Cognitive Motivation and Its Impact on Price Cognition

As defined by Cacioppo and Petty (1982), need for cognition (NFC) refers to individuals’ tendency of engaging in effortful thinking. Tenets of dual process theory invoke that low NFC individuals are likely to exert greater use of system 1 processing which is a more affect based and automatic system for information processing (Haugtvedt, Petty, & Cacioppo, 1992). However, effortful thinking can enhance certain biases and individuals with high NFC are likely to show such biases more often than individuals with low NFC. For example, high NFC individuals are found to show greater false memories (Graham 2007) and similar to low NFC individuals, high NFC individuals are also found to show halo effects (Petty et al. 2009) and anchoring effects (Blankenship et al. 2008). In alignment with such research demonstrating the counter intuitive fact that thoughtful individuals may also make errors in judgment and decision making, in this research we demonstrate that high NFC individuals are more likely to make errors in price cognition than low NFC individuals. Marketers often offer products at a price that is just below a round number to make an impression to the consumers that the product is offered at a cheaper price or on sale (Schindler and Kirby 1997). While there is apparently no difference between $4.00 and $3.99, consumers perceive the latter as a lower price. The magnitude of such price perception is substantial enough to generate additional sales (Kalyanam and Shively 1998). Even though research has shown that it is an error emanating from incomplete processing of pricing information (Thomas and Morwitz 2005), scant attention has been paid to explore the impact of consumers’ tendency to think effortfully on their tendency of making such errors in price cognition. This research fills in this gap by demonstrating that individuals who exert greater degree of effortful thinking are more likely to make errors in price cognition relative to individuals who do not enjoy effortful thinking. Moreover, we found that effortful thinking leads to overreaction to free offers. We reasoned that high NFC individuals are more likely to be driven by maximization goals rather than satisficing goals (Nenkov et al. 2008; Cacioppo and Petty 1982) and such maximization tendency will enhance the attractiveness of a price point that provides a discount cue. In our context, we posit that the low price perception induced by JBP enhances the feasibility of goal achievement (i.e, best shopping outcome) for high NFC individuals and therefore, such price points are evaluated as more attractive by such group of individuals. As a consequence, effortful thinkers, often driven by the maximizing goal, are more likely to be deceived by JBP than effortless thinkers. Similarly, greater degree of effortful thinking may enhance the perception that a free offer gives them an opportunity of maximizing their shopping value by eliminating price constraints.