Coupons or free shipping? Effects of price promotion strategies on online review ratings

Ji Wu, Haichuan Zhao, Haipeng Chen

Research output: Contribution to journalReview articlepeer-review

29 Scopus citations

Abstract

Price promotions can be implemented by either discounting a product’s base price (e.g., offering a coupon) or reducing one of its surcharges (e.g., free shipping). This study examines how the two prevalent price promotion strategies affect online review ratings differently as a function of the temporal distance between purchase and review. Drawing upon the framing literature and construal level theory, we argue that whereas free shipping should increase review ratings regardless of temporal distance, coupons should increase review ratings through perceptions of monetary savings when temporal distance is close but decrease review ratings through low perceive product quality when temporal distance is far. Consistent with this argument, our analysis of online consumer reviews from an e-commerce website matched with actual transactional data finds that coupons have a positive effect on review ratings in the short run but a negative effect in the long run. In contrast, free shipping has a consistently positive effect on review ratings over time. A text-mining analysis of the review contents reveals patterns that are consistent with the proposed underlying mechanisms. We then conduct two laboratory experiments that manipulate temporal distance and construal level respectively with real spending and consumptions to provide convergent evidence for the differential effects of coupon versus free shipping on review ratings over time and additionally demonstrate the underlying processes due to perceptions of monetary savings and perceived product quality.

Original languageEnglish
Pages (from-to)633-652
Number of pages20
JournalInformation Systems Research
Volume32
Issue number2
DOIs
StatePublished - Jun 2021

Bibliographical note

Publisher Copyright:
© 2021 INFORMS

Keywords

  • Construal level
  • Coupon
  • Free shipping
  • Online consumer reviews
  • Perceived product quality
  • Perceptions of monetary savings
  • Temporal distance

ASJC Scopus subject areas

  • Management Information Systems
  • Information Systems
  • Computer Networks and Communications
  • Information Systems and Management
  • Library and Information Sciences

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