Promoting Portion Downsizing by Improving Consumer Response to Percentage Cost vs. Percentage Benefit Offers

Marketing communication, particularly in the domain of food, frequently contains percentage information about benefit changes (e.g., 50% larger food packages) or about cost changes (e.g., 50% price reduction). Nominally equivalent percentage changes to the cost versus the benefit associated with an offer are not economically equivalent in terms of cost/benefit or benefit/cost ratio. To compare two percentage changes in cost and benefit requires knowing whether x% is bigger or smaller than -x/(1+x)%; this comparison involves multiple arithmetic operations and is very difficult to do mentally, even in the simplest cases (e.g., +50% vs. -33%). Chen, Marmorstein, Tsiros, and Rao (2012) have shown that, when comparing offers with percentage information (e.g., a 50% quantity increase vs. a 33% price reduction, which has the same unit price consequence), consumers focus on the nominal percentage and fail to take into account the base levels of these percentages, a phenomenon that they called “base value neglect”. Across four studies, we examine the robustness of the effect found for bonus packs vs. price changes by Chen, et al. (2012), and demonstrate the moderating roles of consumer goals (minimize cost, maximize benefit, or maximize value), cognitive reflection (Frederick, 2005), and provision of a cost/benefit vs benefit/cost ratio (such as unit price) (Manning, Sprott, & Miyazaki, 2003; Larrick & Soll 2008).