In the competitive landscape of modern business, where consumers are bombarded with a plethora of choices, it is crucial for marketers and pricing managers to understand how to present their deals or price promotions in the marketplace so as to effectively capture attention and drive sales.

To develop this nuanced understanding, managers should consider delving into “behavioral pricing” — an important consumer research domain, which examines the psychology underlying consumers’ perceptions of and responses to various aspects of pricing (Chen et al., 2021; Koschate-Fischer & Wüllner, 2017). Behavioral pricing offers valuable insights into how businesses can strategically frame prices and deals to maximize their impact. One such useful insight emerges from a recent research paper by Kirk L. Wakefield, Priya Raghubir, and J. Jeffrey Inman, “Have We Got a Deal for You: Do You Want the Good News or Bad News First?” published in the Journal of Service Research (2023). This paper examines consumer preferences for the order of good and bad news in the context of sales promotions.

In typical sales promotions, the good news of the discount (e.g., “50% off”) is presented first and prominently (e.g., in a large font). This is followed by the bad news, that is, some sort of restriction (e.g., “when buying at least 2 items”) or limitation (“between 12 noon and 6 pm only”), in a smaller font. Counter to this traditional deal framing, Wakefield and colleagues suggest first presenting the restriction or limitation of an offer (bad news), followed by the actual discount or benefit (good news).

Across four studies, including a large field study (N = 329,647), the authors show this bad-news-first strategy can enhance the perceived attractiveness and fairness of the deal and increase consumers’ purchase intentions. This is because receiving bad news first allows consumers to adjust their expectations and prepare for the good news, which can make the good news more salient and attractive (Wakefield et al., 2023).
The basic rationale behind this bad-news-first strategy lies in the concept of reward. When buyers encounter the restriction first, it is mentally perceived as a hurdle they must clear to be eligible for the offer. Subsequently, when the discount is revealed, it stands out as a reward promised to clear the eligibility hurdle, thus making it more pronounced and appealing.

Moreover, it is well-known that buyers find restrictions/limitations of the deals to be irritating and inconvenient (Raghubir et al., 2004). So, when this undesirable, usually hidden part of the deal is presented first, they see it as fairer and feel in greater control (in terms of using the deal). In contrast, in the current framing approach (good news followed by bad news), the seller is perceived to be in greater control of the deal, making the offer seem relatively unfair. This is another important psychological reason for the bad-news-first framing strategy being more effective.

The findings of this research have implications for marketers and pricing managers to determine the effective presentation order of various pieces of information in their sales promotions. In contrast to the currently popular managerial practice, they should present the restrictions of their offers first, followed by the discounts (e.g., “On select weekends, enjoy 35% off”) because this way they can increase the salience and perceived fairness of their deals, ultimately making them more attractive for the buyers (Wakefield et al., 2023).

To effectively implement the bad-news-first strategy of deal presentation, pricing managers may adhere to the following guidelines:

1. Clarity and Conciseness in Restriction Presentation: Present the restriction clearly and concisely, ensuring that consumers fully understand its implications (e.g., “Spend minimum Rs. 5000”). Avoid jargon or complex language that could obscure the message.
2. Presenting the Discount/Benefit in a Similar Way to the Restriction: Do not highlight the discount too prominently (e.g., using large font sizes or contrasting colors) because that could attenuate the perceived fairness of the bad-news-first strategy. Frame the discount subtly like a reward, that is, place it immediately after the restriction information (e.g., “Spend minimum Rs. 5000, and get flat 20% off”).

By understanding the psychological underpinnings of consumer behavior and incorporating behavioral pricing principles into their deal-framing strategies, pricing managers can effectively capture consumer attention, enhance the perceived value of their offerings, and ultimately drive sales success. The art of presenting pricing deals lies in crafting a compelling value proposition that appeals to the consumers, which is possible only if managers embrace behavioral pricing insights to inform their decision-making.

In this series of articles in IIMU Business Review, I will focus on such similar counterintuitive and managerially relevant findings from behavioral pricing research to help marketers be more strategic in their pricing approach. By leveraging behavioral pricing strategies like the bad-news-first framing strategy, marketers can transform their price promotions and deals from mere discounts into persuasive value propositions that resonate with their consumers on a psychological level.