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Coupons or Free Shipping? Effects of Price Promotion Strategies on Online Review Ratings

Author

Listed:
  • Ji Wu

    (Department of Management Science, Business School, Sun Yat-Sen University, Guangzhou 510275, China)

  • Haichuan Zhao

    (Department of Marketing, School of Management, Shandong University, Jinan 250100, China)

  • Haipeng (Allan) Chen

    (Department of Marketing and Supply Chain, Gatton College of Business and Economics, University of Kentucky, Lexington, Kentucky 40506)

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.

Suggested Citation

  • Ji Wu & Haichuan Zhao & Haipeng (Allan) Chen, 2021. "Coupons or Free Shipping? Effects of Price Promotion Strategies on Online Review Ratings," Information Systems Research, INFORMS, vol. 32(2), pages 633-652, June.
    • Handle: RePEc:inm:orisre:v:32:y:2021:i:2:p:633-652
    DOI: 10.1287/isre.2020.0987
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    2. Hu, Li & Zhang, Mengwei & Wen, Xin, 2023. "Optimal distribution strategy of coupons on e-commerce platforms: Sufficient or scarce?," International Journal of Production Economics, Elsevier, vol. 266(C).
    3. Duan, Yongrui & Liu, Tonghui & Mao, Zhixin, 2022. "How online reviews and coupons affect sales and pricing: An empirical study based on e-commerce platform," Journal of Retailing and Consumer Services, Elsevier, vol. 65(C).
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    5. Di Li & Hu Wang, 2022. "Effects of retailers' free shipping promotions on manufacturers' product sales and product review ratings in multichannel retailing," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 1912-1925, September.
    6. Ji, Guojun & Fu, Tianyu & Li, Shuhao, 2023. "Optimal selling format considering price discount strategy in live-streaming commerce," European Journal of Operational Research, Elsevier, vol. 309(2), pages 529-544.
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    8. Prashanth Ravula, 2023. "Impact of delivery performance on online review ratings: the role of temporal distance of ratings," Journal of Marketing Analytics, Palgrave Macmillan, vol. 11(2), pages 149-159, June.
    9. Guan, Dongxiao & Lei, Yunfei & Liu, Yu & Ma, Qinhai, 2024. "The effect of matching promotion type with purchase type on green consumption," Journal of Retailing and Consumer Services, Elsevier, vol. 78(C).

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