A rose by any other name would smell as sweet? The impact of hierarchical labeling on consumers’ choices in tiered pricing plans

Companies often use hierarchical labels to describe the products in a choice set (e.g., Bronze/Silver/Gold, or Silver/Gold/Platinum). Does the label of the tiered products influence consumer choices? Through five experiments (totaling 1,954 participants), we find a labeling effect. On the one hand, consumers are more likely to make a purchase (i.e., they are less likely to defer) in the first place with superior-sounding labels. On the other hand, such labels shift choices down towards cheaper-priced products. Further, we find that product labeling moderates the choice share of a middle option such that the well-documented compromise effect diminishes with superior-sounding labels due to the shift towards cheaper-priced options. Our research contributes to the literature on framing effects, choice deferral, and the compromise effect. Our findings suggest companies should use superior-sounding labels if they want to increase overall sales, but inferior-sounding labels when they care more about increasing choices of higher-priced products.