Incommensurate Resources: Not Just More of the Same

The pricing literature is replete with research that focuses on how consumers respond to sales promotions when both the reference level and the change are expressed in dollar terms (i.e., discounts). The psychophysics of pricing suggests that changes in monetary magnitude are not based on their absolute level, but rather on their deviation from some reference level, or how the change is “framed.” Often, however, a promotion is presented in nonmonetary terms (e.g., a premium). When two resources are delivered simultaneously, but in different currencies (e.g., receive a free razor with the purchase of a can of shaving cream), the marginal value of the nonmonetary, incremental benefit may be difficult to evaluate in relation to the focal product or its price. Therefore, the value of the premium may be less likely than a comparable discount to be viewed in a relative sense and thus less likely to suffer from diminishing marginal returns. This research explores how people often fail to exhibit the same diminishing sensitivity to an incremental benefit, or cost, when it is accrued in a currency other than the referent currency. The authors define two different carriers of wealth or welfare (i.e., resources) that are difficult to convert into any meaningful common unit of measurement as “incommensurate.” This research introduces a novel mechanism for influencing whether people attend to absolute rather than relative differences. This work also offers guidance to managers who might benefit from the strategic use of nonmonetary promotions.