When budgeting backfires: how self-imposed price restraints can increase spending

Citation

Larson, J.S. (2012), "When budgeting backfires: how self-imposed price restraints can increase spending", Strategic Direction, Vol. 28 No. 8. https://doi.org/10.1108/sd.2012.05628haa.011

When budgeting backfires: how self-imposed price restraints can increase spending

Article Type: Abstracts From: Strategic Direction, Volume 28, Issue 8

Larson J.S. and Hamilton R.Journal of Marketing Research, April 2012, Vol. 49 No. 1, Start page: 218, No. of pages: 13

A common strategy for controlling spending is to impose a price restraint on oneself. For example, a consumer who is concerned with limiting expenses may decide before going shopping that he or she only wants to spend approximately $100 for a particular purchase. Although conventional wisdom predicts that self-imposed price restraints will decrease consumer spending, the authors show that salient price restraints can actually increase consumers’ preferences for high-priced, high-quality items. The authors propose that making a price restraint salient has the effect of partitioning consumers’ evaluations of price and quality, leading to larger differences in perceived quality between options and a greater focus on quality during the final decision. Thus, while budgets and other types of price restraints can limit spending by eliminating some high-priced options from consideration, this research suggests that they can also have the ironic effect of increasing consumers’ spending relative to a situation in which consumers have not imposed a price restraint.Article type: Research paperISSN: 0022-2437Reference: 41AH915

Keywords: Budgeting, Price restraints, Quality perceptions