Spangenberg, E.R. (2000). On the Origin and Distinctness of Skepticism Toward Advertising. Marketing Letters, 11(4), 311–322. Prelec, D., Lowenstein, G., & Zellermeyer, O. (1998). Closet Tightwads: Compulsive Reluctance to Spend and the Pain of Paying. Presented as part of a special session, Perceived Pain and Pleasure: Preferences for Experience-Structure and Characteristics. In J.W. Alba & J.W. Hutchinson (Eds.), Advances in Consumer Research (Vol. 25, p. 23). Provo, UT: Association for Consumer Research. Tversky, A., & Kahneman, D. (1974, September). Judgment Under Uncertainty: Heuristics and Biases. Science, 185, 1124–1131. Venkatesh, R., & Mahajan, V. (1993). A Probabilistic Approach to Pricing a Bundle of Products or Services. Journal of Marketing Research, 30, 494–508.
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Yadav, M.S. (1994, September). How Buyers Evaluate Product Bundles: A Model of Anchoring and Adjustment. Journal of Consumer Research, 21, 342–353. Yadav, M.S., & Monroe, K.B. (1993). How Buyers Perceive Savings in a Bundled Price: An Examination of a
APPENDIX A
Bundle’s Transaction Value. Journal of Marketing Research, 30, 350–358. Zaichkowsky, J.L., & Sadlowsky, D.P. (1991). Misperceptions of Grocery Advertising. The Journal of Consumer Affairs, 25(1), 98–109.
EXAMPLES OF STIMULI USED IN STUDY (BUNDLED, REFERENCE PRICE; UNBUNDLED, NO REFERENCE PRICE)
Assume you just moved into a new home and you need to buy a table lamp. You see the following in a popular home furnishing catalog:
Assume you just moved into a new home and you need to buy a table lamp. You see the following in a popular home furnishing catalog:
• Silver-tone finish
• Silver-tone finish
• 22 inches tall
• 22 inches tall
• Price: $80
• Price: $65
• No shipping charges
• Shipping charges: $15
You have seen similar lamps at local stores for $65.
APPENDIX B
SCALES Liking of the Offer (scale alpha ⫽ .85)
Item 1. This catalog offer seems to be a good value. 2. I would consider buying this lamp from this catalog. 3. If I bought this lamp from this catalog, I would be satisfied with what I’d be paying.
Factor Loading
Item-Total Correlation
.87 .86 .90
.71 .69 .77
Alpha if Item Deleted .80 .82 .75
(Continued)
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Shipping Charge Skepticism (scale alpha ⫽ .65) Item 1. I believe that most firms that sell through catalogs try to make a profit on shipping charges. 2. $65 (plus $15 shipping) is too much to pay to get this lamp.a 3. This seller is making too much profit on this lamp offer. 4. It really bothers me to have to pay shipping charges for products I order. 5. Delivery of products to my door is a service worth paying for.b
a
Stated price adjusted per condition.
b
Item reverse-coded.
Factor Loading
Item-Total Correlation
Alpha if Item Deleted
.57
.34
.62
.68 .60 .76
.43 .37 .52
.58 .61 .53
.61
.36
.62
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