PERSONALITY TYPES AND CONSUMER PREFERENCES FOR MULTIPLE

CURRENCY USAGES: A STUDY OF THE RESTAURANT INDUSTRY

DISSERTATION

Presented in Partial Fulfillment of the Requirements for the Degree Doctor of

Philosophy in the Graduate School of the Ohio State University

By

Hsin-Hui Hu, B.B.A., M.S.

****

The Ohio State University

2005

Dissertation Committee: Approved By:

H.G. Parsa, Ph. D.

R. Thomas George, Ed. D. Adviser

Kenneth R. Lord, Ph. D. College of Human Ecology

ii

ABSTRACT

The immense popularity of marketing promotions and loyalty programs has

resulted in the introduction of several new exchange media other than money. Therefore,

consumers are increasingly able to pay for goods and services in a combination of

currencies, not just in dollars. The current study examined the effects of personality

traits – need for cognition and self-monitoring – on consumers’ preferences of currency

usage in restaurant industry, and explored whether differences in restaurant segments

were related to consumers’ currency preferences. It also presented and tested the

conceptual model developed for this study.

An experimental design was applied to test seven hypotheses that reflected the

research question, whether individual differences and restaurant segments would

influence consumers’ preference of the currency usage. Total of 471 participants were

included in the study. Descriptive statistics and multinomial logistic regression was

performed with SPSS and STATA to analyze the data.

Results of the study indicated that the effects of self-monitoring and dining

companions are significantly related to consumers’ currency preferences while restaurant

segment and need for cognition have no significant impact on consumers’ currency

preferences. It showed that high self-monitors are less likely to prefer the currency of

points compared to dollars than low self-monitors. Moreover, consumers who dine alone

iii

are more likely to prefer to pay with points-only as opposed to dollars-only than

consumers who dine with the boss. Additionally, high self-monitors dining alone were

more likely to prefer to pay with combined-currency (dollars and points) or points-only

than low self-monitors. On the other hand, high-self monitors dining with a boss were

more likely to prefer to pay with dollars-only than to pay with dollars and points or

points-only.

The study identified the characteristics of consumers using the different currency

options in foodservice industry. By understanding the individual personality differences

of customers when using different currencies, restaurants could decide whether or not to

implement different currency prices based on their target markets.

iv

Dedicated to my loving family

v

ACKNOWLEDGEMENTS

This dissertation would not have been possible without the personal and

professional support of numerous people. I would like to express my gratitude to the

following people for their love, support, and patience over the last few years.

I would especially like to express my gratitude towards my advisor, Dr. H.G. Parsa,

for inspiring and encouraging me to pursue my doctoral degree. Not only was he readily

available for me, but Dr. Parsa was also to play a critical role in helping me survive the

doctoral program by providing whatever support he could. Throughout my doctoral work

he encouraged me to develop independent thinking and research skills. He continually

stimulated my analytical thinking and greatly assisted me with scientific writing. Dr.

Parsa is not only an advisor but also a friend and family to me. He has certainly become a

model for the type of researcher, teacher, and adviser I would like to become some day.

To the members of my committee, I am deeply grateful to Dr. R. Thomas George

for his support, guidance, and suggestions throughout my doctoral work. Dr. George

always read and responded to the drafts of each chapter of my work more quickly than I

could have hoped. His oral and written comments are always extremely perceptive,

helpful, and appropriate. I also extend my sincerest thanks to Dr. Kenneth Lord for his

generous time and commitment. Dr. Lord was always available to provide feedback on

this project and made valuable contributions. I admire his enthusiasm for research and

sincerely appreciate the considerable amount of time he spent helping with this study.

vi

I would like to express my thanks and appreciations to many other professors: Dr.

Wayne Johnson, Dr. Jay Kandampully, Dr. Timothy C. Brock, Dr. Neal F. Johnson, and

Dr. Xiaodong Liu in The Ohio State University; Dr. Jinlin Zhao and Professor Cheryl M.

Carter of Florida International University for their guidance, support and encouragement.

I also wish to thank Dr. Mohammed A. Rahman for his suggestions and support in

statistical techniques and research methods throughout my doctoral work. Special thanks

go to the chair, Dr. Hong, faculty and staff of the Department of Consumer Sciences for

their assistances and support during my doctoral work.

My graduate studies would not have been the same without the emotional and

social support from my friends and family. I am particularly thankful to my friends:

David Njite, Emma Lo, Ming-Tsung Huang, Jim Jao, Wei-Ching Lee, Shu-Fang Lin,

Howard Hsieh, Shin-I Liou, and Yi-Fang Lee. We not only studied, relaxed, and traveled

well together, but they were even willing to read some portions of this dissertation and

thus provided some very useful input. Their knowledge of computers was also extremely

helpful.

Most importantly, my parents contributed greatly for this dissertation. My family

has provided me with extraordinary encouragement and support through my academic

endeavor. I thank them for always being at my side, listening to me and giving me

support. I am grateful to my sisters, my brother, my grandmother and grandfather for all

their encouragement and unending enthusiastic support.

vii

VITA

August 30, 1976…………………….Born – Taipei, Taiwan

1999....................................................B.B.A. in Tourism, Ming Chuan University, Taipei, Taiwan

2001…………………………………M.S. in Hospitality and Tourism Management, Florida International University, Miami, FL

2002-2005…………………………..Graduate Student and Graduate Teaching Associate, Department of Consumer Sciences, College of Human Ecology, The Ohio State University, Columbus, OH

PUBLICATIONS

Research Publications

1. Parsa, H.G. and Hu, H.H. (2004). “Price-Ending Practices and Cultural Differences in the Food Service Industry: A Study of Taiwanese Restaurants,” Foodservice Technology. 4, 21–30.

2. Hu, H.H.; Zhao, J. and Carter, C. (2003). “Shipboard Employee Job Satisfaction in Major Cruise Lines,” FIU Hospitality Review. 21 (November), 10-21.

FIELD OF STUDY

Major Field: Human Ecology

Specialization: Hospitality Management, Consumer Behavior

viii

TABLE OF CONTENTS

Contents Page

Abstract ............................................................................................................................. ii

Dedication ........................................................................................................................ iv

Acknowledgments............................................................................................................. v

Vita.................................................................................................................................. vii

List of Tables ................................................................................................................... xi

List of Figures ................................................................................................................. xii

Chapters

1. INTRODUCTION ....................................................................................................... 1

Statement of the Problem.............................................................................. 4 Purpose of the Study ..................................................................................... 5 Definition of Terms....................................................................................... 6 Structure of the Study ................................................................................... 7

2. REVIEW OF LITERATURE ...................................................................................... 9

2.1 Sales Promotion ............................................................................................ 9 Consumer Benefits of Sales Promotions .................................................... 12 Consumer Response to Sales Promotions................................................... 16 The Effects of Sales Promotion on Purchase Intentions............................. 19 Price Perception and Sales Promotions....................................................... 20 Potential Traits and Influence on Consumer Purchase Behavior................ 21 Role of Price Promotion Framing ............................................................... 23 Sales Promotion in Hospitality Industry ..................................................... 27

2.2 Sales Promotion: The Usage of Currency................................................... 29 Currency Usage in Hospitality Industry ..................................................... 31

2.3 Personality Traits ........................................................................................ 35 Need for Cognition ..................................................................................... 36 Need for Cognition in Consumer Reactions of Price Promotion................ 37

ix

Self-Monitoring........................................................................................... 40 Self-Monitoring and Consumer Behavior................................................... 43 Impression Management............................................................................. 47 Self-Monitoring and Impression Management ........................................... 50

2.4 Conceptual Model....................................................................................... 54 Chapter Summary ....................................................................................... 56

3. METHODOLOGY .................................................................................................... 58

Experimental Design................................................................................... 58 The Sample Frame ...................................................................................... 61 Data Collection ........................................................................................... 62 Experimental Procedures ............................................................................ 62 Instrumentation ........................................................................................... 63

Independent Variables ...................................................................... 63 Dependent Variables......................................................................... 66

Data Analysis ............................................................................................ 67 Assumptions of Multinomial Logistic Regression ........................... 69 Interpretation of Multinomial Logistic Regression Model ............... 70

Chapter Summary ....................................................................................... 72

4. RESULTS .................................................................................................................. 74

Descriptive Statistics................................................................................... 74 Sample Characteristics...................................................................... 74 Currency Preference.......................................................................... 75 Restaurant Segments......................................................................... 76 Need for Cognition ........................................................................... 77 Self-Monitoring................................................................................. 78 Dining Companions .......................................................................... 79

Multinomial Logistic Regression Analysis................................................. 82 Summary of the Hypothesis Tests .............................................................. 94

5. CONCLUSIONS........................................................................................................ 97

Discussions and Summary .......................................................................... 97 Implications............................................................................................... 100 Limitations ................................................................................................ 102 Recommendations for Future Research .................................................... 103 Chapter Summary ..................................................................................... 104

x

6. POSTCRIPTS .......................................................................................................... 105 Restaurant Context.................................................................................... 106 Airline Context.......................................................................................... 109 Summary of the Results ............................................................................ 114

BIBLIOGRAPHY........................................................................................................... 115 APPENDIX A: Results of Multinomial Logistic Regression Analysis: 188 samples

included for Need for Cognition ........................................................... 129

APPENDIX B : Experiment Instruments ....................................................................... 134

APPENDIX C : Experiment Instruments for Postscript ................................................. 166

xi

LIST OF TABLES

Table Pages

2.1 Summary of Hotel Rewards Programs (continued) ............................................... 32

3.1 Experimental Design to assess Consumer Preferences for Currency Usage (continued) .............................................................................................................. 60

3.2 Measurement of Variables ..................................................................................... 68

4.1 Descriptive Statistics by the Type of Currency ..................................................... 81

4.2 Results of Multinomial Logistic Regression Analysis: Dollars and Points versus Dollars-only (continued)....................................................................................... 90

4.3 Results of Multinomial Logistic Regression Analysis: Points-only versus Dollars-only (continued)....................................................................................... 92

4.4 Summary of the Hypothesis Tests of Currency Preferences ................................. 96

6.1 Descriptive Statistics by the Type of Currency in Restaurant Context ............... 107

6.2 Results of Multinomial Logistic Regression Analysis for Restaurant Context ... 109

6.3 Descriptive Statistics by the Type of Currency in Airline Context ..................... 110

6.4 Results of Multinomial Logistic Regression Analysis for Airline Context......... 113

A.1 Results of Multinomial Logistic Regression Analysis: Dollars and Points versus Dollars-only (188 samples included for Need for Cognition) ................. 130

A.2 Results of Multinomial Logistic Regression Analysis: Points-only versus Dollars-only (188 samples included for Need for Cognition) ............................ 132

xii

LIST OF FIGURES

Figure Pages

2.1 The Effects of Need for Cognition, Self-Monitoring, Dining Companion, and Restaurant Segment on the Choice of Currency in the Restaurant Industry......... 55

4.1 Preferences for Three Types of Currencies ........................................................... 75

4.2 Currency Preferences in Three Restaurant Segments............................................ 77

4.3 Currency Preferences and Need for Cognition ...................................................... 78

4.4 Currency Preferences and High and Low Self-Monitoring ................................... 79

4.5 Currency Preferences for Companions Using Three Different Currency Types... 80

4.6 Currency Preferences of High Self-Monitors with Companions........................... 87

4.7 Currency Preferences of Low Self-Monitors with Companions............................ 88

4.8 Currency Preferences of High Self-Monitors with Three Restaurant Segments ... 88 4.9 Currency Preferences of Low Self-Monitors with Three Restaurant Segments.... 89 6.1 Currency Preferences in Restaurant Context ....................................................... 107

6.2 Currency Preferences for Need for Cognition in Restaurant Context ................. 108

6.3 Currency Preferences in Airline Context............................................................. 111

6.4 Currency Preferences for Need for Cognition in Airline Context ....................... 112

1

CHAPTER 1

INTRODUCTION

The immense popularity of marketing promotions and loyalty programs has

resulted in the introduction of several new exchange media other than money (Drèze and

Nunes, 2004). In 1985 American Airlines invented a new marketing idea called

frequent-flyer miles; they launched AAdvantage, the world's first mileage-based

frequent-flyer program. Airlines first introduced mileage schemes to build customer

loyalty. They also provided a vast marketing database, allowing airlines to track a

passenger's travel history and to focus advertising. Recently airlines have been selling

these mileages not only to credit-card companies but also to various business entities to

attract customers. However, almost 50% of miles are earned without even leaving the

ground. The biggest earners are credit-card spending and telephone calls, and services

such as car rentals, hotels, share-trading or refinancing a mortgage all offer extra

opportunities to top up consumers’ frequent miles (The Economist, 2002).

For example, the AAdvantage program provided by the American Airlines is

American's travel awards program. It was the original travel awards program, established

more than 20 years ago, and today is the world's largest program. AAdvantage members

earn miles each time they purchase an eligible published-fare ticket and fly on American

Airlines, American Connection, American Eagle or any of the more than 30 airline

2

partners. Members also earn bonus miles for flying on an eligible purchased-fare

Business Class or First Class ticket on American Airlines or any of its airline partners as

follows: an additional 25% of flight mileage flown in Business Class, or an additional

50% of flight mileage flown in First Class. In addition, members earn miles when staying

at AAdvantage hotel partners or when renting a car from a partner company. Currently

over 35 hotel partners representing more than 75 brands and all seven major car-rental

agencies are AAdvantage partners. Because not everyone is a frequent traveler, miles can

also be earned through non-travel-related partners including assorted financial and retail

partners. Miles can be redeemed for a variety of travel awards around the world on

American Airlines.

In the lodging industry, Hilton hotels also introduced a loyalty program called

Hilton Honors Club (HH club) (www.hhonors.hilton.com, 2005). The program of Hilton

Honors Club (HH club) offers a customer one qualifying stay accounting for two benefits

(they call this double dipping). The first benefit is that a qualifying-rate stay at one of the

affiliated hotels can earn 500 miles worth of frequent-flyer mileages of customer’s choice

from about 30 selected airlines. The second benefit is that every dollar a customer spends

earns 10 honor points. Those honor points can be used to receive various goods offered

by their reward site. The popular items on the reward site are mini disc players, MP3

players, cameras, camcorders, watches and computers. The points necessary to redeem

those items range widely from 45,000 to over 100,000 points. Another popular way to

benefit from those honor points is to either earn a 50% discount or to receive a free stay

at those participating hotels. For as few as 2,500 points, a member can benefit from the

50% discount for a weekend stay. And a free stay at one of those hotels starts at 10,000

3

points. Those points can also be used to obtain a free car rental, a vacation package of a

customer’s choice (Europe, Asia, Middle East, etc.), or a free three- to seven-day cruise

trip (either Carnival or Prince cruise) for as little as 185,000 points

(www.hhonors.hilton.com, 2005).

Various American Express Cards provide a program for cardholders to access free

rewards. For every dollar spent on the card, cardholders earn one point. Earned points can

be applied to a variety of services and products, many of which are travel related. There

is no yearly limit or expiration on points earned. Also, the Chase Ultimate Rewards

Platinum MasterCard, issued by Chase Bank, is designed for those who have very good

credit and plan to take advantage of the reward program offered. Through the reward

program, cardholders earn one point for every dollar spent on general purchases that may

be redeemed for gift certificates, brand-name merchandise, a variety of travel awards, or

cash rewards. Unused points do expire within three years and the maximum number of

points that may be earned per billing period must not exceed the cardholder's credit limit.

From frequent-flyer mileages to credit cards, consumers accumulate assets in

various novel currencies, which they then budget, save, trade, and spend just as they do

with money. Currently, some 100 million people around the world belong to at least one

such scheme (including one in three adults in the United States), collecting the nearly 500

billion miles distributed annually (The Economist, 2002). As of April 2002, the

cumulative number of unredeemed miles worldwide was estimated to be approximately

8.5 trillion, which at current redemption rates would take almost 23 years to clear (The

Economist, 2002). In 2000 alone, airlines issued 13 million free award tickets

(www.WebFlyer.com cited by Drèze and Nunes, 2004). Frequent-flyer miles or reward

4

points are treated almost like a second currency, but they are not freely tradable. The fine

print of all programs specifies that consumers cannot sell, buy or barter miles. However,

as with any controlled currency, there is a thriving black market. Brokers, such as Award

Traveller, will buy the miles at a discount. A direct consequence of the ubiquity of

rewards programs is that consumers are increasingly able to pay for goods and services in

a combination of currencies, not just in dollars (Drèze and Nunes, 2004). However, more

research is needed to understand consumer behaviors and responses to different

currencies.

STATEMENT OF THE PROBLEM

Several variables have the potential to affect consumer evaluation of different

currencies such as amount of payment, demographic characteristics, or personality traits.

Drèze and Nunes (2004) reported that consumers prefer one currency price over another

based on the amount of payment. Individual differences could be important moderators of

the consumer preferences of currency usage. It may be that certain consumers who are

contemplating spending reward points, dollars, or any mix of two currencies have

difficulty recalling or constructing a value for different amounts of either currency or

both. In addition, for certain consumers, the relevant information may be unavailable or

inaccessible. Despite the growing popularity of prices issued in more than one currency,

limited research has examined how consumers evaluate currency prices other than money.

Although various novel currencies have been introduced and applied at various business

5

entities to attract a customer, the restaurant business often does not utilize any currency

other than money except for credit cards. Thus, a need exists to expand our knowledge

and conceptualization of currency preferences to include consumer responses to different

currencies in the restaurant industry.

PURPOSE OF THE STUDY

The understanding of consumer behavior would be improved by the knowledge of

the consumers’ characteristics that relate to the different currency options. By

understanding the individual personality differences of customers when using different

currencies, restaurants could decide whether or not to implement different currency prices

based on their target markets. Thus, the purpose of this study is to explore whether

differences in currency usage are related to consumer behavior. This study is designed to

describe how two personality variables – need for cognition and self-monitoring – may

aid in understanding how individual differences can influence consumers’ preferences for

currency usage in the restaurant industry. In addition, it shows how the individual

difference variables of need for cognition and self-monitoring fit into an overall

conceptualization of currency preferences. Another purpose of the study is to determine

whether consumers’ currency preferences vary across restaurant segments.

6

DEFINITION OF TERMS

The operational definitions of the terms used in the present study follows:

Sales Promotion

Sales promotion is considered as an action-focused marketing event whose purpose

is to have a direct impact on the behavior of the firm's customers (Blattberg and Neslin,

1990).

Currency

A currency is a unit of exchange, facilitating the transfer of goods and services. It

is a form of money, where money is defined as a medium of exchange rather than e.g. a

store of value (Wikipedia, www.en.wikipedia.org/wiki/Currency, 2005).

Fine-Dining Restaurant

A fine-dining restaurant is defined as a restaurant offering high-quality foods with

high-quality service. Fine-dining restaurants are operationalized on menu price criteria of

an average guest check of $25 or higher (National Restaurant Association, 2004).

Casual-Dining Restaurant

A casual-dining restaurant is defined as a restaurant offer some table and bar

service such as coffee shops. Casual-dining restaurants are operationalized on menu price

criteria of an average guest check of $6 to $24 (National Restaurant Association, 2004).

Quick Service Restaurant

A quick-service restaurant is defined as a restaurant that offers a “limited menu

featuring food such as hamburgers, fries, hot dogs, chicken, tacos, burritos, gyros,

teriyaki bowl, various finger foods, and other items for the convenience of people on the

7

go.” Quick-service restaurants offer quality, speed, cleanliness, service, and value for the

customers (Walker, 2001). Quick-service restaurants are operationalized on limited menu

items, limited service with an average guest check of $5 or under (National Restaurant

Association, 2004).

Self-Monitoring

Self-Monitoring “is concerned with individual differences in the willingness or

ability to modify behavior in accordance with the norms of situational appropriateness”

(Miller and Thayer, 1988, p. 545).

Need for Cognition

Need for cognition refers to an individual’s tendency to engage in and enjoy

effortful cognitive endeavors (Cacioppo and Petty, 1982).

Dining Companion

Dining companion is operationally defined as the companion with whom one

shares the dining experience.

STRUCTURE OF THE STUDY

The structure of the study is presented as follows. Chapter 2, the literature review,

includes three sections. Section 2.1 provides an in-depth literature review on the concept

and theory of sales promotion from a consumer perspective. Section 2.2 discusses a

specific type of sales promotion – the usage of currency – and its relationship with

8

consumer behaviors and applications. Section 2.3 addresses the theoretical development

of the personality traits and consumer preferences for currency usage. Section 2.4

presents research hypotheses and a conceptual model based on the theory and related

research.

Chapter 3 presents the experimental and statistical methods used to test the

hypotheses. Two causal experimental designs are discussed. Multinomial logistic

regression is applied to analyze the data and test the hypotheses for the study.

Chapter 4 provides a descriptive profile of the sample as well as the results of

multinomial logistic regression. The summary of the hypothesis tests is also presented.

Chapter 5 presents a discussion of findings, conclusions, and implications of these

results. Limitations of the study and recommendations for future research are also

discussed.

9

CHAPTER 2

LITERATURE REVIEW

In this chapter, a literature review focuses on the impact of personality traits and

restaurant segments on consumer currency preferences. The literature review is organized

into three sections: sales promotion, sales promotion and the usage of currency, and

personality traits.

2.1 SALES PROMOTION

Sales promotions encompass all promotional activities other than advertising,

personal selling, or public relations. Blattberg and Neslin (1990) summarized various

definitions offered by several authors, and consider sales promotions as an action-focused

marketing event whose purpose is to have a direct impact on the behavior of the firm's

customers. Several important aspects of sales promotions should be highlighted to

complete the definition mentioned above. First, sales promotions involve some type of

inducement that provides an extra incentive to buy and represents the key element in a

promotional program (Schultz and Robinson, 1982). According to Strang (1983), this

incentive is added to the basic benefits provided by the brand. It temporarily alters the

perceived brand price or value. It is also considered as an acceleration tool designed to

speed up the selling process and maximize sales volume (Neslin et al., 1984). By offering

10

this extra incentive, sales-promotion techniques can motivate consumers to buy a larger

quantity of a brand or shorten the interpurchase time of the trade by inducing consumers

to take more immediate action (Laroche, et al., 2001). In essence, sales promotions are

used by nearly all consumer goods and services producers as temporary incentives

aimed at changing purchase behavior (Quelch, 1989).

While these incentives can be monetary or nonmonetary, most theoretical models

that have appeared in the marketing literature to date have focused on monetary

incentives. Various statistics show that sales promotions represent a significant part of a

firm’s marketing expenditures. A 1996 U.S. study reported that nearly 77% of the

advertising and promotions expenditure of consumer goods firms was on consumer and

trade promotions (Nielsen, 1996). Promotion spending reached over $288.3 billion in

2003, up 9.7% from the previous year in the U.S. The Promotion Marketing Association

(2003) reported that U.S. manufacturers spent almost twice as much of total 2003 budget

on consumer promotion (46%) than they did on consumer advertising (24.2%).

The promotional price is ‘‘packaged’’ and advertised in several ways (Kotler,

1994): (1) A limited-time “shelf-price” reduction: A lower price is offered for a limited

time to all consumers. The shelf-price discount is a reduction in a brand’s regular price. It

is displayed on the package and typically ranges from10 to 25% off the regular price for

grocery packaged goods. A shelf-price discount implies that all consumers who buy the

product at the time when the brand is on discount have the opportunity to buy it at a

lower price. Media advertising (e.g., television or newspaper) usually accompanies this

type of promotion (Kotler, 1994). (2) Free-Standing Insert (FSI) Coupons: A lower price

is offered to those consumers who present a coupon before the coupon’s expiry date

11

(Shimp, 1993). FSI coupons provide the firm with the option of charging a higher shelf

price while offering a lower price to those who choose to use the cents-off coupon when

one is available. Typically, a coupon is placed in a “free-standing insert” (FSI) in the

Sunday newspaper. No other media advertising usually accompanies this type of a price

promotion. (3) Mail-in Rebates: A lower price is offered to those consumers who send in

by mail a “proof of purchase.” Media advertising may or may not accompany this type of

price promotion. For example, automobile manufacturers typically advertise these rebates;

most packaged-goods rebates, however, are not advertised, except at the point of sale. (4)

Price Packs: A lower price is offered by means of an offer on the package –a peel-off

label which can be contemporaneously presented at the check-out counter or a coupon

that has to be cut out and presented on the next purchase occasion – or stored inside the

package. The non-peel-off on-package coupon is similar to the in-package coupon in

terms of when it can be redeemed, but it is different in that its existence is advertised on

the package (Raju et al., 1994). No media advertising usually accompanies a price-pack

promotion. (5) Electronic Coupons: These are coupons which are automatically generated

at the check-out counter based on what the consumer is buying. They are similar to

in-pack coupons in that they are good only for the next purchase, and their availability is

not known to the consumer at the point of purchase (Walsh, 1994).

Depending on how a sales promotion is presented, all contemporaneous

transactions may or may not happen at a single price. For example, in 1993 in the U.S.,

88% of all coupons were distributed through FSIs, making them the most popular

promotion vehicle. But only 1.8% of these coupons were redeemed, suggesting that a

large fraction of consumers was paying regular prices while a FSI coupon was available

12

(Walsh, 1994). By contrast, Engel et al. (1994) reported that coupons on product

packages had a redemption rate of 33% (among those buying the product), but only 3.8%

of coupons were package coupons. Coupons at the store shelf – which are like shelf-price

reductions – had a high redemption rate (among those buying the product), yet only 5%

of coupons were distributed at the store shelf. Finally, electronic coupons had a

redemption rate of 9%, but only 1% of all coupons were distributed electronically

(Whalen, 1994).

Consumer Benefits of Sales Promotions

According to Keller (1993), the benefits of sales promotion can be defined as the

perceived value attached to the sales-promotion experience, which can include both

promotion exposure (e.g., seeing a promotion on a product) and usage (e.g., redeeming a

coupon or buying a promoted product). This definition implies that consumers respond to

sales promotions because of the positive experience they provide, or, following

Holbrook’s (1994) definition, because of their customer value. Most analytical and

econometric models of sales promotions simply assume that monetary savings are the

only benefit motivating consumers to respond to sales promotions (Blattberg and Neslin,

1993). Behavioral research on sales promotions has tended to focus on the demographics

of deal-prone consumers (Blattberg et al. 1978; Narasimhan 1984; Bawa and Shoemaker,

1987) and on the identification of personal traits such as “coupon proneness,”

“value-consciousness,” or “market mavenism” (Mittal, 1994; Lichtenstein, Netemeyer,

and Burton, 1995). These studies offer a coherent portrait of the demographic and

psychographic characteristics of deal-prone consumers. However, because of their focus

13

on individual variables, these studies do not examine the nature, and the number, of the

specific consumer benefits of sales promotions. Yet, some robust empirical results

suggest that monetary savings cannot fully explain why and how consumers respond to

sales promotions. To account for these findings, researchers have advanced explanations

related to achievement motives (Darke and Freedman, 1995), self-perception (Schindler,

1992), and fairness perception (Thaler, 1985) or to price and quality inferences in

low-involvement processing (Inman, McAlister and Hoyer, 1990; Raghubir and Corfman,

1999). The contributions of the personality studies, the parsimony of the economic

perspective, and the existing work on the non-monetary benefits of sales promotions have

greatly contributed to our understanding of consumer response to sales promotion;

however, the extent of support for some of these explanations is limited.

An integrated study of the consumer benefits of sales promotions by Chandon,

Wansink, and Laurent (2000) provided a framework of the multiple consumer benefits of

a sales promotion. To develop a framework of the different consumer benefits of sales

promotions, Chandon, Wansink, and Laurent (2000) elaborated the literature on

consumer response to sales promotions, customer value, and hedonic consumption with

nine in-depth consumer interviews. The authors found that monetary and nonmonetary

promotions provide consumers with different levels of three hedonic benefits

(opportunities for value-expression, entertainment, and exploration), and three utilitarian

benefits (savings, higher product quality, and improved shopping convenience).

Utilitarian benefits are primarily instrumental, functional, and cognitive; they provide

customer value by being a means to an end. Hedonic benefits are non-instrumental,

experiential, and affective; they are appreciated for their own sake, without further

14

regards to their practical purposes (Hirschman and Holbrook, 1982). Hence, the benefits

of sales promotions can be classified as utilitarian when they help consumers maximize

the utility, efficiency, and economy of their shopping and buying, and as hedonic when

they provide intrinsic stimulation, fun, and self-esteem. On the one hand, buying a

promoted product can provide the moral satisfaction of behaving according to one’s

principles and values (e.g., being a good or a thrifty shopper)—an intrinsic or hedonic

benefit. On the other hand, buying a promoted product can be a means of increasing one’s

prestige and achieving higher social status or group affiliation (e.g., becoming a

recognized smart shopper or a market maven)—an extrinsic or utilitarian benefit

(Chandon, Wansink, and Laurent, 2000).

Chandon, Wansink, and Laurent (2000) further developed a benefit congruency

framework that predicts the types of product for which monetary and non-monetary

promotions are most effective. The fact that monetary and non-monetary promotions

provide different consumer benefits suggests that their effectiveness may depend on the

congruence or the match that these benefits have with the product, consumer, or purchase

occasion. According to most models of consumer choice (e.g., combinatorial models of

attitude formation or utility theory), consumers evaluate products on basis of the benefits

they provide, weighted by the importance of these benefits. The weighting of the benefits

varies across products, purchase occasions, and individuals (Meyer and Kahn, 1991;

Eagly and Chaiken, 1993). For low-involvement, repeat-purchase products, the weights

of some of these benefits may go down to zero, so that only a few benefits, the most

important ones, are considered in the purchase evaluation. For instance, Hoyer's (1984)

field study of laundry-detergent buyers in the US showed that a few product benefits such

15

as product performance, price, emotional attachment, or social norms account for 81% of

the benefits sought. Many studies have documented the varying importance of benefits

sought (e.g. Shavitt, 1990; Strahilevitz and Myers, 1998) but Leong’s (1993) study

provides some of the clearest evidence that although the same list of benefits accounted

for 86% of the benefits sought by Singaporean consumers, the weights of these benefits

were very different from the figures reported for US buyers. Interestingly, Leong found

that these weights varied more across product categories (e.g., laundry detergent vs.

shampoo) than across nationalities for the same category. Therefore, the utilitarian

benefits of a given choice alternative are given more weight when consumers make a

utilitarian purchase decision, and that hedonic benefits are given more weight when they

make a hedonic purchase decision. The varying importance of the benefits sought implies,

in turn, that the effectiveness of a sales promotion is higher when its benefits are

congruent with those sought for the purchase occasion. Simply stated, the

benefit-congruency principle proposes that sales promotions are more effective in

influencing brand choice when they provide the benefits that have the largest weight in

the evaluation of a purchase alternative (Chandon, Wansink, and Laurent, 2000).

In summary, sales promotions can provide consumers with an array of hedonic and

utilitarian benefits beyond monetary savings. Hedonic benefits include value expression,

entertainment, and exploration. Along with simple monetary savings, utilitarian benefits

also include product quality and shopping convenience. Moreover, non-monetary

promotions provide more hedonic benefits and fewer utilitarian benefits than monetary

promotions. All benefits, except quality, contribute to the overall evaluation of monetary

and non-monetary promotions. However, each type of promotion is primarily evaluated

16

based on the dominant benefits it provides. Finally, for high-equity brands, sales

promotions are more effective when they provide benefits that are congruent with those

provided by the product being promoted. Specifically, monetary promotions are more

effective for utilitarian products than for hedonic products. Conversely, non-monetary

promotions are relatively more effective for hedonic products than for utilitarian products

(Chandon, Wansink, and Laurent, 2000).

Consumer Response to Sales Promotions

Previous research in marketing and psychology has examined consumer response

to sales promotions using experimental methods and econometric analysis of secondary

data (e.g., Jain and Vilcassim, 1991; Kahn and Raju, 1999). Recently, researchers have

attempted to understand consumer response to sales promotions using theoretical models.

Helsen and Schmittlein’s study (1992) provided a better understanding of stockpiling

behavior. They defined stockpiling as loyal users buying more of the promoted brand, or

buying it earlier than when there is no promotion. As consumption rate is assumed to be

constant, it follows that promotion-induced stockpiling leads to loyal consumers being

subsidized. The authors note that this reduces the profitability of a promotional campaign.

Helsen and Schmittlein (1992) analyzed stockpiling using the framework developed in

Golabi (1985). Golabi considers the problem of a buyer purchasing a single item with no

transaction costs. The consumption rate is assumed to be constant, and future prices are

considered to be uncertain. However, the buyer assumed to know the probability

distribution of future prices. Golabi showed that under these assumptions, the optimal

purchasing policy is characterized by a set of critical prices. In other words, the observed

17

price in a period, when compared to the set of critical prices, can be used to arrive at

optimal procurement for that period. Expanding Golabi’s framework, Helsen and

Schmittlein (1992) examined the effect of deal frequency and deal magnitude on

stockpiling behavior and found that lower deal frequency leads to greater stockpiling.

The intuitive justification is that more frequent deals imply lesser need to stockpile on

any particular deal occasion.

Moreover, Assuncao and Meyer (1993) extended Golabi’s work on two critical

dimensions. First, they allowed consumption to be a function of price. In his model,

Golabi assumed a constant consumption rate. This assumption is quite appropriate in an

industrial buying context where quantity purchased is determined by engineering needs

and considerations. However, a consumer might want to adapt consumption by

substituting one product for another depending on prices. Also, Assuncao and Meyer

allowed future prices to follow a first-order stochastic process. Consequently, one can

examine purchasing behavior in situations where the consumer might believe that after a

promotion has been offered, it is less likely that a promotion will be offered in the very

next period. Assuncao and Meyer (1993) showed quite elegantly why a rational consumer

is likely to consume more if there is more stock at hand. The intuition is quite simple. A

more heavily stocked-up consumer has the capacity to wait longer for a good price deal.

Consequently, the price that the consumer expects to pay is also lower. Hence, the

consumer can indulge and consume more. Their results also explain why promotional

price elasticities are higher than regular price elasticities. Furthermore, as in Helsen and

Schmittlein’s study (1992), these authors also found that a higher discounting frequency

leads to lower price sensitivity and stockpiling.

18

A single supplier is an assumption in both Helsen and Schmittlein’s (1992) and

Assuncao and Meyer’ studies (1993). However, Krishna (1992) modeled situations where

the market consists of more than one brand, and the consumer has the option to choose

which brand to buy as well as how much to buy of the chosen brand – a scenario more

representative of today’s marketplace. Using the framework suggested in Raju,

Stinivasan and Lal (1990), Krishna (1992) assumed that the consumer’s brand-choice

decision is based on prices adjusted for quality. In other words, the consumer will choose

a brand that is lower priced once prices have been adjusted for quality differences

between the two brands. These quality-adjusted prices are referred to as “effective prices”.

Krishna (1992) showed why a consumer will purchase only one brand on any buying

occasion, and also that the entire information necessary to understand a consumer’s

buying decision is included in the probability distribution of the lowest realized effective

price. Recall that the consumer is assumed to compare effective prices and purchase the

brand with the lowest effective price to derive critical prices. The key implications in

Krishna’s study (1992) are derived using Monte Carlo simulations in a three-brand

market. In lines with Helsen and Schmittlein (1992) and Assuncao and Meyer (1993),

Krishna also found that higher discounting frequency leads to lower stockpiling. The

simulation results suggest that in markets with low brand loyalty and high promotional

frequency, one is not likely to observe a post-promotional dip mainly because off-deal

sales are lower, both before as well as after a promotion.

19

The Effects of Sales Promotion on Purchase Intentions

Shoemaker (1979) was one of the first to investigate the effects of promotions on

purchase behavior. He empirically showed that purchase acceleration was due to sales

promotion. His findings suggested that promotions were more apt to be associated with

increased quantity than with shorter interpurchase time. Then, Blattberg et al. (1981)

explained the dealing of storable products based on the idea of transferring

inventory-carrying costs from the retailer to the consumer. For four product classes, they

found statistically significant evidence of purchase acceleration in terms of both larger

quantities and shorter interpurchase times. Raju and Hastak (1983), who examined the

effect of a deal’s magnitude on the purchase behavior due to promotions, confirmed these

results. At the individual level, however, price promotions seemed to act as a disturbing

element, which inhibits negative thoughts that might arise about the brand. Also, Neslin

et al. (1984) expanded this empirical line of inquiry by developing an analytical

framework for studying purchase acceleration. Their main findings concern how coupons,

temporary price cuts, and featured price cuts were all associated with higher purchase

quantities.

In summary, there is a good deal of empirical support for an increase in purchase

quantity due to sales promotions in the consumer packaged-goods area, supporting the

concept of potential stockpiling (Helsen and Schmittlein, 1992). Also, as suggested by

Lichtenstein et al. (1990), deal-prone consumers tend to develop links between their

liking of specific price promotions and their inclination to buy products using these

20

promotions. Indeed, the notion of transaction utility dictates the behavior of the consumer.

It allows a particular psychological inducement (i.e., feeling good about using the

promotion) that plays the major role in directing the behavior.

Price Perception and Sales Promotions

Several recent studies tend to support the presence of mental processing engaged in

by the consumer at the initial stage of promotion use, particularly regarding the influence

of the promotion on the price perception of the purchase (Cheong, 1993; Folkes and

Wheat, 1995; Lichtenstein et al., 1998). Price-perception theories address the relationship

between objective price and consumers' judgments of the price (Sawyer et al., 1984).

Price promotions significantly affect consumers' price perception (Folkes and Wheat,

1995). Offering a product with a rebate results in higher perceptions as measured by the

most one would pay, expected price, fair price and reasonable price. This difference is

explained from a Mental Accounting perspective (Thaler, 1985).

Kalwani and Yim (1992) also explored the field of consumers' price expectations.

Their study proposes that consumers form expectations of prices and use them in

formulating their response to retail pricing. Their findings reveal that consumer reaction

depends not only on retail price, but also on the comparison they make with the

reservation price. In other words, consumers use the price they expect to pay for a brand

on a given purchase occasion as reference in forming price judgments. Therefore, even if

different processes have been hypothesized, there is a consensus on the existence of a

cognitive process. This process can be described as a cognitive evaluation, made by the

consumers, of the benefits of a price promotion.

21

Moreover, this idea is developed by Lichtenstein et al. (1998), who found

similarities between consumers with positive attitude toward private-label products and

consumers using price promotions, particularly regarding the mental calculation involved.

They describe these consumers as thoughtful shoppers who take pride in their

decision-making ability. These evaluations made by the consumers positively influence

the purchase intention of private-label products through the liking of these private labels.

Finally, certain promotional mechanisms such as coupons inherently require

searching costs (Schneider and Currim, 1991). Indeed, coupon users are used to engaging

in coupon searching and sorting (Bawa and Shoemaker, 1987). Particularly, the liking of

coupons seems correlated with specific behavior such as intensive use of weekly store

fliers containing coupons as well as information on sales (Lichtenstein et al., 1995).

Hence, using a coupon and identifying cents-off are thoughtful decisions and involve

information-search costs (Kahn and Schmittlein, 1992). Moreover, Kalwani and Yim

(1992) showed that consumers tend to use the last few purchase prices as a reference, as

well as readily available information from the environment concerning promotions. This

information is included circulars as well as other advertising information.

Potential Traits and Influence on Consumer Purchase Behavior

From managerial and academic perspectives, a tremendous effort has been made to

define the deal-prone consumer. The targeting of consumer deals, as well as the

understanding of consumer behavior would be improved by the knowledge of the

consumers’ characteristics that relate to deal purchasing in a product market. Mittal (1994)

presented a set of explanatory variables to capture the psychology of coupon-use

22

behaviors. His model regrouped demographic variables, lifestyles and self-perception

traits (busyness, financial wellness, and pride in homemaking). Particularly, he

underlined the fact that busy and well-off people were buying fewer promoted products

than their counterparts. He also reviewed some of the consumer shopping traits, such as

brand loyalty, store loyalty and comparison shopping. One of his main findings was that

coupon-redemption behavior and demographics were not linked in any way. This finding

contradicts previous findings (Blattberg et al., 1978; Narasimhan, 1984; Bawa and

Shoemaker, 1987). However, consumers' shopping traits do have a significant effect in

explaining coupon redemption.

Brand loyalty is probably the most studied individual-difference variable in the

promotional literature. Results are consistent in suggesting that brand loyalty negatively

affects deal or coupon attitude and use (Webster, 1965; Montgomery, 1971). Price et al.

(1988) included another personality trait in the study of coupon proneness, which is

market mavenism. The authors define market mavens as the people who possess

information about the products and places to shop, and who provide other consumers

with market information. These consumers are characterized by their expertise, in that

they plan their shopping trips and their expenses, and they are heavy users of coupons.

The results of this work indicate that this type of consumer is likely to engage in smart

shopping behaviors. Urbany et al. (1996) found a positive effect of market mavenism on

search behaviors and cognitive activities. An additional trait, which could significantly

influence promotion use, is variety seeking. In particular, when consumers seek variety,

they should like promotions that might help them discover new products (Narasimhan,

1984). Lichteinstein et al. (1990) were among the first to describe moderators of the

23

relationship between coupon proneness and coupon redemption behavior. They

developed a two-staged model in which a psychological level influenced the

coupon-responsive behavior rather than seeing it as isomorphic with the behavior.

Role of Price Promotion Framing

Research in the price-framing literature (Kahneman & Tversky, 1979; Thaler, 1985;

Thaler & Johnson, 1990) provides important insights into the process by which

consumers evaluate different deals and subsequently encode them in memory. Framing

effect refers to the finding that consumers respond differently to different descriptions of

the same decision question (Frisch, 1993). Framing of decision problems can affect

consumers’ judgments and, therefore, preferences (Kahneman and Tversky, 1979).

Folkes and Wheat (1995) found that framing via various types of promotions affects

consumers’ price perceptions.

According to Thaler (1985), people perform mental accounting on their

transactional gains or losses based on differential responses to such outcomes.

Considering the prospect theory which holds that an individual’s value function is

concave (risk-averse) over gains and convex (risk-seeking) in the loss domain, Thaler

showed that people psychologically segregate multiple gains but integrate losses.

Because a typical promotion represents a small gain relative to a larger loss (i.e., price

paid), using Thaler’s notion, in such cases individuals may either segregate the gain

(silver lining) or integrate it with the price and encode it as a reduced loss. However,

there is some evidence that shows that the key factor in “whether a consumer is going to

frame a given promotion as a gain or a reduced loss” seems to depend on the nature of

24

the promotion itself, that is, if it is monetary or nonmonetary. As Diamond and Campbell

(1989) explained, if the promotion is monetary and therefore in the same metric as the

item price, consumers are more likely to integrate it and subsequently encode it as a

reduced loss. However, if the promotion is nonmonetary (such as additional units of the

product), it obviously is in a different metric and therefore it will be encoded as a gain.

Furthermore, Diamond and Sanyal (1990) showed that consumers seem to prefer

promotions that are framed as gains to those that are described as reduced losses. In

particular, the authors find that in their experiments extra-product promotions that

involve giving an extra amount of the product (e.g., 49 cents worth of free soup) are

chosen over price promotions that give the same amount off as discount.

Communicating a price promotion in different formats is similar to the framing of

purchase decision (Monroe, 1990). Different message formats, e.g.,” dollar off”,

“percentage off”, “2 for $” or “Buy1, get 1 at 1/2 price” illustrate direct reference to the

price differences (Raghubir, 1992). The role of deal semantics on subsequent consumer

evaluations has been investigated through several studies (e.g., Della Bitta et al., 1981;

Lichtenstein, Burton, and Karson, 1991; Grewal et al., 1996). These articles have

principally examined the issue of how different semantic cues (in price information)

appear differentially to communicate value to buyers. Lichtenstein, Burton, and Karson

(1991) found that a between-store price-comparison cue (“See elsewhere at $, Our price

$”) resulted in a less favorable attitude to the deal than a within-store comparison (Was $;

Now only $). Grewal et al. (1996) demonstrated how the consumer’s situation (i.e., being

in the store versus at home), as well as offered discount size moderate this semantic effect.

Das (1992) investigated how consumers perceive four economically equivalent deals

25

(which are all held constant at 25% discount level), for example, “25% off total when you

purchase 2,” “Buy 1, get 1 at price,” “Save $ on purchase of 2,” and “2 for $,” over eight

different product items. Results showed that deal semantics do indeed affect consumer

evaluations, and that this effect is larger for lower-priced products. Further, the author

reported that there is a significant interaction effect between certain types of semantic

cues and item price; for example, the savings (“Save $”) frame appears to be preferred for

higher-priced items.

Della Bitta et al. (1981) conducted an experiment to access consumer perceptions

of comparative price advertisements. Their study was designed to explore the effects of

different ways of presenting comparative price offers. Della Bitta et al. focused on the

comparative information to describe a sale such as describing a sale by dollar amount off

or percent off. The findings of their study indicated that presenting percent-off format

produced a nearly significant lower perception of value for the money than did presenting

dollar-amount-off format. Promotions presented in dollar amount off were more

positively evaluated than the percentage-off formats. Lichtensteien et. al. (1991)

examined the differential effects of two types of semantic cues: comparative prices (i.e.,

“see elsewhere $__, our price $__”) and past prices (i.e., “was $__, now only $__”) on

consumer perceptions. By using the actual newspaper advertisement that they modified

for the study, they learned that comparative prices in advertisements influenced a

consumer’s purchase intention more than past prices. Raghubir (1992) investigated the

26

effects of semantic cues on consumer evaluations of promotional deals, and found that “2

for $” and “Buy1, get 1 at 1/2 price” frames were most effective across price levels.

Moreover, “save $__” frame was particularly effective at a high price level, but not at not

low price levels.

Harlam et al. (1995) demonstrated that discounts presented in “together” format

(e.g. “buy X and Y together at $__”) produce highest purchase intent and those presented

in “separate” (e.g. “buy X at $__ and Y at $__ if you buy the bundle”) format produce the

lowest intent. Additionally, Chen et al. (1998) investigated how the framing of price

promotions influences consumers’ perceptions of these promotions and their purchase

intentions. They found no significant differences in consumer price perceptions as a

function of promotions framed as off-price sales or coupons. However, both promotional

frames resulted in lower price perceptions than did price perception for the item with

rebates. Because rebates generally involve a delay in receiving the price savings,

consumers may not integrate the savings into the price of the item. Thus, participants’

price perceptions for the item were similar to their perceptions of regular price. The

results also suggested that consumers evaluated a price reduction framed in dollar terms

and percentage terms differently for high-end and low-end products. For high-price

products, consumers perceive a price reduction framed in dollar terms as more significant

than the same price reduction framed in percentage terms. Oppositely, for low-price

products, consumers evaluate the price reduction framed in percentage terms more

positively than in dollar terms.

27

Sales Promotion in Hospitality Industry

Much of the academic research in sales promotion has focused on package goods;

however, there is a need to understand whether consumers’ response to coupons for

service purchases is similar to that of package-goods purchases. Hospitality services offer

consumers a combination of tangible and intangible attributes. The fact that hospitality

services contain both a tangible and an intangible component raises questions about how

consumers will respond to a particular sales-promotion tool.

Taylor and Long-Tolbert (2002) examined the influence of coupons on consumers’

quick-service restaurant (QSR) purchases. The high level of coupon activity evident in

the fast-food market is largely a function of intense competition. In the fast-food context,

patrons might perceive the risks associated with experimenting with unfamiliar QSR

alternatives to be high, especially if they ascribe importance to attributes such as food

quality or taste. As a result, it is unlikely that a large number of consumers will use a

coupon to try an unfamiliar service provider whose service or food quality is unknown.

Thus, a consumer who redeems a quick-service coupon during a promotion period would

be expected to have a high likelihood of making a repeat purchase once the promotion

concludes. The results of this study revealed that coupon redemption did not negatively

affect repeat purchase behavior. Also, consumers who redeemed the coupon were 7.5

times more likely to return to the QSR than non-redeemers. The coupon did not deter

repeat-purchase behavior, as has been found in some package-goods studies. Finally, the

greatest difference between consumers’ responses to coupons in package-goods

purchases and in QSR purchases was in the timing of subsequent purchases. The coupon

did not lengthen the repurchase time for QSRs following redemption, as it often does for

28

package goods. Coupon promotions are virtually a mainstay for QSRs. Consistent with

the findings in package-goods studies, fast-food consumers who have exhibited a strong

preference for a particular brand, as demonstrated through frequent prior purchases, are

most likely to take advantage of a coupon for that brand. This implies that consumers’

prior-purchase behavior provides a good indicator of the likelihood that consumers

respond to a coupon promotion.

In order to have better understanding of consumers’ responses to price promotions

in the service sector, Hu, Parsa, and Khan (2005) explored the role of discount formats

and various discount levels. They found that in service industries, high- and low-end

services are significantly different from each other in preference for type of discount

formats. Price reductions should be stated in dollar format for high-end services whereas

price reductions should be framed in percentage format for low-end services. Moreover,

consumers perceived discount levels differently depending for high- and low-end services.

Consumers perceive price reductions more strongly in high-end services than in low-end

services. In addition, consumers perceive quality attributes significantly lower in high

discount level (50%) for low-end services, compared to high-end services. For low-end

services, high discount level (50%) may lower consumers’ quality perceptions and may

not motivate their purchase intentions. Firms specializing in low-end services should not

place emphasis on large price reductions (50%) to avoid discounting consumers’

perceptions of quality and further affect their purchase intentions.

Furthermore, in high-end services, at low discount levels (5%) consumers prefer

price reductions in percentage format rather than dollar format. Therefore, firms that

provide high-end services should consider small price reductions and offer price

29

reductions in percentage format. Interestingly, consumers perceive discount formats

differently in different industries. In the restaurant industry, consumers prefer

percentage-discount format for fine-dining restaurants and dollar-discount format for

QSR. In the hotel industry, consumers prefer dollar-discount format over percentage

format overall. In addition, in the restaurant industry, consumers prefer percentage format

for low discount level (5%) in fine-dining restaurants and prefer dollar format for low

discount level (5%) in QSR. In the hotel industry, consumers prefer percentage-discount

format for low discount level (5%) in high-end hotels and prefer dollar-discount format

for high-discount level (40% and 50%) in low-end hotels.

2.2 SALES PROMOTION: THE USAGE OF CURRENCY

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 (Nunes and Park, 2003). Yet many everyday exchanges involve a variety

of resources other than money (Donnenworth and Foa, 1974; Nunes and Park, 2003;

Drèze and Nunes, 2004).

Nunes and Park (2003) proposed a concept of incommensurate resources

addressing those individual carriers of wealth or welfare that are difficult to convert into a

single currency or common unit of measurement. In many respects, the notion of

incommensurate resources resembles the concept of compatibility. Previous work on

scale-compatibility biases suggests that the specific nature of a response scale tends to

focus people’s attention on compatible features of a stimulus (Slovic, Griffin and Tversky

1990; Shafir 1995). When two resources are delivered simultaneously, but in different

30

currencies, 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 (Nunes and Park, 2003).

In their study, Nunes and Park examine how consumers evaluate outcomes that involve

different currencies. The results of their study demonstrate that two different resources

(i.e., dollars and miles), which independently were perceived as equivalent, have different

effects when included as an incremental cost based on the currency of the primary

expense. As a result, the study shows that incommensurate resources can affect the

perceived value of an incremental benefit and incremental cost.

In extending the Nunes and Park work, Drèze and Nunes (2004) examined

consumers’ responses for the combined-currency price (dollars and miles). They make a

clear statement that the consumer does not value each unit in a currency equally. In other

words, each mile or dollar spent is not valued equally; the disutility of paying more

dollars and/or miles increases as the payment in that currency increases. By defining a

superior price as either lowering the psychological cost to the customer associated with a

particular revenue objective by the firm or raising the amount of revenue that can be

collected given a particular psychological cost, Drèze and Nunes (2004) showed that both

an interior solution can exist such that consumers prefer a combined-currency price and a

corner solution can also exist in which a price in one of the currencies dominates. Their

study indicates that consumers prefer the combined-currency prices to charges issued in a

single currency for payments in the “relatively low total cost” conditions. This implies

that consumers’ valuation for dollars increases more quickly than for miles as the amount

31

to be spent increases. In addition, the preference to pay primarily in dollars is at the low

end, and the preference to pay primarily in miles is at the high end. In the middle range,

combined-currency prices are most widely favored. Consequently, the evidence in the

Drèze and Nunes study (2004) illustrates how people often prefer to pay prices that

comprise payments in more than one currency. It also shows that consumers may favor

single-currency price because as the payment becomes larger in one currency, the

perceived cost of tracking transactions in more than one currency could become more

challenging.

Currency Usage in Hospitality Industry

Inspired by the airlines' success, most major hotel chains have developed

frequent-guest programs that reward customers for repeat business (McCleary and

Weaver, 1991). These programs aim to enhance the customer's sense of membership in a

unique club with benefits from this membership (e.g. free hotel rooms and gifts). Initially,

the hotel frequency programs were added perks for guests to garner free room nights and

other benefits during stays. These programs serve as a currency exchange to amass airline

frequent-flyer miles, hotel points and other kinds of rewards (Tepeci, 1999).

In a survey of its HHonors members, Hilton hotels learned that 19 percent of them

would not stay at a Hilton without such a membership program. Marriott also reported

that its FGP members spent two and a half times more at Marriott than they did before

joining the program (Seacord, 1996). McCleary and Weaver (1992) found that business

travelers who belonged to FGPs were willing to pay more than nonmembers for a hotel

room and FGP members were more likely to bring their families along to stay in the hotel.

32

Since it relaunched its frequent-guest program in 1993, ITT Sheraton's Club International

has more than doubled its membership base from 725,000 members to nearly 2 million.

The currency of Sheraton's program was changed from points to ClubMiles redeemable

for stays at Sheraton properties, car rentals with Avis, or frequent-flyer miles with its

eight airline partners. In addition, members visiting Sheraton's hotels in Las Vegas and

Tunica County can try the luck of the dice by exchanging ClubMiles for gaming chips.

Some chains offer more unusual rewards. Club Express, the frequent-guest program of

Renaissance Hotels and Resorts, allows its members to earn U.S. Savings Bonds.

Travelodge's Guest Rewards members garner long-distance calling cards for limited free

calling. Hyatt Hotels Corp.'s Gold Passport's program features check-cashing privileges.

The program's top award is a 10-night "Dreamscape" vacation, which includes airline

tickets for two, car rental and meals at any Hyatt hotel and resort (Bond, 1995). Table 1

presents a list of popular hotel rewards programs.

Continued

Table 2.1: Summary of Hotel Rewards Programs

Rewards Program Hotel

Best Western Gold Crown Club Best Western chain of hotels

Hilton HHonors

Hilton, Conrad DoubleTree Embassy Suites Hampton Inn Hilton Garden Inn Homewood Suites Scandic Hotels

33

Table 2.1 Continued

Howard Johnson SuperMiles

Howard Johnson chain of

hotels

Hyatt Gold Passport

Hyatt chain of hotels

Marriott Rewards

Marriott Hotels Resorts and Suites Courtyard by Marriott Fairfield Inn by Marriott Renaissance Hotels Resorts and Suites Marriott Conference Centers SpringHill Suites by Marriott Residence Inn TownePlace Suites by

Marriot

Priority Club

Inter-Continental Hotels and Resorts

Crowne Plaza Hotels and Resorts

Holiday Inn Holiday Inn Express Staybridge Suites

Starwood Preferred Guest

Westin Sheraton Four Points by Sheraton The Luxury Collection St. Regis and W Hotels

Travelodge Miles

Travelodge Travelodge Hotels Travelodge Inn Travelodge Suites and

Thriftlodge

Radisson Gold Rewards

Radisson Hotels worldwide

Wyndham by Request

Wyndham Hotels and Resorts

34

Although various novel currencies have been introduced and applied in the hotel

industry, restaurant business has not commonly used any currency other than money. In

the restaurant industry, the type of restaurant can be categorized into three segments

based on the level of service and the menu prices. According to the National Restaurant

Association, restaurants are categorized as: (1) high-end, fine-dining restaurants with

menu prices of $25 or higher; (2) mid-price, casual-dining restaurants with menu prices

ranging from $6 to $24; (3) quick-service restaurants (QSRs) with menu prices of $5 or

under. Based on the findings of Drèze and Nuness’ study (2004), consumers prefer one

currency price over another based on the amount of payment. The evidence in their study

indicates that the preference to pay primarily in dollars is at the low end, and the

preference to pay primarily in points is at the high end (miles are a type of

frequency-marketing device that could more generally be referred to as “points”);

however, in the middle range, combined-currency prices are most widely favored.

Although the distinctions in the menu prices of three restaurant segments are not

significant, the preference of currency usage may still be affected by different restaurant

segments. Thus, the next hypotheses:

H1: While dining out, consumers are more likely to pay with (a) single currency –

points- only – at high-end restaurants, (b) combined-currency – dollars and

points – at mid-priced restaurants, and (c) single currency – dollars- only – at

low price restaurants.

35

2.3 PERSONALITY TRAITS

The preferences of currency usage may be influenced not only by external but also

by internal factors such as personality traits of consumers. Interest in the relationship of

personality variables and consumer behavior has existed since the importance of

marketing was first recognized. Although the term “personality” has different meanings

to different people, one definition is that of a set of characteristics or traits that are

relatively enduring and differentiate one person from another (Guilford, 1959). An

advantage of the trait approach to personality is that traits can be objectively measured

with standard psychometric instruments and the resulting scores used to uncover

trait-performance relationships. Consumer behaviorists have attempted to link personality

traits and market behavior for the last 40 years on the assumption that this knowledge

would be useful in devising marketing strategy. This effort has often produced equivocal

results (Kassarjian and Sheffet, 1991). Some studies find strong relationships, some weak

ones, and some none at all.

Two personality variables have been used in the context of theoretical frameworks

and seem to offer a great deal of promise in understanding consumer behavior (Haugtvedt,

Petty, and Cacioppo, 1992). These personality variables – need for cognition (Cacioppo

and Petty, 1982) and self-monitoring (Snyder, 1974) – are useful for understanding

consumer behavior because they are closely linked with many theoretical frameworks.

36

Need for Cognition

Need-for-cognition is a well established and often-used individual-difference

construct investigated in over 100 empirical studies (Cacioppo et al., 1996). Need for

cognition refers to an individual’s tendency to engage in and enjoy effortful cognitive

endeavors (Cacioppo and Petty, 1982). The notion of such a disposition was first

researched by Cohen, Scotland, and Wolfe (1955), who suggested that individuals

differed in their “need to understand and make reasonable the experiential world” and

called this individual difference the need for cognition. Murphy (1947) described a

similar tendency as characterizing “thinkers,” for whom he suggested it was “fun to

think”. Research on need for cognition suggests that this characteristic is predictive of the

manner in which people deal with tasks and social information. Differences in need for

cognition represent differences in people’s chronic tendencies to engage in and enjoy

effortful thinking. Thus, the kinds of effects associated with need for cognition should

generally mirror the kinds of effects found for situational factors influencing motivation

to think (Cacioppo and Petty, 1982). Need for cognition is not conceptualized as a level

of intellectual ability, but rather as a relative proclivity to process information (Cacioppo

et al., 1996).

The need-for-cognition scale was formally developed and validated by Cacioppo

and Petty (1982), who suggested that it “taps individuals’ tendency to organize, abstract

and evaluate information”. Cacioppo and Petty (1982) argued that individuals who

possess high need for cognition are more highly motivated to think about the given

information than individuals with low need for cognition. In other words, individuals

with high need for cognition are viewed as cognitive spenders, report greater enjoyment

37

of complex tasks (Cacioppo and Petty, 1982, 1984) and are less likely to reduce their

efforts on cognitive tasks in situations where reduction of effort typically occurs (Petty et

al., 1985). Cognitive spenders have more dimensions available to interpret the

environment, are better able to process the large amounts of information conveyed in an

informationally complex message, and are less likely to suffer from information overload

than cognitive misers (Malhotra 1982). Also, in general, cognitive spenders are more

curious, enjoy mental activities, seek out additional stimulus information, differentiate

between strong and weak arguments, and recall more information from an event. In

contrast to cognitive spenders, low need-for-cognition individuals are viewed as cognitive

misers (Taylor, 1981), and they dislike effortful cognitive activities. Such individuals

prefer simple over complex tasks. Cognitive misers are likely to perform effortful

cognitive actions only when such actions are necessary for obtaining desired extrinsic

rewards (Cacioppo and Petty, 1984). In addition, cognitive misers are not characterized

as unable to differentiate cogent from hollow arguments, but rather they typically prefer

to avoid the effortful, cognitive work required to derive their attitudes based on the merits

of arguments presented (Haugtvedt, Petty, and Cacioppo, 1992).

Need for Cognition and Consumer Reactions to Price Promotions

In addition to its frequent use in psychological domains, need for cognition has

been applied in several consumer-behavior studies. Imman, Macalister, and Hoyer (1990)

were the first to examine the relationship between need for cognition and consumers’

reactions to promotion signals. The results of their study demonstrated that for cognitive

misers, promotion signal alone represents a sufficiently significant change in the choice

38

condition to induce a shift in choice behavior toward the promoted brand. For cognitive

spenders, however, a concomitant price cue is needed. This implies that cognitive misers

might employ less complex decision rules or heuristics than do cognitive spenders.

Moreover, Inman, Peter, and Raghubir (1997) examined whether an individual’s need for

cognition moderates the purchase-limit restriction effect. Consumers use restrictions as a

source of information to help them assess a promotion’s value. Folger (1992) suggested

that unavailability functions as a signal regarding the good, thereby making the good

more salient. Similarly, a restriction may act as a heuristic cue that signals deal value

(Inman, McAlister, and Hoyer, 1990) and may prompt consumers to allocate resources to

assess the offer. The results of their study indicated that promoting a brand with

restriction yields an increase in likelihood of purchase for cognitive misers, while

cognitive spenders are unaffected by a restriction. Restrictions appear to have a greater

influence on individuals who have a lower intrinsic preference of the cognitive demands

imposed by information processing.

Chatterjee and Basuroy (1998) investigated the role of need for cognition on

consumers’ reactions to price-matching offers. Cognitive misers are unlikely to devote

much thought to any situation. Hence they are more prone to use price-matching signals

as a heuristic to simplify choice. Cognitive spenders, on the other hand, are more likely to

consider both the competition as well as the collusion aspects of price-matching offers,

and base their choice on more substantive cues. Whereas cognitive spenders are

persuaded by price reduction, cognitive misers are persuaded by discount signals even

when the price of the promoted brands is not actually reduced (Imman, Macalister, and

Hoyer, 1990; Inman, Peter, and Raghubir, 1997). Burman and Biswas (2004) examined

39

the influence of need for cognition on consumer processing of reference prices. Their

study suggested that the cognitive spenders scrutinize the information more and therefore

enter the correction stage to either reject or discount an implausible reference price. On

the other hand, cognitive misers remain in the characterization stage due to their lack of

motivation to assess the information thoroughly and therefore will be more vulnerable to

implausible reference price claims. Hence, cognitive spenders respond favorably to the

plausible high reference-price condition as the savings are higher than in the plausible

low reference-price condition, but reflect greater discernment in the implausible reference

price condition and either disregard the price completely or discount it before making a

decision. Conversely, the attractiveness of the offer to the cognitive misers increases as

the reference price increases, and therefore the implausible reference price will be highly

effective simply because it indicates large savings.

Extending the preceding literature, one can state that currency usage is affected by

the need for cognition. Combined-currency price (e.g., dollars and points) requires

individuals to evaluate the value of each in a currency independently. When comparing

the combined currency to the single currency, individuals need to devote more thought to

combined-currency price than to a single-currency situation. Since need for cognition

appears to be a primary individual-difference variable identified as influencing

motivation to think, need for cognition should also influence individuals’ preference of

currency usage. Cognitive spenders are more likely to engage in and enjoy effortful

cognitive endeavors and prefer complex tasks over simple tasks. Hence, cognitive

spenders may prefer the combined currency compared to cognitive misers. Although

cognitive misers prefer simple to complex tasks, they are likely to perform effortful

40

cognitive actions only when such actions are necessary for obtaining desired extrinsic

rewards (Cacioppo and Petty, 1984). Average consumption by consumers is high at

high-end restaurants (as measured by the average guest check average), compared to the

spending at quick-service restaurants. Thus, cognitive spenders may prefer to use

combined currency at high-end restaurant to maximize their savings. To avoid the

complexity of dealing with two or more currencies, cognitive misers, in contrast, are most

likely to pay with a single currency while visiting restaurants of their choice. The choice

for mode of payment could also be affected by the type of restaurant since guest check

average differs significantly among the three types of restaurants.

H2: While dining out, consumers with a high need for cognition are more likely to

prefer payment with combined currency than cognitive misers.

H3: While dining out, currency preferences of consumers with high and low need for

cognition are affected by the type of restaurant (high, mid and low priced).

Self-Monitoring

Since the time that Snyder (1974) developed the construct of self-monitoring, it has

been one of the most frequently employed individual-difference measures in the field of

personality and social psychology. The self-monitoring construct seems particularly

useful, because this trait reflects the degree to which individuals are influenced by

internal versus external cues. According to Snyder (1979, 1987), people differ in the

extent to which their behavior is susceptible to situational or interpersonal cues, as

opposed to inner states or dispositions. Individuals can be classified into two groups with

regard to their level of self-monitoring. Low self-monitoring individuals are especially

41

sensitive and responsive to inner dealings, attitudes, and beliefs. They view their behavior

to be influenced primarily by internal cues, such as personal beliefs and values. The

behaviors of low self-monitors reflect their feelings and attitudes without regard to

situational or interpersonal consequences of those behaviors (Snyder, 1979; Ajzen et. al.,

1982). Low self-monitors are conceived as thinking of themselves as “rather principled

beings” whose behavior flows from internal affective and personality dispositions and

who lack either the social skills or the perceptual sensitivity (or both) to mold their

behavior to situational demands (Snyder and Kendzierski, 1982).

In contrast, high self-monitors are much less sensitive to internal beliefs and values.

Instead, they view their behaviors as stemming primarily form a pragmatic view of what

external, situational cues define as socially appropriate action (Snyder, 1974). High

self-monitors are seen as being sensitive to cues as to the proper self-presentation in a

given situation and are highly capable of translating these perceptions into normatively

appropriate behavior. Thus, as originally conjectured by Snyder, at the fundamental core

of self-monitoring is unidimensional continuum ranging from a primary concern with

external sources of identity to an orientation toward internal sources of identity.

Studies of self-monitoring show that anticipated future interaction induce the

“situationally guided” high self-monitors to become even more attentive to situational

cues when deciding how to act while prompting low self-monitors to rely even less on

situational cues and more on personal thoughts and evaluations. Because high

self-monitors are easily deflected by situational influences and behave in anticipation of

consequences, their behaviors are likely to be inconsistent with their previous attitudes. In

contrast, low self-monitors, whose behaviors reflect their feelings and attitudes without

42

regard to situational or interpersonal consequences, could be expected to exhibit

substantial attitude-behavior correspondence (Shaffer, Ogden, and Wu, 1987). Moreover,

high self-monitors can be likened to consummate social pragmatists, willing and able to

project images designed to impress others. They seem to believe in the appearances they

create and to take stock in the fact that these appearances can and do become social

realities. By contrast, low self-monitors seem not only unwilling but also unable to carry

off appearances. They live as if put-on images are falsehoods, as if only those public

displays true to the privately experienced self are principled (Gangestad and Snyder,

2000).

Self-monitoring was first defined by Snyder (1974), who also developed a scale to

measure the construct. Items were chosen in the scale to describe (a) concern with social

appropriateness of one’s self-presentation, (b) attention to social comparison information

as cues to appropriate self-expression, (c) the ability to control and modify one’s

presentation and expressive behavior, (d) the use of this ability in particular situations,

and (e) the extent to which the respondent’s expressive behavior and self-presentation is

cross-situationally consistent or variable (Snyder, 1974). Studies on self-monitoring have

used multi-item self-report measures to identify people high and low in self-monitoring.

The most frequently used instruments are the 25-item, true-false, original

Self-Monitoring Scale (Snyder, 1974) and an 18-item refinement of this measure

(Gangestad and Snyder, 1985; Snyder and Gangestad, 1986). Although multiple content

domains are represented in these measures, expressive control figures prominently.

Indeed, a Self-Monitoring Scale item with one of the highest item-total correlations is “I

would probably make a good actor.” By any criterion, the theory of self-monitoring has

43

been a generative one. The self-monitoring construct has captured the interest of social

psychologists and personologists alike. Empirical tests of hypotheses spawned by

self-monitoring theory have accumulated into a very sizable literature. Several hundred

articles on self-monitoring have appeared since its inception, prompting claims that it “is

an important construct that promises social psychologists much in the way of explanatory

leverage” (Lennox and Wolfe, 1984) and that the Self-Monitoring Scale “is one of the

most popular measures to be introduced in recent years” (Briggs and Cheek, 1988).

Self-Monitoring and Consumer Behavior

There is a substantial body of empirical work on the link between self-monitoring

and consumer behavior (DeBono, 2000). Numerous studies indicate that the

self-monitoring construct appears reliably to identify individuals whose attitudes serve

either predominantly social-adjustive or value-expressive functions (DeBono, 1987;

Kristiansen and Zanna, 1991; Bazzini and Shaffer, 1995). As such, it represents a

valuable vehicle for examining questions related to attitude functions. High self-monitors,

as identified by their relatively high score on the self-monitoring scale (Snyder and

Grangestad, 1986), typically try to be the kind of person called for in each situation in

which they find themselves. They tend to be concerned about the image they project to

others in social situations, and they are generally adept at adjusting their

self-presentations to fit differing social and interpersonal considerations of

44

appropriateness. As a consequence of this orientation, high self-monitors often display

marked situational shifts in the images they project to others. In addition, they tend to

judge a product’s quality higher if it is advertised with an image orientation (DeBono and

Packer, 1991).

Low self-monitors, on the other hand, tend to be influenced by advertisements that

stress the performance of the product, in particular the extent to which it operates as

products of that type should. Such “hard-sell” advertisements often highlight the

durability of a product, the high quality of the material or ingredients in the product or, in

case of food products, the good taste of that product. Unlike their highly self-monitoring

counterparts, low self-monitors think more highly of these types of advertisements, are

wiling to pay more for products so advertised, and are more likely to try a product that is

marketed with a hard-sell approach (Snyder and DeBono, 1985). In addition, low

self-monitors rate the quality of products advertised with a quality orientation more

favorably than they would if these same products advertised with more of an image

orientation (DeBono and Packer, 1991). It appears then that low self-monitors’ concerns

with the consistency between what they purport to be and what they actually do is

paralleled by a concern with the consistency between what a product purports to be and

what it actually does. Empirical evidence has shown that high self-monitoring individuals

prefer brands in congruence with social situations while self-image congruence and

utilitarianism dominate the brand preference of low self-monitors (DeBono, 2000; Hogg,

45

Cox and Keeling, 2000). Also, high self-monitors respond more favorably to

status-oriented advertising claims while low self-monitors are more sensitive to the

quality and functional performance of products (Shavitt, Lowrey and Han, 1992; DeBono,

2000).

Shavitt et al. (1992) showed that high self-monitors tended to select social-identity

terms when describing products that could serve social purposes. When creating copy for

multiple-use products, high self-monitors gave social arguments for product purchase

(e.g., the product will make you look better), whereas low self-monitors preferred

utilitarian ones (e.g., the product will work better). Snyder (1987) has suggested that

self-monitoring affects consumer behavior because it is associated with interest in

maintaining a front through the use of props that convey an image of the self to other

people. This interest lends a chameleon-like quality to the high self-monitor who may

appear to be different people in different situations. High self-monitors, more than low

self-monitors, appear to be concerned with physical appearance and body image (Snyder

et al., 1985; Sullivan and Harnish, 1990), are aware of the messages that clothing and

other personal effects send, and can report behaviors that would produce certain

impressions (Snyder and Cantor, 1980). For example, clothing is often used for its

symbolic value (Solomon, 1983) and high self-monitors may be adept at manipulating

self-presentation through clothing. Some research shows that high self-monitoring

females are more likely than their low self-monitoring counterparts to be opinion leaders

in clothing selection and to use clothing to attain social approval (Davis and Lennon,

1985). Theoretically, these clothing choices would be driven by the item’s usefulness in

conveying messages appropriate for different social situations rather than being an

46

expression of private attitudes and feelings. The high self-monitor, more than low

self-monitor, could be expected to be able to describe what to do and wear to assume a

role that is different from the roles he or she usually plays.

Moreover, product and brand choice may reflect differences in concerns for

prestige and appearance among high and low self-monitors. Snyder (1987) reports that,

when high self-monitors were asked to judge the quality of either a sporty Pontiac Fiero

or a boxy Volkswagen Rabbit on the basis of car test report and photographs, they gave

more favorable quality ratings to the sporty car. Low self-monitors favored the functional

Volkswagen and seemed to believe that a flashy appearance could mask hidden flaws. In

addition, they tended to believe that generic products were as good as name-brand

products. Becherer and Richard (1978) indicated that self-monitoring acts as a

moderating variable that increases the ability of personality traits to predict brand choice.

The strongest moderating effect appeared among low self-monitors. The low

self-monitors’ personality traits, measured with a standard personality test (the California

Personality Inventory), predicted brand choice better than did high self-monitors’ traits.

These results were interpreted in the light of the low self-monitor’s tendency to remain

true to his or her internal self-image and not to exhibit situationally variable behavior to

the same degree as a high self-monitor.

Individuals’ preferences of payments (currency usage) may also be influenced by

self-monitoring. High self-monitors view their behaviors as stemming primarily from a

pragmatic view of what external and situational cues define as socially appropriate action

and use these cues as guidelines for monitoring their own verbal and nonverbal self

presentation (Snyder, 1979). Since combined-currency price is a signal of price discount,

47

high self-monitors may be less likely to use it. In contrast, high self-monitoring

individuals may be more likely to choose single currency to show their social status.

Even the nonmonetary currencies such as points or miles are a form of promotions; on

the other hand, they also deliver the images of loyal customers who are highly valued by

the organization. Hence, high self-monitors may prefer to use the single currency

compared to low self-monitors.

H4: While dining out, high self-monitoring consumers are more likely to pay with a

single currency than low self-monitoring consumers.

Impression Management

There are numerous ways in which to define impression management, yet at the

center of any of these is the recognition that people’s comprehension of a phenomenon

can be directed by others and their attempts to frame one’s perception (Fisk and Grove,

1996). Impression management refers to the process by which individuals attempt to

control the impressions others form of them. Because the impressions people make on

others have implications for how others perceive, evaluate, and treat them, as well as for

their own views of themselves, people sometimes behave in ways that will create certain

impressions in others’ eyes (Leary and Kowalski, 1990). Schlenker (1980) identifies

impression management as “the conscious or unconscious attempt to control images that

are real or imagined in social interactions”. Tedeschi (1981) stated that what people do

and say frequently represents attempts to create desired impressions on others. People are

fairly sensitive to the social significance of their conduct and behaviors and are motivated

to create desirable social identities in their interpersonal encounters (Tetlock and Mansted,

48

1985). Baumeister (1995) postulated that the self is an interpersonal tool; hence, people

become concerned with managing the impressions they create on others and fashion a

self that will bring them social approval and acceptance. Tedlock and Mansted, (1985)

conjectured that examples of impression management and strategic self-presentation are

ubiquitous in our society and range from our social gatherings and the cars we drive to

even the clothing we wear.

Ratner and Kahn (2002) indicated that individuals incorporate more variety in

hedonic choices (in food contexts in the present studies) to make a favorable impression

on others. Impression-management concerns lead people to choose variety: specifically,

they choose variety because they think it will convey a favorable image to others.

Moreover, previous research (Zimbardo, 1970; Diener,1980) has shown that individuals

adhere more to social norms about what constitutes appropriate behavior when their

behavior is identifiable than when it is anonymous. In laboratory experiments,

participants wearing name tags, who are referred to repeatedly by name, reveal personal

information about themselves to other participants, or have their behaviors known to the

other participants engage in more socially desirable behaviors. When anonymous,

people’s inhibitions against performing deviant behaviors are relaxed. Outside of the lab,

consumers have also been shown to act in more socially desirable ways when those

behaviors are identifiable rather than anonymous. For example, in one naturalistic study,

young consumers were more likely to steal Halloween candies when they were

anonymous than when they provided individuating information (Diener, et al., 1976).

49

Research on reference-group influences suggests that a crucial factor that

influences the salience of impression management concerns the nature of the salient

reference group (such as dining company). Bearden & Etzel (1982) found that consumer

purchases are not only a result of personal decision, but also an interaction of influence of

reference groups. These authors reported that the conspicuousness of a product is

positively related to its susceptibility to reference-group evaluation. Also, an individual’s

self-esteem can be enhanced through ownership and consumption of products typically

associated with an admired person or group or what we refer to as the aspiration group. In

a restaurant context, Stayman and Deshpande (1989) found that consumers’ menu

choices were affected by their dining companions, with menu items consistent with the

diner’s ethnic background more likely to be selected when dining with parents than with

business associates. Similarly, consumer preferences for currency usage may be affected

by the diner’s expectations of the attributions of those with whom s/he is dining; i.e., is

the use of “points” viewed as the mark of a “cheap” or a “smart” diner.

When points (either solely or in combination with dollar) are a signal of price

discount, paying with points may be viewed as a indicating that the diner is “cheap” when

dining with a higher-status recipient (e.g., boss). On the other hand, while dining with an

equal-status companion (e.g., friend), points (either solely or in combination with dollar)

may contribute to the conveyance of the impression of a “smart” diner who gets the most

for his/her money. When dining alone, impression management, which is relevant only in

a social-relations context, becomes unnecessary; the diner’s individual financial

motivations would face no competition from social demands, leaving him or her free to

reap the financial rewards of paying with points without regard to the impression it may

50

create. Hence, consumers may be less likely to pay with points (either solely or in

combination with dollar) while dining with a higher-status recipient than while dining

with an equal-status companion or alone.

H5: While dining out, currency preferences are affected by the dining context, such

that payment is more likely to occur with (a) dollars-only when dining with a

higher-status companion and (b) points-only when dining with an equal-status

companion or when dining alone.

Self-Monitoring and Impression Management

There are individual differences in the extent to which people are willing to adapt

their behavior to fit situational demands (e.g., Snyder 1987; Bearden, Netemeyer, and

Teel 1989). Snyder’s (1979) review of the literature reveals support for many predicted

differences between low and high scorers on the self-monitoring scale. In comparison to

low scorers, high scorers are more likely to adapt their behavior to the normative

requirements of particular situations, more likely to seek out information on what others

consider appropriate behavior, and less likely to rely on internalized standards as guides

to behavior. Overall, the behavior of high self-monitors appears to be primarily under the

control of impression-management concerns. This evidence suggests that the

self-monitoring variable should be useful in assessing the comparative validity of

impression management. Those effects mediated by impression management processes

should occur much more strongly among high self-monitors (Tetlock and Manstead,

1985).

51

Ratner and Kahn (2002) provided empirical support for the proposition that

individuals sometimes switch away from their favorites in order to make a favorable

impression on others. The finding indicated that the public/private difference is driven by

people’s desire to be evaluated favorably by others: an individual difference in desire to

alter one’s behavior to fit social situation influenced levels of variety seeking in predicted

ways, such that high-self monitors choose more variety than low-self monitors when

trying to make others think they made an interesting (rather than a rational) decision.

High self- monitors may seek variety in public to convey an image to others that they are

interesting and creative people. Low self- monitors, on the other hand, should be less

willing to change their behaviors simply to please or entertain others. However, if low

self- monitors are induced in public to make a thoughtful, rational decision, and they

believe that choosing to incorporate a varied set is a rational decision, they may be

induced to choose variety in public. Hence, if consumers feel pressure to choose variety

in public, then people will likely observe considerable variety in the consumer choices

made by others (Ratner and Kahn, 2002).

Njite and Parsa (2004) investigated the moderating role of self-monitoring on price

misrepresentation. The results of their study show that it is possible for individuals to

misrepresent price and purchase information in order to create favorable impressions

upon others. High self-monitoring individuals tended to misrepresent the information

more than low self-monitoring individuals. A deliberate concealment of a discount should

contribute to the conveyance of the impression of higher prestige, hence acceptance

within a desired perceived higher-status referent group. Due to their characteristics on the

self-monitoring scale, it is predicted that the high self-monitoring consumers are more

52

likely to conceal having purchased a product at a discount. However, the

misrepresentation is greater when communicating with a higher-status recipient as

compared to an equal-status group. Misrepresentation enables the communicator to be

identified more positively, having a prestige, and therefore to be affiliate with an aspired

higher-status group (Sengupta, et. al., 2002). On the other hand, low self-monitors are

less likely to conceal having purchased a product at a discount whether communicating

with a higher-status recipient or equal-status group.

Self-monitoring may yield different effects for different types of companions (e.g.,

friends and family versus someone the diner wants to impress like a date or the boss).

Since the effects mediated by impression-management processes should occur much

more strongly among high self-monitors, high self-monitors may be concerned that a

higher-status dining companion (e.g., boss) would perceive use of points (either solely or

in combination with dollars) as “cheap.” In contrast, there would be no basis for such an

effect to emerge if the diner were a low self-monitor or is s/he were dining alone:

H6: While dining out, currency preferences across dining contexts are moderated by

self-monitoring, such that high self-monitors are more likely than low

self-monitors to pay with dollars-only when dining with a high-status

companion.

Since points (either solely or in combination with dollars) could be a signal of price

discount, use of points at high-end restaurants may be viewed as a “smart” choice by

some, whereas use of points at quick-service restaurants may be viewed as a “cheap”

option. Since the guest average check at high-end restaurants is higher, paying with

points could save much more. Thus, points may be viewed as a “smart” choice at

53

high-end restaurants. However, at quick-service restaurants the average guest check is

much lower; paying with points may save only a few dollars. Therefore, points may be

considered as “cheap” option at quick-service restaurants. According to Snyder (1979),

high self-monitors view their behaviors as stemming primarily from a pragmatic view of

what external and situational cues define as socially appropriate action and use these cues

as guidelines for monitoring their own verbal and nonverbal self presentation. High

self-monitors may be concerned that use of points (either solely or in combination with

dollars) would be perceived as “smart” at high-end restaurants, whereas use of points

would be perceived as “cheap” at quick-service restaurants. However, there would be no

basis for such an effect to emerge for low self-monitors. Alternatively, restaurant type

may have an opposite effect. A high self-monitor at a fine-dining establishment may not

want to dilute the impression that s/he is sparing no cost to entertain a high-status

companion by paying with points. Taking such a person to a QSR, on the other hand,

may eliminate the possibility of any such impression from the moment the party enters a

QSR unit. Any “impression” from such a choice would focus more on efficient use of

time (e.g., a quick bite to eat and then back to work). Payment by points may be further

evidence of efficiency (efficient use of monetary resources). Which (if either) of these

outcomes may arise is an empirical question. In either case, the effects of self-monitoring

on currency preference may be moderated by the restaurant segments. Rather than stating

competing predictions, H7 takes the form of a non-directional moderating prediction:

H7: While dining out, currency preferences of high- and low-self-monitoring

consumers are affected by the type of restaurant (high, mid and low priced).

54

2.4 Conceptual Model

Figure 2.1 presents a proposed model, focused mainly on consumers’ currency

preferences. The proposed model incorporates the key variables discussed above such as

personality traits (need for cognition and self-monitoring), restaurant segments, and

dining companions. The present study retains the following hypotheses in the proposed

model. This study hypothesizes that restaurant segments affect consumers’ currency

preferences directly. Moreover, need for cognition has direct impact on currency

preference, and this relationship is also affected by restaurant segments. Furthermore,

self-monitoring also has direct impact on currency preference, and this relationship is

influenced by restaurant segments and dining companions.

55

Figure 2.1: The Effects of Need for Cognition, Self-Monitoring, Dining Companion, and Restaurant Segment on the Choice of Currency in the Restaurant Industry

Currency - $ - $ + Points - Points

Self-Monitoring - High - Low

H7

H1

H4

H2 H3

Need for Cognition - High - Low

Dining Companion - Boss - Friend - Alone

H5

H6

Restaurant Segment - High-end - Mid-price - QSR

55

56

Chapter Summary

This chapter provides an in-depth literature review on the concept and theory of

sales promotion from a consumer perspective, and discusses a specific type of sales

promotion – the usage of currency – and its relationship with consumer behaviors and

applications. Finally, it addresses the theoretical development of the personality traits and

consumer preferences for currency usage. Based on the theory and related research, seven

hypotheses were offered in the study. The experimental and statistical methods used to

test the hypotheses are presented in the next chapter.

Restaurant Types and Preference for Currency Usage:

H1: While dining out, consumers are more likely to pay with (a) single currency –

points - at high-end restaurants, (b) combined-currency- dollars and points –

at mid-priced restaurants, and (c) single currency – dollars - at low price

restaurants.

Personality Types and Preference for Currency Usage:

Need for Cognition:

H2: While dining out, consumers with a high need for cognition are more likely to

prefer payment with combined currency than cognitive misers.

H3: While dining out, currency preferences of consumers with high or low need for

cognition are affected by the type of restaurant (high, mid and low priced).

Self-Monitoring:

H4: While dining out, high self-monitoring consumers are more likely to pay with a

single currency than low self-monitoring consumers.

57

H5: While dining out, currency preferences are affected by the dining context, such

that payment is more likely to occur with (a) dollars-only when dining with a

higher-status companion and (b) points-only when dining with an equal-status

companion or when dining alone.

H6: While dining out, currency preferences across dining contexts are moderated by

self-monitoring, such that high self-monitors are more likely than low

self-monitors to pay with dollars-only when dining with a high-status

companion.

H7: While dining out, currency preferences of high and low self-monitoring

consumers are affected by the type of restaurant (high, mid and low priced).

58

CHAPTER 3

METHODOLOGY

This study was designed to explore the relationship between individual differences

(personality traits), restaurant segments, and consumers’ preference for currency usage. A

purpose of this study was to examine the effect of personality traits – need for cognition

and self-monitoring – on consumers’ preference for currency usage. The second purpose

of the study was to determine whether differences in restaurant segments were related to

consumers’ currency preferences. The chosen two experimental designs involve

measuring the dependent variable (currency preference) and blocking variables (need for

cognition and self-monitoring) and randomly assigning subjects to the independent

variables (restaurant type and dining context). Seven hypotheses are formulated to test

the research question, whether individual differences and restaurant segments would

influence consumers’ preference of the currency usage.

Experimental Design

The experimental method was chosen for this study because an experimental

design permits the inference of causation and allows the researcher to make a small

number of observations, but infer facts that would normally require an exhaustive set of

59

observations. Subjects are treated identically, except for the features that are different.

Thus observed differences in behavior can be unambiguously attributed to critical

differences among treatment conditions (Campbell and Stanley, 1963; Keppel, 1991).

Also, careful design helps the researcher to maximize the information gleaned from a

given number of experiments and minimize the number of studies required to validate (or

invalidate) a hypothesis. Although the survey method provides broad portraits of large

groups and large amounts of data at low cost, it is not able to test cause-and-effect

relationships. However, experiment design provides enough control to test cause/effect

relationships between variables by manipulating the independent variables and observing

the effect of the manipulation on the dependent variables (Keppel, 1991).

In order to examine the effect of personality traits and restaurant segments on

consumers’ preference for the currency usage, need for cognition (high vs low) and

self-monitoring (high vs. low) served as measured variables, with restaurant segments

(fine dining/causal dining/quick service restaurants) and dining context (boss/friend/alone)

as manipulated variables. Two 2 x 3 x 3 between-subject experimental designs are chosen:

(a). 2 Need for Cognition x 3 restaurant segments x 3 dining contexts and (b). 2

Self-Monitoring x 3 restaurant segments x 3 dining contexts, as depicted in the following

table:

60

Independent Variable Restaurant Segment Dining Companion

High Need for Cognition Fine-Dining Restaurant Boss Friend

Alone

Casual-Dining Restaurant Boss

Friend

Alone

Quick Service Restaurant Boss

Friend

Alone

Low Need for Cognition Fine-Dining Restaurant Boss Friend

Alone

Casual-Dining Restaurant Boss

Friend

Alone

Quick Service Restaurant Boss

Friend

Alone

High Self-Monitoring Fine-Dining Restaurant Boss Friend

Alone

Casual-Dining Restaurant Boss

Friend

Alone

Quick Service Restaurant Boss

Friend

Alone

Continued

Table3.1: Experimental Design to Assess Consumer Preferences for Currency Usage

61

Table 3.1 Continued

Independent Variable Restaurant Segment Dining Companion

Low Self-Monitoring Fine-Dining Restaurant Boss Friend

Alone

Casual-Dining Restaurant Boss

Friend

Alone

Quick Service Restaurant Boss

Friend

Alone

The Sample Frame

Population

The population targeted for this study was individuals over 18 years of age who

have experience with fine-dining, casual-dining, and quick-service restaurants. Students

in The Ohio State University were selected to represent the targeted population.

Sampling

The experiment employed a between-subjects design. It involved four independent

variables (need for cognition, self-monitoring, restaurant segment, and dining context)

and one dependent variable with three categories (dollars-only, dollars and points, and

points-only). According to Hosmer and Lemeshow (2000), the minimum number of cases

needed per independent variable is 10. Thus, the minimum number of subjects is180 ({2

x 3 x 3} x 10 = 180). In the present case, a convenience sample of 471 subjects was

selected from the target population, which exceeds the minimum requirements per cell. It

62

is a convenience sample and limitations of non-probabilistic sampling apply here. Also,

since the current study is more focused on tapping the basic psychological processes than

generalizations, a student sample is appropriate (Grewal, et al., 2000).

Data Collection

Several undergraduate classes offered at different class times during spring 2005

were used to collect the partial responses. The researcher's being physically present

during data collection offers many advantages: the researcher is better able to explain the

study, answer any questions immediately, administer the study protocol under controlled

conditions, and ensure that missing data are minimized. Another strategy of data

collection involved the use of “snowball” samples that rely on referrals from initial

subjects to generate more subjects and attempt to capture respondents who share

particular characteristics by asking those who meet the eligibility criteria to suggest

friends or neighbors who do as well (Atkinson and Flint, 2001). The defining feature of a

snowball sample is that it gathers individuals into a sample who have some acquaintance

with those who are already participating in the process.

Experimental Procedures

This study was conducted during class time starting at the beginning of the class.

Different undergraduate classes at different class time during an academic term were used

to collect responses over a period of two weeks. Direct administration was used in this

study for students enrolled in particular classes. The questionnaires were filled out in

class rooms with the researchers as the proctors. In phase I, all respondents were expected

63

to complete Snyder and Grangestad’s (1986) Self-Monitoring Scale and Cacioppo, Petty,

and Kao’s (1984) Need for Cognition Scale. Respondents were also required to answer a

series of questions related to their prior experiences in different currencies and

demographic information. In phase II, participants were asked to complete a

scenario-based, paper-and-pencil study in which they were asked to imagine that they

were paying for dinner with either dollars, reward points or the combination of two of

them. They were told to read a scenario in their booklet and to proceed through the

questions that follow at their own pace. Participants were subsequently instructed to

assume that they possess enough points and money to accommodate whichever pricing

option they prefer. Immediately following their reading of the presented scenario,

participants were asked to indicate on semantic-differential scales their preferences for

each of the three currencies (dollars-only, dollars and points, and points-only).

INSTRUMENTATION

Independent Variables

Need for Cognition

The Need for Cognition Scale (NCS), containing 18 statements on a five-point

scale, was used to measure the need for cognition measuring the tendency to engage in

and enjoy effortful cognitive activity (Cacioppo, Petty, and Kao, 1984). Need for

Cognition has been considered to be a rather stable individual difference that would

motivate individuals to elaborate issue-relevant arguments, regardless of topic or

situation. Cacioppo and Petty (1982) developed the Need for Cognition Scale by

generating a pool of opinion statements that appeared relevant to the hypothetical

64

construct. After removing ambiguous scale items, the remaining 45 items were tested on

groups assumed to differ in terms of their need for cognition. Statements that failed to

discriminate between these two groups were removed, resulting in the 34-item scale. An

abbreviated 18-item version of the scale (Cacioppo, Petty, and Kao, 1984) was chosen

because it was shown to tap the construct with comparable validity and greater efficiency

and ease of administration (Cacioppo, et al., 1996). This scale consists of 18

semantic-differential scales wherein subjects rate the extent to which various statements

are characteristic of themselves. Each item on this instrument was rated on a scale

ranging from 1 (not at all like me) to 5 (very much like me). Half of these items were

worded such that the endorsement indicated a greater need for cognition (e.g., “I usually

end up deliberating about issues even when they do not affect me personally”), whereas

the other half were worded such that the endorsement indicated a lesser need for

cognition (e.g., “I only think as hard as I have to”) (Appendix B). To calculate the

need-for-cognition scores, the nine items were reversed scored, and then all eighteen

items were summed. Respondents were split into high- and low-NFC groups based on a

median score split.

Self-monitoring

The personality trait of self-monitoring was assessed with a scale that is widely

used to measure the construct, Snyder’s (1987) Self-Monitoring Scale. The scale contains

18 true/false items scored in the direction of high self-monitoring so that higher scores

indicate higher self-monitoring (Appendix B). The scale was chosen because it has

greater internal consistency than the original 25 item SMS designed by Snder (1974).

65

Snyder constructed the revised scale from the earlier 25-item measure by choosing items

with at least a 0.15 correlation with the latent self-monitoring variable reflecting social

sergeancy, the tendency to be exhibitionistic and extroverted. The reported internal

consistency of the revised version of the Self-Monitoring Scale is approximately 0.70.

Lennox and Wolfe’s (1984) Revised Self-Monitoring Scale (RSMS) was not chosen

because it does not correlate with the original SMS scale and may be measuring a

different construct (Shuptrine, et al., 1990). Some researchers have argued against the use

of the SMS because of the presence of two or three factors (e.g. Wolfe, Lennox, and

Cutler, 1986; Briggs and Cheek, 1988; Lennox, 1988). However, Snyder and Gangestad

(1986) presented a strong argument that a single-person variable does exist and showed

that the full SMS consistently outperformed the factors in prior studies by Snyder. In

numerous studies by Snyder and various associates completed using the 25-item SMS,

the SMS had greater predictive ability than any of the subscales, as indicated by larger

F-values. In extensive validation, the SMS has demonstrated considerable internal

consistency, stability over time, and discriminant validity (Miller and Thayer, 1989).

Self-monitoring is traditionally viewed as a dichotomous trait and analyzed by dividing

respondents into high and low self-monitoring groups based on the self-monitoring score

of 10 (Larkin and Pines, 1994). Subjects with self-monitoring scores greater than or equal

to 10 were regarded as high self-monitors, and those with scores less than or equal to 9

were regarded as low self-monitors.

66

Restaurant Segments and Dining Companions

The study requires the participants to respond to one of the three restaurant

segments addressed by the hypotheses (fine-dining, casual-dining, quick-service

restaurants). Additionally, it requires subjects to experience one of the three dining

contexts (boss, friend, alone). Therefore, the development of scenarios involved three

levels of restaurant segments and three levels of dining contexts. Different occasions

were designed to include the different dining contexts in three types of restaurant

segments. In the scenarios, the subject was assumed to pay for herself / himself and the

person who is dining with her/ him. Therefore, the price in each scenario is for two

people. Also, price levels at the three restaurant segments were pretested on a student

sample.

Dependent Variables

The currency preference (dollars/points/dollars and points) is included as the

dependent variable. To assess participants’ preferences of currency usages,

semantic-differential scales anchored with disagree – agree; poor – good; do not prefer –

prefer; and unlikely to pay – likely to pay were used. Responses for these items range

from 1 to 7. These items are as follows:

Item 1: How likely that you agree to pay for this causal-dining experience with the

following choices?

Item 2: Paying for the causal-dining experience with the following choices is good

or bad?

67

Item 3: How do you prefer to pay for this causal-dining experience with the

following choices?

Item 4: How likely that you will pay for this causal-dining experience with the

following choices?

The currency preference is measured using 1 to 7 interval scale for each currency.

The responded scores of four questions for each currency were averaged, and the average

scores for three currencies were compared. The highest score among those three

currencies was considered as the currency that the respondent preferred.

The order of the three currencies (dollars-only, dollars and points, and points-only)

was counterbalanced across the items to avoid an order effect. Also, listing the three

currencies in varying orders required respondents to engage more attention and thought

while making their choices for currency preferences. The measurement of the selected

variables was described in Table 3.2.

DATA ANALYSIS

Analysis of the data is based on the hypotheses formulated from the research

question that motivated this research. The data collected from the participants are

analyzed using the Statistical Package for Social Sciences 12th version (SPSS) and

STATA 8th version. Multinomial Logistic regression was applied to analyze the data and

test the hypotheses for the study. Multinomial logistic regression is used to analyze

relationships between a non-metric dependent variable and metric or dichotomous

independent variables. It compares multiple groups through a combination of binary

68

Variables Measurement

Dependent Variables: Currency Preference:

(Dollars-only) 1 = Yes, 0 = No

Dollars and Points 1 = Yes, 0 = No

Points-only 1 = Yes, 0 = No

Independent Variables: Restaurant Segment

(Fine-Dining) 1 = Yes, 0 = No

Casual-Dining 1 = Yes, 0 = No

QSR 1 = Yes, 0 = No

Need for Cognition

(Low NFC) 1 = Yes, 0 = Other

High NFC 1 = Yes, 0 = Other

Self-Monitoring

(Low SEM) 1 = Yes, 0 = Other

High SEM 1 = Yes, 0 = Other

Companions

(Boss) 1 = Yes, 0 = No

Friend 1 = Yes, 0 = No

Alone 1 = Yes, 0 = No

Notea: The reference category is presented in parentheses

Table 3.2: Measurement of Variables logistic regressions, and allows researchers to analyze the dependent variable which is

categorical variable (discrete not continuous) with more than two possible values

(Hosmer and Lemeshow, 2000). The group comparisons are equivalent to the

comparisons for a dummy-coded dependent variable, with the group with the highest

numeric score used as the reference group. Multinomial logistic regression provides a set

69

of coefficients for each of the two comparisons. The coefficients for the reference group

are all zeros, similar to the coefficients for the reference group for a dummy-coded

variable. Thus, there are three equations, one for each of the groups defined by the

dependent variable. The three equations can be used to compute the probability that a

subject is a member of each of the three groups. A case is predicted to belong to the

group associated with the highest probability. Predicted group membership can be

compared to actual group membership to obtain a measure of classification accuracy

(Hosmer and Lemeshow, 2000).

Assumptions of Multinomial Logistic Regression

Multinomial logistic regression does not make any assumptions of normality,

linearity, and homogeneity of variance for the independent variables. Because it does not

impose these requirements, it is preferred to discriminant analysis when the data does not

satisfy these assumptions. The assumptions of multinomial logistic regression include:

Error terms are assumed to be independent (independent sampling).

Linearity: logistic regression does not require linear relationships between

the independents and the dependent, but it does assume a linear relationship

between the logit of the independents and the dependent.

No multicollinearity: to the extent that one independent is a linear function of

another independent, the problem of multicollinearity will occur in logistic

regression.

70

Expected dispersion: in logistic regression the expected variance of the

dependent can be compared to the observed variance, and discrepancies may

be considered under- or overdispersion (Wright, 1995).

The minimum number of cases per independent variable is 10, using a guideline

provided by Hosmer and Lemeshow (2000).

Interpretation of Multinomial Logistic Regression Model

There are several ways to interpret the multinomial logistic regression coefficients:

the effects on log odds; the effect on odds ratio; and the effect on probability.

The Effect on Log Odds

The logistic regression coefficients show the effects of the independent variables

on the predicted log odds of an event occurring. The logistic coefficients estimate the

additive change in the predicted log odds for a one-unit increase in the independent

variables, controlling for all other independent variables in the model. For categorical

independent variables, a unit change in the variable implies the difference between

membership in the indicator category and membership in the reference or omitted

category. In interpreting the logistic coefficient in terms of the effect on the log odds, the

threshold between negative and positive effect is 0 (Pampel, 2000). The logistic

coefficients estimate the marginal effects of the independent variables on the log odds of

falling into a particular category as opposed to a reference category (Liao, 1994). For

categorical independent variables, the logistic coefficient indicates the difference of logit

among the categories.

71

The Effect on Odds

The exponential of the logistic coefficient provides an estimate of the effect of the

independent variable on the odds of an event occurring. The exponentiated coefficient is

called the odds ratio and represents a multiplicative change in the odds for a one-unit

increase in the independent variable. For categorical independent variables, the

exponentiated coefficient is the odds ratio for those in the indicator category versus those

in the reference category. The exponential of a positive number is greater than 1, and the

odds ratio 1 corresponds to the logistic coefficient 0. An exponentiated coefficient greater

than 1 increases the odds and an exponentiated coefficient smaller than 1 decrease the

odds. The distance of an exponentiated coefficient from 1 in either direction indicates the

size of the effect on the odds for a one-unit change in the independent variable (Pampel,

2000). The exponentiated logistic coefficient is a single summary statistic for the

marginal effect of a given independent variable on the odds, controlling for other

independent variables (DeMaris, 1992). Interpreting the logistic coefficients in terms of

the effect on the odds of an event occurring is an easy and flexible way of interpretation.

The Effect on Probabilities

Based on the logistic coefficients, predicted probability for a given set of values of

the independent variables can be computed. Computing the event probability before and

after a unit change in ith explanatory variable provides the marginal effect of the

explanatory variable on the probability. However, the probability is a function of the

values of all explanatory variables in the model and the marginal effect on the probability

depends on a given set of values of the independent variables. The relationships between

72

the independent variables and the probability of an event occurring are nonlinear and

nonadditive (Liao, 1994; Pampel, 2000). Therefore, in contrast to marginal effect on log

odds, the marginal effect on the probability is not constant (DeMaris, 1992). It is not

possible to represent the marginal effect of a given predictor on the probability for all

cases using a single coefficient. Therefore, interpreting the logistic coefficient in terms of

the marginal effects on the probability is useful to examine a typical case. It is useful to

estimate the probability focusing on one or two interesting independent variables and

setting the values in other variables at their sample means (Liao, 1994). Predicted

probability in multiple-outcome models is more useful than those in binary-outcome

models. The probability represents a more general case because of the flexible number of

response categories (Liao, 1994). Predicted probability in multinomial model also

depends on a given set of values of the independent variables. Thus, predicted probability

is estimated focusing on a single independent variable and setting the value in other

variables at their sample means.

Chapter Summary

This chapter presents the two causal experimental designs and discusses statistical

methods used to test the hypotheses. The independent variables included in this study are

need-for-cognition and self-monitoring, restaurant segments and dining companions. The

dependent variable measures the preferences for three currency usages. The sample used

in the study included different undergraduate classes and snowball sample at The Ohio

State University. Multinomial logistic regression with SPSS and STATA is applied to

73

analyze the data and test the hypotheses for the study. Descriptive profiles of the sample

as well as the results of descriptive analysis and multinomial logistic regression are

discussed in the next chapter. The summary of the hypothesis tests is also presented in

chapter 4.

74

CHAPTER 4

RESULTS

In this chapter, descriptive analyses were used to identify the patterns explaining

consumers’ currency preferences. Frequencies were computed for the independent as

well as the dependent variables, the three currency categories. It also provides the results

of the hypothesis tests. The results from multinomial logistic regression analyses were

used to identity the consumers’ characteristics when using different currencies.

Descriptive Statistics

The respondent pool (n = 471) was recruited from different undergraduate classes

and snowball sample at The Ohio State University. Sample characteristics and the

frequencies for each of the independent and dependent variables are presented overall in

Table 4.1.

Sample Characteristics. In the sample, 43% of the respondents were female, and

about 57% were male. The majority of the respondents (82.1%) were 18-23 years old.

More than two-thirds of the respondents (72.4%) were employed. The mean of total

monthly spending was about $670 and the mean of monthly spending on food was about

$186.

75

The currency preferences for male subjects are similar to those for females. About

half of male (52.5%) and female (51.7%) preferred points-only. Subjects over 26 years

old had higher preference for points-only (73.0%) than those in other age groups. Also,

the preferences for points-only for employed respondents (55.4%) were higher than those

for unemployed respondents (43.1%). Interestingly, subjects with total spending under

$520 and spending in food under $100 had lower preference (41.9% and 41.2%,

respectively) for the points-only option than those in higher-expenditure groups.

Currency Preference. Dependent variables include three categories of currency

preferences: dollars-only, dollars and points, and points-only. Table 4.1 shows the

frequency of preference the type of currency. About 27% of the 471 cases preferred

dollars-only, 20.2% preferred combined-currency (dollars and points), and 51.8%

preferred points-only (Figure4.1).

0%

10%

20%

30%

40%50%

60%

Dollars Only Dollars &Points

Points Only

Figure 4.1: Preferences for Three Types of Currencies

76

Restaurant Segments. According to Figure 4.2, the patterns of currency preferences

were similar across in three restaurant segments (fine-dining, casual-dining, and

quick-service restaurant). Generally, more than half of the respondents preferred

points-only across three restaurant segments, and the respondents least preferred the

combined-currency: dollars and points.

In fine-dining restaurants, 51.8% of the respondents preferred points-only, 27.4%

of the respondents preferred dollars-only, and 20.7% preferred the combination of dollars

and points. Similarly, in casual-dining restaurants, 50.3% of the respondents preferred

points-only, 29.1% of the respondents preferred dollars-only, and 20.5% preferred the

combination of dollars and points. The respondents’ preferences for dollars-only were

slightly higher than in the other two restaurant segments. In quick-service restaurants, the

respondents’ preferences for points-only were slightly higher than fine-dining and

casual-dining restaurants, with 53.8% of the respondents preferring points-only, 26.9% of

the respondents preferring dollars-only, and 19.2% preferring a combination of dollars

and points. In summary, consumer preference across the three restaurant segments is

reasonably consistent.

77

0%

10%

20%

30%

40%

50%

60%

Fine-Dining Casual-Dining QSRDollars OnlyDollars & PointsPoints Only

Figure 4.2: Currency Preferences in Three Restaurant Segments

Need for Cognition. The mean score in this sample was 58.38, with scores ranging

from 18 to 99. Subjects were split into high and low need-for-cognition groups based on

the median (score of 58) split. According to Figure 4.3, the preferences for three types of

currencies for high need-for-cognition respondents are similar to those for low need for

cognition respondents. Among the high need-for-cognition, 52.8% preferred points-only,

28.1% preferred dollars-only, and 19.1% preferred the combination of dollars and points.

For low need-for-cognition respondents, 51.3% of the respondents preferred points-only,

27.5% preferred dollars-only, and 21.2% preferred the combination of dollars and points.

78

0%

10%

20%

30%

40%

50%

60%

High NFC Low NFC Dollars OnlyDollars & PointsPoints Only

Figure 4.3: Currency Preferences and Need for Cognition

Self-Monitoring. Consistent with past research on self-monitoring (see Larkin and

Pines, 1994), subjects with self-monitoring scores greater than or equal to 10 were

regarded as high self-monitors, and those with scores less than or equal to 9 were

regarded as low self-monitors. For self-monitoring, 31.3% of the high self-monitors and

24.1% of the low self-monitors prefer to pay with dollars-only. The preference for usage

of dollars-only was higher for high self-monitors than for low self-monitors (Figure 4.4).

On the other hand, the preference for usage of points-only was higher for low

self-monitors than for high self-monitors. In the current sample, 54.8% of the low

self-monitors and 49.4% of the high self-monitors prefer to pay with points-only.

Moreover, 21.2% of the low self-monitors and 19.3% of the high self-monitors preferred

the combination of dollars and points.

79

0%

10%

20%

30%

40%

50%

60%

High SEM Low SEM Dollars OnlyDollars & PointsPoints Only

Figure 4.4: Currency Preferences and High and Low Self-Monitoring

Dining Companions. For companions, 46.1% of the respondents who dine with the

boss while 19.5% of the respondents who dine with a friend and 16.1% of the

respondents who dine alone preferred dollars-only. According to Figure 4.5, the

preferences for paying dollars-only while dining with the boss were higher than while

dining with a friend or alone. Also, the preferences for usage of the combination of

dollars and points while dining with a friend (23.5%) were higher than while dining with

the boss (18.0%) or while dining alone (19.4%). On the other hand, the preferences for

paying with points-only while dining alone (64.5%) were much higher than while dining

with the boss (35.9%), and slightly higher than while dining with a friend (57.0%).

80

0%

10%

20%

30%

40%

50%

60%

70%

Boss Friend Alone Dollars OnlyDollars & PointsPoints Only

Figure 4.5: Currency Preferences for Companions Using Three Different Currency Types

81

Table 4.1: Descriptive Statistics by the Type of Currency

Currency Preference Dollars-

Only Dollars & Points

Points- Only

Total Sample

Overall Currency Preference

n=129 (27.4%)

n=95 (20.2%)

n=244 (51.8%)

n = 471 (100%)

n (%) n (%) n (%) n (%) Demographic Variables

Gender Male 54 (27.0%) 41 (20.5%) 105 (52.5%) 200 (42.5%)

Female 77 (28.4%) 54 (19.9%) 140 (51.7%) 271 (57.5%)Age

18-20 27 (20.6%) 38 (29.0%) 66 (50.4%) 131 (27.7%) 21-23 79 (30.9%) 46 (18.0%) 131 (51.2%) 256 (54.4%) 24-26 18 (38.3%) 8 (17.0%) 21 (44.7%) 47 (10.0%)

26 or older 7 (18.9%) 3 (8.1%) 27 (73.0%) 37 (7.9%) Employment

Yes 91 (26.7%) 61 (17.9%) 189 (55.4%) 341 (72.4%) No 40 (30.8%) 34 (26.2%) 56 (43.1%) 130 (27.6%)

Monthly Spending Low (under $520) 42 (28.4%) 44 (29.7%) 62 (41.9%) 148 (31.4%)

Middle ($521-$770) 43 (28.3%) 23 (15.1%) 86 (56.6%) 152 (32.3%) High (over $770) 45 (26.5%) 28 (16.5%) 97 (57.1%) 170 (36.1%)

Food: Low (under $100) 24 (23.5%) 36 (35.3%) 42 (41.2%) 102 (21.7%)

Middle ($101-$200) 47 (30.9%) 25 (16.4%) 80 (52.6%) 152 (32.3%) High (over $200) 60 (27.6%) 34 (15.7%) 123 (56.7%) 217 (46.1%)

Independent Variables

Restaurant Segment Fine-Dining 45 (27.4%) 34 (20.7%) 85 (51.8%) 164 (34.8%)

Casual-Dining 44 (29.1%) 31 (20.5%) 76 (50.3%) 151 (32.1%) QSR 42 (26.9%) 30 (19.2%) 84 (53.8%) 156 (33.1%)

Need for Cognition High NFC 66 (28.1%) 45 (19.1%) 124 (52.8%) 235 (49.9%) Low NFC 65 (27.5%) 50 (21.2%) 121 (51.3%) 236 (50.1%)

Self-Monitoring High SEM 76 (31.3%) 47 (19.3%) 120 (49.4%) 243 (51.6%) Low SEM 55 (24.1%) 48 (21.1%) 125 (54.8%) 228 (48.4%)

Companions Boss 77 (46.1%) 30 (18.0%) 60 (35.9%) 167 (35.5%)

Friend 29 (19.5%) 35 (23.5%) 85 (57.0%) 149 (31.6%) Alone 25 (16.1%) 30 (19.4%) 100 (64.5%) 155 (32.9%)

82

Multinomial Logistic Regression Analysis

Personality types: need for cognition and self-monitoring, dining companions,

restaurant segments, and demographic variables related to the preference of currency

usage were examined using multinomial logistic regression analysis. Among the three

categories of currencies, the single currency dollars-only was the reference category for

the dependent variable. The likelihood of preference for each currency is compared with

the likelihood of preference of dollars-only. Table 4.2 and Table 4.3 present the results of

the multinomial logistic analysis of the demographic variables and the independent

variables associated with the preference for dollars-only, the combination of dollars and

points or points-only. Table 4.2 shows how the likelihood of preferring the

combined-currency (dollars and points) differs from the likelihood of preferring

dollars-only. And Table 4.3 shows the comparison of the likelihood of preferring

points-only with the likelihood of preferring dollars-only.

Demographic Variables

Gender, age and employment have no significant effect on currency preference

when comparing the preference for the combined-currency (dollars and points) to the

preference for dollars-only (Table 4.2). However, when comparing the preference for

points-only to the preference for dollars-only, the effect of age was positive and

significant at 0.1 level (p=.07 for age group of 21-23 years old and p=.06 for age group of

24-26 years old) (Table 4.3). The estimated odds for age group of 21-23 years old was

2.504 and for age group of 24-26 years old was 3.019, indicating that compared to the

21-23 years and 24-26 years old, over 26 years old were more likely to prefer points-only

as opposed to dollars-only.

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Employment had a positive effect on the probability of preferring points-only as

opposed to preferring dollars-only at 0.1 significant level (p=.08). The estimated odds for

employed respondents was 1.616 higher than for unemployed respondents (Table 4.3).

This suggests that employed respondents were 1.616 times more likely to prefer to pay

with points-only (as opposed to dollars-only) than unemployed respondents.

The effect of total monthly-spending was negative and significant at 0.05 level

(p=.05 for high monthly-spending) and at 0.1 level (p=.07 for mid-level monthly

-spending) when comparing the preference for points-only to the preference for

dollars-only (Table 4.3). For total monthly-spending, low monthly-spending was the

reference category. The estimated odds for high monthly-spending was .500 and for

mid-level monthly-spending was .482, indicating that compared to high and mid-level

monthly-spending respondents, those low in monthly spending were less likely to prefer

points-only as opposed to dollars-only.

In addition, the logistic coefficients for high monthly-spending for food and

mid-level monthly-spending for food were both positive and significant at 0.01 level

(p=.01 for high monthly-spending in food) and at 0.05 level (p=.02 for mid-level

monthly –spending in food) when comparing the preference for the combined currency

(dollars and points) to the preference for dollars-only (Table 4.2). The estimated odds for

high monthly-spending and mid-level monthly-spending in food were 3.111 and 3.252,

indicating that compared to respondents in high and mid rang in monthly-spending for

food, the low monthly-spending respondents were more likely to prefer the

combined-currency (dollars and points), as opposed to dollars-only.

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Independent Variables

For restaurant segments, fine-dining restaurant was the reference category. The

effect of restaurant segments was not significant when comparing the preference for the

combined-currency (dollars and points) to the preference for dollars-only and when

comparing the preference for points-only to the preference for dollars-only. Therefore,

hypotheses 1a, 1b, and 1c were not supported. However, the logistic coefficient for

casual-dining restaurant was negative and significant at 0.1 level (p=.07) when

comparing the preference for the combined currency (dollars and points) to the

preference for dollars-only (Table 4.2). The estimated odds for casual-dining restaurant

was .328. This suggests that respondents dining at fine-dining restaurant were .328 times

less likely to prefer to pay with the combined currency (dollars and points), as opposed to

dollars-only, than those dining at casual-dining restaurant.

The effect of need for cognition was first examined based on the median (score of

58) split into high and low need-for-cognition groups. The effect of need for cognition

was not significant at the 0.05 level when comparing the preference for the

combined-currency (dollars and points) to the preference for the dollars-only and when

comparing the preference for points-only to the preference for dollars-only. In addition,

to create a clear difference between the high and low need-for-cognition group, out of a

total sample of 471, subjects whose NFC score fell in the middle third of the distribution

were deleted from further analyses (see Inman et al., 1990; Petty and Cacioppo, 1986).

After dropping the middle third of the distribution, 188 subjects were included in the

analyses. The effect of need for cognition was still not significant when comparing the

preference for the combined-currency (dollars and points) to the preference for the

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dollars-only and when comparing the preference for points-only to the preference for

dollars-only (results presented in Appendix A). Thus, the results did not support

hypothesis 2. Furthermore, the interaction effect of need for cognition and restaurant

segments was also not significant. Hypothesis 3 was not supported.

The effect of self-monitoring was not significant when comparing the preference

for the combined-currency (dollars and points) to the preference for dollars-only.

Hypothesis 4 was not supported. However, self-monitoring was significant at 0.1 level

(p=.07) and had a positive effect on the probability of preferring paying points-only as

opposed to paying dollars-only. The estimated odds for high self-monitors was 2.448.

This suggests that low self-monitors were 2.448 times more likely to prefer to pay with

points-only (as opposed to dollars-only) than high self-monitors. In other words, high

self-monitors were less likely to prefer to pay with points-only (as opposed to pay with

dollars-only) than low self-monitors.

For companions, dining with the boss was the reference category. The logistic

coefficient for who dine with a friend was negative and significant at the 0.1 significance

level (p= .08) when comparing the preference for points-only to the preference for

dollars-only. The estimated odds for dining with a friend was 0.469. This suggests that

for who those dine with the boss were 0.469 times less likely to prefer to pay with

points-only (as opposed to dollars-only) than the respondents who dine with a friend.

Also, the logistic coefficient for who dine alone was negative and significant at the 0.05

significance level (p=.02) when comparing the preference for points-only to the

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preference for dollars-only. The estimated odds for dining alone was 0.4, indicating that

respondents that dine with the boss were 0.4 times less likely to prefer to pay with

points-only (as opposed to dollars-only) than the respondents who dine alone. Thus, the

results support hypothesis 5.

The interaction effect of self-monitoring and companions was marginally

significantly associated with currency preference. The logistic coefficient for high

self-monitors dining alone was negative and significant at the 0.05 significance level

(p=.02) when comparing the preference for the combined-currency (dollars and points) to

the preference for dollars-only. The estimated odds ratio for dining alone was .199. In

addition, the logistic coefficient for high self-monitors dining alone was negative and

significant at the 0.05 significance level (p=.01) when comparing the preference for

points-only to the preference for dollars-only. The estimated odds ratio was .217. These

suggest that high self-monitors dining alone were more likely to prefer to pay with

combined-currency (dollars and points) or points-only than low self-monitors (Figure 4.6

and 4.7). Thus, hypothesis 6 was supported.

Additionally, the interaction effect of self-monitoring and restaurant segment was

marginally significantly associated with currency preference. The logistic coefficient for

high self-monitors dining in fine-dining restaurant and quick-service restaurant were not

significant when comparing the preference for the combined-currency (dollars and points)

to the preference for dollars-only and when comparing the preference for points-only to

the preference for dollars-only. However, the logistic coefficient for interaction of

self-monitoring and casual-dining restaurant was positive and significant at 0.1 level

(p=.07) when comparing the preference for the combined currency (dollars and points) to

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the preference for dollars-only (Table 4.2). The estimated odds ratio was 3.629. This

suggests that low self-monitors dining in casual-dining restaurant were more likely to

prefer to pay with combined-currency (dollars and points) than high self-monitors (Figure

4.8 and 4.9). Therefore, Hypothesis 7 was partially supported.

0%

10%

20%

30%

40%

50%

60%

70%

Boss Friend Alone Dollars OnlyDollars and PointsPoints Only

Figure 4.6: Currency Preferences of High Self-Monitors with Companions

88

0%

10%

20%

30%

40%

50%

60%

70%

Boss Friend Alone Dollars OnlyDollars and PointsPoints Only

Figure 4.7: Currency Preferences of Low Self-Monitors with Companions

0%

10%

20%

30%

40%

50%

60%

Fine-Dining Casual-Dining QSR Dollars OnlyDollars & PointsPoints Only

Figure 4.8: Currency Preferences of High Self-Monitors with Three Restaurant Segments

89

0%

10%

20%

30%

40%

50%

60%

Fine-Dining Casual-Dining QSR Dollars OnlyDollars & PointsPoints Only

Figure 4.9: Currency Preferences of Low Self-Monitors with Three Restaurant Segments

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∗, ∗∗, and ∗∗∗Significance levels at the .1, .05, and .01

Continued Table 4.2: Results of Multinomial Logistic Regression Analysis: Dollars and Points

versus Dollars-only

Dollars + Points vs. Dollars-only Variables (n=471) β S.E. Sig. Exp (β)

Demographic Variables Gender (omitted Male)

Female .039 .296 .896 1.039

Age (omitted 26 or older)

18-20 -1.258 .784 .108 .284 21-23 -.232 .756 .759 .793 24-26 -.229 .851 .788 .795

Employment (omitted Yes)

No -.025 .318 .938 .976

Total Monthly Spending (omitted Low: under $520)

High (over $770) -.188 .440 .668 .828 Middle ($521-$770) -.407 .512 .427 .666

Monthly Spending in Food (omitted Low: under $100)

High (over $200) 1.135** .447 .011 3.111 Middle ($101-$200) 1.179** .529 .026 3.252

Independent Variables

Restaurant Segment (omitted Fine-Dining)

Casual-Dining -1.115* .628 .076 .328 QSR -.407 .605 .501 .665

Need for Cognition (omitted Low NFC )

High NFC -.290 .497 .559 .748

Self-Monitoring (omitted Low SEM)

High SEM .194 .607 .749 1.215

91

Table 4.2 Continued

∗, ∗∗, and ∗∗∗Significance levels at the .1, .05, and .01

Dollars + Points vs. Dollars-only Variables (n=471) β S.E. Sig. Exp (β)

Companions (omitted Boss )

Friend -.668 .514 .194 .513 Alone -.301 .509 .554 .740

Interactions

NFC*Casual-Dining .711 .713 .319 2.037 NFC*QSR -.040 .719 .955 .960

SEM*Casual-Dining 1.289* .712 .070 3.629 SEM*QSR .804 .710 .258 2.234

SEM* Friend -.642 .702 .360 .526 SEM*Alone -1.616** .742 .029 .199

Constant 1.295 1.952 .507

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∗, ∗∗, and ∗∗∗Significance levels at the .1, .05, and .01

Continued Table 4.3: Results of Multinomial Logistic Regression Analysis: Points-only versus

Dollars-only

Points-only vs. Dollars-only Variables (n=471) β S.E. Sig. Exp (β)

Demographic Variables Gender (omitted Male)

Female -.056 .244 .819 .946

Age (omitted 26 or older)

18-20 .101 .545 .853 1.106 21-23 .918* .505 .069 2.504 24-26 1.105* .588 .060 3.019

Employment (omitted Yes)

No .480* .275 .081 1.616

Total Monthly Spending (omitted Low: under $520)

High (over $770) -.693** .359 .054 .500 Middle ($521-$770) -.730* .407 .073 .482

Monthly Spending in Food

(omitted Low: under $100) High (over $200) .231 .397 .560 1.260

Middle ($101-$200) .292 .443 .510 1.339

Independent Variables

Restaurant Segment (omitted Fine-Dining)

Casual-Dining -.466 .517 .367 .627 QSR .099 .490 .839 1.105

Need for Cognition (omitted Low NFC )

High NFC -.056 .412 .893 .946

Self-Monitoring (omitted Low SEM)

High SEM .895* .502 .074 2.448

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Table 4.3 Continued

∗, ∗∗, and ∗∗∗Significance levels at the .1, .05, and .01

Points-only vs. Dollars-only Variables (n=471) β S.E. Sig. Exp (β)

Companions (omitted Boss )

Friend -.756* .433 .081 .469 Alone -.915** .406 .024 .400

Interactions

NFC*Casual-Dining .384 .591 .516 1.468 NFC*QSR -.644 .585 .271 .525

SEM*Casual-Dining .309 .592 .601 1.363 SEM*QSR -.158 .585 .788 .854

SEM* Friend -.926 .580 .111 .396 SEM*Alone -1.527** .610 .012 .217

Constant 2.719 1.436 .058

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Summary of the Hypothesis Tests

Table 4.4 summarized the results of the research hypothesis testing regarding the

preferences for currency usages. Restaurant segments were not significantly related to the

preference for currency usages. Thus, the research hypothesis that while dining out,

consumers are more likely to pay with single currency (points only) at high-end

restaurants, to pay with the combined-currency (dollars and points) at mid-priced

restaurants, and to pay with single currency (dollars only) at low-price restaurants was

not supported. Though hypothesis 1 was not supported, casual-dining restaurant had a

negative impact on the probability of preferring paying the combined-currency (dollars

and points) as opposed to paying dollars-only.

Need for cognition was not significantly related to the preference for currency

usages. Thus, the research hypothesis that while dining out, consumers with a high need

for cognition are more likely to prefer payment with combined currency than cognitive

misers was not supported. Also, the interaction effect of need for cognition and restaurant

segments was not significant. Therefore, the research hypothesis that while dining out,

currency preferences of consumers with high or low need for cognition are affected by

the type of restaurant was not supported.

For self-monitoring, high self-monitors were less likely to prefer to pay with

points-only (as opposed to pay with dollars-only) than low self-monitors. Though the

research hypothesis that while dining out, high self-monitoring consumers are more likely

to pay with a single currency than low self-monitoring consumers was not supported,

self-monitoring had a positive effect on the probability of preferring paying points-only

as opposed to paying dollars-only.

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Dining companions had negative effect on the probability of preferring points-only

relative to preferring dollars-only. Thus, the research hypothesis that while dining out,

currency preferences are affected by the dining companions was supported. The

interaction effect of self-monitoring and dining companions was partially significantly

related to the preference for currency usages. High self-monitors dining alone were more

likely to prefer to pay with combined-currency (dollars and points) or points-only than

low self-monitors. This result supports the research hypothesis that while dining out,

currency preferences across social contexts are moderated by self-monitoring.

Finally, the interaction effect of self-monitoring and restaurant segment was

partially significantly related to the preference for currency usages. Low self-monitors

dining in casual-dining restaurant were more likely to prefer to pay with

combined-currency (dollars and points) than high self-monitors. This result supports the

research hypothesis that while dining out, currency preferences of consumers with high

or low need for cognition are affected by the type of restaurant (high, mid and low

priced).

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Research Hypotheses Model

Restaurant Types and Preference for Currency Usage:

H1: While dining out, consumers are more likely to pay with

(a) single currency – points - at high-end restaurants,

(b) combined-currency- dollars and points – at mid-priced

restaurants, and (c) single currency – dollars - at low price

restaurants.

Not supported

Personality Types and Preference for Currency Usage:

Need for Cognition:

H2: While dining out, consumers with a high need for

cognition are more likely to prefer payment with

combined currency than cognitive misers.

Not supported

H3: While dining out, currency preferences of consumers with

high or low need for cognition are affected by the type of

restaurant (high, mid and low priced).

Not supported

Self-Monitoring:

H4: While dining out, high self-monitoring consumers are more likely to pay with a single currency than low self-monitoring consumers.

Not supported

H5: While dining out, currency preferences are affected by the dining context, such that payment is more likely to occur with (a) dollars when dining with a higher-status companion and (b) points when dining with an equal-status companion or when dining alone.

Supported

H6: While dining out, currency preferences across dining contexts are moderated by self-monitoring, such that high self-monitors are more likely than low self-monitors to pay with dollars when dining with a high-status companion.

Supported

H7: While dining out, currency preferences of high and low self-monitoring consumers are affected by the type of restaurant (high, mid and low priced).

Supported

Table 4.4: Summary of the Hypothesis Tests of Currency Preferences

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CHAPTER 5

CONCLUSIONS

This chapter presents a discussion and a summary on the findings of the study. The

factors affecting the preference for currency usages are discussed. Implications for the

foodservices industry, the limitations of the study, and the directions for future research

are also addressed.

Discussions and Summary

The purpose of this study was to examine the effect of personality traits – need for

cognition and self-monitoring – on consumers’ preference for currency usage. A second

purpose of the study was to determine whether differences in restaurant segments were

related to consumers’ currency preferences. The independent variables included in this

study were the scores on need-for-cognition and self-monitoring scales, restaurant

segments and dining companions. The dependent variable measured the preferences for

three currency usages.

The sample used in the study included different undergraduate classes and

snowball sample at The Ohio State University. The study involved two phrases of data

collection. In phrase one, respondents were first asked to complete Snyder and

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Grangestad’s (1986) Self-Monitoring Scale and Cacioppo, Petty, and Kao’s (1984) Need

for Cognition Scale, to answer a series of questions related to their prior experiences in

different currencies and to provide demographic information. Participants were then

asked in phrase two to complete a scenario-based study in which they were asked to

indicate on semantic-differential scales their preferences for each of the three currencies

(dollars-only, dollars and points, and points-only).

The data collected from the participants were analyzed using SPSS and STATA

software packages. Multinomial logistic regression was performed to determine if need

for cognition, self-monitoring, restaurant segments, and dining companions would make

significant contribution to the currency preferences. There were several main findings

resulting from the data analysis. The overall results revealed that age, employment, total

monthly-spending, monthly-spending in food, self-monitoring, dining companions, and

the interaction of self-monitoring and dining companions affect consumer preferences for

currency usages.

First, age and employment have positive effects on the probability of preferring

points-only as opposed to preferring dollars-only. Consumers over 26 years old were

more likely to prefer points-only (as opposed to dollars-only) compared to consumers

21-23 years old and 24-26 years old. Moreover, employed consumers are more likely to

prefer to pay with points-only (as opposed to dollars-only) than unemployed consumers.

Furthermore, high and mid-level monthly-spending consumers are more likely to prefer

points-only as opposed to dollars-only. For high and mid-level monthly-spending

consumers, the currency of points is probably more attractive because of its nonmonetary

nature. Since their monthly spending is relatively high, high and mid-level

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monthly-spending consumers may use points first rather than dollars to take advantage of

greater flexibility of the dollars. However, low monthly food spending respondents are

more likely to prefer the combined-currency (dollars and points), as opposed to

dollars-only, than high and mid-monthly food spending respondents. People who would

like to spend more on food probably do not mind paying for food in restaurants with

dollars.

Though the effect of restaurant segment is not significant on the probability of

preferring points-only as opposed to dollars-only, consumers dining at fine-dining

restaurant are less likely to prefer to pay with the combined currency (dollars and points)

than the consumers dining at casual-dining restaurant. Moreover, need for cognition and

the interaction of need for cognition and restaurant segments have no significant impact

on consumer preferences for currency usage.

High self-monitors are less likely to prefer to pay with points-only (as opposed to

paying with dollars-only) than low self-monitors. For high self-monitors, the preferences

for currency usages are more likely influenced by the image delivered by the currency

than for low self-monitors. Even though the currency of points delivers image of a loyal

customer, it still communicates the image of price discount. Therefore, comparing to

dollars, high self-monitors are less likely to prefer the currency of points.

Companions have a negative effect on the probability of preferring points-only as

opposed to dollars-only. Consumers who dine with a friend or alone are more likely to

prefer to pay with points-only (as opposed to dollars-only) than consumers who dine with

the boss. This result indicates that dining companion is an important determinant of

preferring the currency of points. Since points are a signal of price discount, consumers

100

do not want to make a cheap impression on the higher-status dining companion (e.g.,

boss) by using points for their dining experiences. On the other hand, if consumers dine

with a friend or alone, they are more likely to reap the financial rewards of paying with

points without regard to the impression it creates.

Finally, high self-monitors dining alone are more likely to prefer to pay with

combined-currency (dollars and points) or points-only than low self-monitors. The

interaction effect of self monitoring and companions is significantly associated with

currency preferences. High self-monitors dining alone are more likely to prefer to pay

with combined-currency (dollars and points) or points-only than low self-monitors. On

the other hand, high-self monitors dining with boss are more likely to prefer to pay with

dollars-only than to pay with dollars and points or points-only. Since the effects of

impression on companions occur much more strongly among high self-monitors,

consumers who are high self-monitors are more concerned that a higher-status dining

companion (e.g., boss) would perceive use of points as “cheap” than consumers who are

low self-monitors or dining alone. Additionally, low self-monitors dining in casual-dining

restaurant are more likely to prefer to pay with combined-currency (dollars and points)

than high self-monitors

Implications

This study extends our understanding of individual difference associated with

currency preference by examining the effects of self-monitoring, companions, and

restaurant segment on preferences for currency usages. Identifying the characteristics of

consumers using the different currency options is critical for the foodservice industry.

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Foodservice managers have to know their customers and remain close to the consumers

(Crawford-Welch, 1994). By understanding the individual personality differences of

customers when using different currencies, restaurants could decide whether or not to

implement different currency prices based on their target markets. Large restaurant chains

may specifically target different personality types with specific promotional programs to

meet their self-monitoring needs.

Dining companions play a major role in the preference of currency usage.

Restaurants could apply different currency prices based on the target customers and the

concepts of the restaurants. The results of this study suggest that consumers do not prefer

paying their dining experiences with points to avoid making a cheap impression on the

higher-status dining companion (e.g., boss). Therefore, it may not be a good idea to use

nonmonetary currency price for those restaurants that target business-oriented customers.

On the other hand, for family-oriented or casual-dining restaurants that attract consumers

to have fun with their companions of equal status or those on whom they do not need to

worry about the impression they make, combined currency (dollars and points) or

points-only may be considered as options for currency usages.

However, the combined currency prices or nonmonetary currency prices need not

be limited to a single restaurant unit but can be applied to the whole restaurant chain. By

implementing such a rewards program, the restaurants may keep more customers

patronizing their chains, increase customers’ loyalty, and further enhance restaurants’ the

long-term profitability.

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Limitations

Little prior research exists on exploring characteristics of consumers dealing with

the different currency options. This study takes the first step towards understanding

characteristics of consumers that influences their currency preferences. However, some

sampling and design characteristics may limit the generalizability of the results to the

larger population of consumers. The major limitations of this study include that the

findings from a student sample may not be the best choice to generalize to other

populations. While students frequently consume in low and mid-price restaurants and are

potential consumers for high-end restaurants, they are not representative of the larger

population. Since students tend to be in low income bracket and are more value oriented

than nonstudents, financial reward of paying with points without costing any money

seems most attractive for them. Also, the sample homogeneity might also have

contributed to the lack of some of the demographic effects.

Moreover, students may not have many experiences in high-end (fine-dining)

restaurants; they may differentiate three restaurant segments only based on the prices but

not other attributes. Therefore, the association between restaurant segments and currency

preferences might have been underestimated. Furthermore, the amount of payment across

the three restaurant segments is not significantly different; therefore, it could be a reason

why the differences in consumer preferences of three currency options across the three

restaurants are not significant.

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In addition, since not all participants completed the scenario-based questionnaires

under supervision, the researchers were not always available to answer questions and

make sure the questionnaires were being filled out properly. Also, the researchers could

not guarantee confidentiality for those subjects who gave their questionnaires to a student

to return to the researchers.

Recommendations for Future Research

Future research efforts could include replications using more representative

samples across all customer segments and more realistic designs allowing for higher

external validity. Also, these findings should be tested in field studies.

In addition, different exchange rates between different currencies may also

influence consumers’ currency preferences. Thus, idiosyncratic exchange rate or a

well-known exchange may be applied to compare the preference for currency usage.

Moreover, different combinations of two different currencies may also affect consumers’

preferences of the combined currency. For example, consumers’ perceptions of the

combined-currency price $70 and 700 points may be different with $59 and 810 points.

Thus, it would be interesting to compare consumers’ preferences for currency usage

including different combinations of two different currencies.

According to Drèze and Nuness (2004), consumers prefer one currency price over

another based on the amount of payment. Also, the results presented in postscript in

chapter 4 suggest that the effect of need for cognition may differ by different industry

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contexts. The price range in different industries varies; therefore, different industries may

have different impacts on consumers’ currency preference. Different industries need to be

included in order to have a better understanding of consumers’ preference for currency

usage.

While concluding that the characteristics of consumers influence their currency

preferences, the question remains as to how different currency preferences affect

consumers spending behaviors. Results from previous studies in price promotion and

consumer purchase behavior consistently showed that price promotions increase sales and

affect consumer spending. Providing reward points as price promotions may not

guarantee increased profits; however, by providing different types of currencies, it is

possible to stimulate consumers’ amount of spending and further increase sales.

Therefore, an extension of this research would be examining whether differences in the

currency usage are related to consumer spending behaviors.

Chapter Summary

This chapter discusses the findings of the study, conclusions, and implications of

these results. Limitations of the study and recommendations for future research are also

discussed. Based on the results, the experiments are continued. As the extended study, the

dependent measure of currency preference was refined and uses different combinations of

three currencies instead of one option in the original study. Also, the independent

variables included in the extended study are need for cognition and three price levels

tested in two different industry contexts – restaurant context and airline context. Results

of the extended study will be discussed in chapter 6.

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CHAPTER 6

POSTSCRIPTS

Upon completing the original study, a follow up study was conducted with refined

instrument. The instrument was refined and tested in two different contexts: airline

context and restaurant context. The independent variables included in this study are only

need for cognition and three restaurant segments (fine-dining, causal-dining, and

quick-service restaurant) in restaurant context and three price levels of airline tickets

(high-priced, mid-priced, and low-priced ticket) in airline context.

To better understand the effect of need for cognition on consumer choice, a revised

study was conducted. A major objective of this follow up study is to increase complexity

of currency so that cognitive recourse will be in greater demand. In other words,

respondents have to use higher level of cognition in making complex choices. The

dependent measure - the currency preference was revised with 5 choices of dollars and

points combinations: 100% dollars-only, 75% of dollars and 25% of points, 50% of

dollars and 50% of points, 25% of dollars and 75% of points, and 100% points-only.

Respondents were asked to rank the options on a scale of 1 (most preferred) to 5 (least

preferred). The prices of combined-currency options were idiosyncratic price options

instead of rounded price options to stimulate respondents’ need for cognition.

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The respondents (n = 106) were recruited from different undergraduate classes

during spring 2005. The results from descriptive analyses and multinomial logistic

regression analyses for airline context and restaurant context were presented as follows

Restaurant Context

The frequency of preference the type of currency in restaurant context was

presented in Table 6.1. In fine-dining restaurants, 55.6% of the respondents preferred

points-only, 27.8% preferred the combined currency (dollars and points) and 16.7%

preferred dollars-only. Similarly, in casual-dining restaurants, 54.5% of the respondents

preferred points-only, 30.3% preferred the combined currency (dollars and points) and

15.2% preferred dollars-only. The respondents’ preferences for the combined currency

(dollars and points) were slightly higher in casual-dining segment than other two

restaurant segments. In quick-service restaurants, the respondents’ preferences for

dollars-only were higher than in fine-dining and casual-dining restaurants (Figure 6.1),

with 48.6% of the respondents preferring points-only, 21.6% preferring the combined

currency (dollars and points), and 29.7% preferring dollars-only.

Need for Cognition. Among the high need-for-cognition respondents, 54.7%

preferred points-only, 22.6% preferred the combined currency (dollars and points) and

22.6% preferred dollars-only. For low need-for-cognition respondents, 50.9% preferred

points-only, 30.2% preferred the combined currency (dollars and points) and 18.9%

preferred dollars-only. According to Figure 6.2, low need-for-cognition respondents had

higher preferences for the combined currency (dollars and points) than high

need-for-cognition respondents.

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Table 6.1: Descriptive Statistics by the Type of Currency in Restaurant Context

0%10%20%30%40%50%60%70%80%

Fine-Dining Casual-Dining QSR Dollars OnlyDollars & PointsPoints Only

Figure 6.1: Currency Preferences in Restaurant Context

Currency Preference Dollars-

Only Dollars & Points

Points- Only

Total Sample

Overall Currency Preference

n=22 (20.8%)

n=28 (26.4%)

n=56 (52.8%)

n = 106 (100%)

n (%) n (%) n (%) n (%) Restaurant Segment

Fine-Dining 6 (16.7%) 10 (27.8%) 20 (55.6%) 36 (34.0%) Casual-Dining 5 (15.2%) 10 (30.3%) 18 (54.5%) 33 (31.1%)

QSR 11(29.7%) 8 (21.6%) 18 (48.6%) 37 (34.9%) Need for Cognition

High NFC 12 (22.6%) 12 (22.6%) 29 (54.7%) 53 (50.0%) Low NFC 10 (18.9%) 16 (30.2%) 27 (50.9%) 53 (50.0%)

108

0%10%20%30%40%

50%60%70%

High NFC Low NFC Dollars OnlyDollars & PointsPoints Only

Figure 6.2: Currency Preferences for Need for Cognition in Restaurant Context

Multinomial Logistic Regression Analysis

For restaurant segments, fine-dining restaurant was the reference category. The

effect of restaurant segments was not significant when comparing the preference for the

combined-currency (dollars and points) to the preference for dollars-only and when

comparing the preference for points-only to the preference for dollars-only.

Moreover, the effect of need for cognition was not significant when comparing the

preference for the combined-currency (dollars and points) to the preference for the

dollars-only and when comparing the preference for points-only to the preference for

dollars-only (Table 6.2).

109

Table 6.2: Results of Multinomial Logistic Regression Analysis for Restaurant Industry Airline Context

Table 6.3 shows the frequency of preference the type for currency in airline context.

For high-priced airline tickets, 72.2% of the respondents preferred points-only, 16.7%

preferred the combined currency (dollars and points), and 11.1% of the respondents

preferred dollars-only. For mid-priced airline tickets, 56.3% of the respondents preferred

points-only, 34.4% preferred the combination of dollars and points, and 9.4% of the

respondents preferred dollars-only. The tendency to prefer the combined currency

Dollars + Points vs. Dollars-only Variables (n=106) β S.E. Sig. Exp (β)

Restaurant Segment (omitted Fine-Dining)

Casual-Dining -.148 .698 .833 .863 QSR .666 .608 .273 1.947

Need for Cognition (omitted Low NFC )

High NFC .317 .518 .540 1.373

Constant .490 .798 .539 Points-only vs. Dollars-only

Variables (n=106) β S.E. Sig. Exp (β)

Restaurant Segment (omitted Fine-Dining)

Casual-Dining -.354 .770 .646 .702 QSR .722 .704 .305 2.058

Need for Cognition (omitted Low NFC )

High NFC .790 .599 .187 2.203 Constant -.384 .912 .674

110

(dollars and points) was higher compared to high-priced and low-priced airline tickets.

For low-priced airline tickets, the respondents’ preferences for dollars-only were higher

than at the other two price levels of airline tickets, with 55.3% of the respondents

preferring points-only, 26.3% preferring the combined currency (dollars and points), and

18.4% of the respondents preferring dollars-only. According to Figure 6.3, the patterns of

currency preferences were different in three levels of airline tickets (high-priced,

mid-priced, and low-priced). In summary, the tendency to prefer points-only decreased as

ticket prices decreased. The respondents’ preferences for the combined currency (dollars

and points) were higher for mid-priced tickets while the respondents’ preferences for

dollars-only were higher for low-priced tickets.

Table 6.3: Descriptive Statistics by the Type of Currency in Airline Context

Currency Preference Dollars-

Only Dollars & Points

Points- Only

Total Sample

Overall Currency Preference

n=14 (13.2%)

n=27 (25.5%)

n=65 (61.3%)

n = 106 (100%)

n (%) n (%) n (%) n (%) Airline Ticket High-Priced ($1,200) 4 (11.1%) 6 (16.7%) 26 (72.2%) 36 (34.0%)

Mid-Priced ($560) 3 (9.4%) 11 (34.4%) 18 (56.3%) 32 (30.2%) Low-Priced ($180) 7 (18.4%) 10 (26.3%) 21 (55.3%) 38 (35.8%)

Need for Cognition High NFC 9 (17.0%) 11 (20.8%) 33 (62.3%) 53 (50.0%) Low NFC 5 (9.4%) 16 (30.2%) 32 (60.4%) 53 (50.0%)

111

0%10%20%30%40%50%60%70%80%

High-Priced Mid-Priced Low-Priced Dollars OnlyDollars & PointsPoints Only

Figure 6.3: Currency Preferences in Airline Context

Need for Cognition. The mean score in this sample was 57.62, with scores ranging

from 34 to 87. Subjects were split into high and low need-for-cognition groups based on

the median (score of 55.5) split. Among the high need-for-cognition respondents, 62.3%

preferred points-only, 20.8% preferred the combined currency (dollars and points) and

17.0% preferred dollars-only. For low need-for-cognition respondents, 60.4%preferred

points-only, 30.2% preferred the combined currency (dollars and points) and 9.4%

preferred dollars-only. According to Figure 6.4, the preferences for the combined

currency (dollars and points) for low need-for-cognition respondents were higher than

those for high need for cognition respondents.

112

0%10%20%30%40%50%60%

70%

High NFC Low NFC Dollars OnlyDollars & PointsPoints Only

Figure 6.4: Currency Preferences for Need for Cognition in Airline Context Multinomial Logistic Regression Analysis

For price level of airline ticket, high-priced ticket was the reference category. The

effect of price level of airline ticket was not significant when comparing the preference

for the combined-currency (dollars and points) to the preference for dollars-only and

when comparing the preference for points-only to the preference for dollars-only.

However, in case of need for cognition, the effect of need for cognition was

positive and significant at 0.05 level (p=.04) when comparing the preference for the

combined-currency (dollars and points) to the preference for the dollars-only, but was not

significant when comparing the preference for points-only to the preference for

dollars-only (Table 6.4). The estimated odds for high need-for-cognition respondents was

4.139. This suggests that low need-for-cognition respondents were 4.139 times more

likely to prefer to pay with the combined-currency (dollars and points), as opposed to

113

dollars-only, than high need-for-cognition respondents. Since the sample size for the cell

of the interaction of price level of airline ticket and airline need for cognition was too

small, the interaction was not included in the analysis.

Table 6.4: Results of Multinomial Logistic Regression Analysis for Airline Context

Dollars + Points vs. Dollars-only Variables (n=106) β S.E. Sig. Exp (β)

Airline Ticket (omitted High-Priced)

Mid-Priced -1.222 .949 .198 .295 Low-Priced -.194 .836 .817 .824

Need for Cognition (omitted Low NFC )

High NFC 1.421** .712 .046 4.139

Constant .886 1.071 .408 Points-only vs. Dollars-only

Variables (n=106) β S.E. Sig. Exp (β)

Airline (omitted High-Priced)

Mid-Priced -.087 .840 .918 .917 Low-Priced .647 .705 .358 1.910

Need for Cognition (omitted Low NFC )

High NFC .700 .625 .263 2.015

Constant .905 .941 .408

114

Summary of the Results

Although the effects of restaurant segment and price level of airline ticket were not

significant in multinomial logistic regression, the patterns of consumers’ currency

preferences were different in three different price levels in descriptive analysis. The

tendency to prefer points-only decrease as lower amount of payment is involved.

Consumers’ preferences for the combined currency (dollars and points) are higher for

mid-priced level while the preferences for dollars-only are higher for low-priced level

compared to two other price levels.

In addition, the effect of need for cognition is significant when comparing the

preference for the combined-currency (dollars and points) to the preference for the

dollars-only in airline context, but was not significant in restaurant context. The reason

may be that there are larger amount of payments involved in airline context compared to

restaurant context. In airline context, low need-for-cognition consumers were more likely

to prefer to pay with the combined-currency (dollars and points), as opposed to

dollars-only, than high need-for-cognition consumers. Although the result is the opposite

the prediction of H2 in the original study, it still suggests that need for cognition is one of

the factor influencing consumers’ currency preference. Consumers’ need for cognition

may be stimulated when larger amount of payments are involved. The price range in

different industries varies; therefore, the effect of need for cognition may differ by

different industry contexts.

115

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129

APPENDIX A

Results of Multinomial Logistic Regression Analysis: 188 samples included for Need for Cognition

130

∗, ∗∗, and ∗∗∗Significance levels at the .1, .05, and .01

Continued Table A.1: Results of Multinomial Logistic Regression Analysis: Dollars and Points

versus Dollars-only (188 samples included for Need for Cognition)

Dollars + Points vs. Dollars-only Variables (n=471) β S.E. Sig. Exp (β)

Demographic Variables Gender (omitted Male)

Female -.180 .502 .720 .835

Age (omitted 26 or older)

18-20 -1.539 1.276 .228 .215 21-23 -.948 1.213 .434 .387 24-26 -.921 1.380 .504 .398

Employment (omitted Yes)

No -.090 .534 .866 .914

Total Monthly Spending (omitted Low: under $520)

High (over $770) 1.180 .789 .135 3.254 Middle ($521-$770) .070 .794 .929 1.073

Monthly Spending in Food (omitted Low: under $100)

High (over $200) .382 .769 .619 1.465 Middle ($101-$200) .605 .893 .498 1.831

Independent Variables

Restaurant Segment (omitted Fine-Dining)

Casual-Dining -1.256 1.074 .242 .285 QSR -.978 .998 .327 .376

Need for Cognition (omitted Low NFC )

High NFC -.354 .871 .685 .702

Self-Monitoring (omitted Low SEM )

High SEM .251 1.048 .811 1.285

131

Table A.1 Continued

∗, ∗∗, and ∗∗∗Significance levels at the .1, .05, and .01

Dollars + Points vs. Dollars-only Variables (n=471) β S.E. Sig. Exp (β)

Companions (omitted Boss )

Friend .004 .819 .996 1.004 Alone -.744 .883 .399 .475

Interactions

NFC*Casual-Dining .353 1.303 .786 1.423 NFC*QSR .671 1.210 .579 1.956

SEM*Casual-Dining 1.683 1.271 .185 5.383 SEM*QSR 1.206 1.155 .297 3.340

SEM* Friend -1.096 1.146 .339 .334 SEM*Alone -1.858 1.336 .164 .156

Constant 2.061 3.206 .520

132

∗, ∗∗, and ∗∗∗Significance levels at the .1, .05, and .01

Continued Table A.2: Results of Multinomial Logistic Regression Analysis: Points-only versus

Dollars-only (188 samples included for Need for Cognition)

Points-only vs. Dollars-only Variables (n=471) β S.E. Sig. Exp (β)

Demographic Variables Gender (omitted Male)

Female -.186 .413 .652 .830

Age (omitted 26 or older)

18-20 -.120 .803 .881 .887 21-23 .797 .709 .261 2.220 24-26 .860 .898 .338 2.363

Employment (omitted Yes)

No .445 .466 .339 1.561

Total Monthly Spending (omitted Low: under $520)

High (over $770) -.669 .638 .294 .512 Middle ($521-$770) -.391 .694 .574 .677

Monthly Spending in Food (omitted Low: under $100)

High (over $200) .388 .680 .568 1.474 Middle ($101-$200) .280 .760 .713 1.323

Independent Variables

Restaurant Segment (omitted Fine-Dining)

Casual-Dining .128 .857 .882 1.136 QSR .487 .791 .538 1.627

Need for Cognition (omitted Low NFC )

High NFC .228 .683 .738 1.257

Self-Monitoring (omitted Low SEM )

High SEM .897 .835 .283 2.453

133

Table A.2 Continued

∗, ∗∗, and ∗∗∗Significance levels at the .1, .05, and .01

Points-only vs. Dollars-only Variables (n=471) β S.E. Sig. Exp (β)

Companions (omitted Boss )

Friend -.277 .671 .680 .758 Alone -1.430** .747 .055 .239

Interactions

NFC*Casual-Dining -1.005 1.025 .327 .366 NFC*QSR -.600 .979 .540 .549

SEM*Casual-Dining .436 1.006 .664 1.547 SEM*QSR .154 .937 .869 1.167

SEM* Friend -1.045 .916 .254 .352 SEM*Alone -1.241 1.171 .289 .289

Constant 2.846 2.285 .213

134

APPENDIX B

EXPERIMENT INSTRUMENTS

135

INSTRUCTIONS:

o The statements below concern your personal reactions to a number of different situations.

o No two statements are exactly alike, so consider each statement carefully before answering.

o If a statement is TRUE or MOSTLY TRUE as applied to you, circle the "T" next to the question.

o If a statement is FALSE or NOT USUALLY TRUE as applied to you, circle the "F" next to the question.

Items True False 1 I find it hard to imitate the behavior of other people. T F 2 At parties and social gatherings, I do not attempt to do or say

things that others will like. T F

3 I can only argue for ideas which I already believe. T F 4 I can make impromptu speeches even on topics about which I

have almost no information. T F

5 I guess I put on a show to impress or entertain others. T F 6 I would probably make a good actor. T F 7 In a group of people I am rarely the center of attention. T F 8 In different situations and with different people, I often act like

very different persons. T F

9 I am not particularly good at making other people like me. True False 10 I'm not always the person I appear to be. T F 11 I would not change my opinions (or the way I do things) in order

to please someone or win their favor. T F

12 I have considered being an entertainer. T F 13 I have never been good at games like charades or

improvisational acting. T F

14 I have trouble changing my behavior to suit different people and different situations. T F

15 At a party I let others keep the jokes and stories going. T F 16 I feel a bit awkward in public and do not show up quite as well

as I should. T F

17 I can look anyone in the eye and tell a lie with a straight face (if for a right end). T F

18 I may deceive people by being friendly when I really dislike them. T F

136

INSTRUCTIONS:

o For each of the statements below, please indicate to what extent the statement is characteristic of you.

- If the statement is extremely uncharacteristic of you (not at all like you) please circle a “1”

- If the statement is extremely characteristic of you (very much like you) please circle“5”

- If a statement is neither extremely uncharacteristic nor extremely characteristic of you; then please use the number in the middle of the scale that describes the best fit.

Items Not at all Very much Like me Like me

1 I would prefer complex to simple problems 1 2 3 4 5 2 I like to have the responsibility of handling a

situation that requires a lot of thinking 1 2 3 4 5

3 Thinking is not my idea of fun 1 2 3 4 5 4 I would rather do something that requires

little thought than something that is sure to challenge my thinking abilities

1 2 3 4 5

5 I try to anticipate and avoid situations where there is likely chance I will have to think in depth about something

1 2 3 4 5

6 I find satisfaction in deliberating hard and for long hours

1 2 3 4 5

7 I only think as hard as I have to 1 2 3 4 5 8 I prefer to think about small, daily projects

to long-term ones 1 2 3 4 5

9 I like tasks that require little thought once I’ve learned them.

1 2 3 4 5

10 The idea of relying on thought to make my way to the top appeals to me 1 2 3 4 5

11 I really enjoy a task that involves coming up with new solutions to problems 1 2 3 4 5

12 Learning new ways to think doesn’t excite me very much 1 2 3 4 5

13 I prefer my life to be filled with puzzles that I must solve 1 2 3 4 5

14 The notion of thinking abstractly is appealing to me 1 2 3 4 5

15 I would prefer a task that is intellectual, difficult, an important to one that is somewhat important but does not require much thought.

1 2 3 4 5

137

Items Not at all Very much

Like me Like me 16 I feel relief rather than satisfaction after

completing a task that required a lot of mental effort

1 2 3 4 5

17 It’s enough for me that something gets the job done; I don’t care how or why it works 1 2 3 4 5

18 I usually end up deliberating about issues even when they do not affect me personally 1 2 3 4 5

138

Please answer the following questions

1. Gender: Male_________ Female ________

2. Age: Under 18______ 18 to 20______ 21 to 23______ 24 to 26______ 26 or older______

3. Are you currently employed? Yes______ No______

4. What is your estimate monthly spending for the following items? Rent______ Food______ Entertainment______

5. Are you familiar with the frequent-flier miles programs? Unfamiliar Familiar

1 2 3 4 5 6 7

6. Are you knowledgeable about the frequent-flier program? Not Knowledgeable Knowledgeable

1 2 3 4 5 6 7

7. Do you have a frequent-flier account? Yes______ No______

8. Are you experienced in redeeming frequent-flier miles? Inexperienced Experienced

1 2 3 4 5 6 7

139

TREATMENT A

Fine-Dining Restaurant Dining with the Boss

140

Dear Participant,

o We are seeking your true reactions to a situation that you might actually experience

in daily life.

o After reading the scenario, please respond to the questions in a natural manner

--the way you believe you would actually react.

Please imagine yourself in the following situation

You have worked with an upscale department store in the upper- Midwest part of the United States. You have been ranked as one of the top-performing managers of your company for two years in a row. And you are expecting to get a promotion soon. You report to the regional manager, who in turn reports to the vice-president. Your regional manager called yesterday to alert you that the vice-president will be in town to visit your market. He is on his way from San Francisco to Boston and stopping over for only one day. The vice-president reports directly to the president of the company. His visit is very important to you and your anticipated promotion. You know the vice-president enjoys good food and wine, and you want to take him to the BEST fine dining restaurant in town. From your past experience, you expect the restaurant bill would be around $150 for the two of you.

141

This fine dining restaurant has a loyal customer reward program for customers to accumulate points at each visit. As a frequent guest, you have collected abundant points over the past few visits, and you have sufficient cash too. So tonight you have 3 CHOICES while paying for your dinner ($150).

The exchange rate: $10 = 100 points

Please answer the following questions

1. How likely that you agree to pay for this fine-dining experience with the following choices?

Very Unlikely Very Likely $150 1 2 3 4 5 6 7 $75 + 750 points 1 2 3 4 5 6 7 1500 points 1 2 3 4 5 6 7

2. Paying for this fine-dining experience with the following choices is -

Poor Choice Excellent Choice $75 + 750 points 1 2 3 4 5 6 7 $150 1 2 3 4 5 6 7 1500 points 1 2 3 4 5 6 7

3. How do you prefer to pay for this fine-dining experience with the following choices?

Least Prefer Most Prefer 1500 points 1 2 3 4 5 6 7 $75 + 750 points 1 2 3 4 5 6 7 $150 1 2 3 4 5 6 7

4. How likely that you will pay for this fine-dining experience with the following choices?

Very Unlikely Very Likely $75 + 750 points 1 2 3 4 5 6 7 $150 1 2 3 4 5 6 7 1500 points 1 2 3 4 5 6 7

5. Please briefly explain the rational behind your choice.

____________________________________________________________________

____________________________________________________________________

142

TREATMENT B

Fine-Dining Restaurant Dining with a Friend

143

Dear Participant, o We are seeking your true reactions to a situation that you might actually experience

in daily life.

o After reading the scenario, please respond to the questions in a natural manner

--the way you believe you would actually react.

Please imagine yourself in the following situation

You and your best friend from high school are going to graduate from college next week. You both are very excited. It is like a dream come true. After the graduation, your Best Friend will be leaving town to join a major corporation in Boston, and you will be heading west to Los Angeles to work with a major consumer corporation. You may not see each other for a while as you both pursue careers at the opposite ends of the country. It will be a long time before you both have a dinner together. So you have decided to take your Best Friend to dinner to celebrate your graduation and beginning of new careers for both of you. You know that s/he enjoys dining at the BEST fine-dining restaurants in town. You want to take her/him to her/his favorite restaurant which also happens to be your favorite one too. From your past experience, you know that the restaurant bill would be around $150 for the two of you.

144

This fine dining restaurant has a loyal customer reward program for customers to accumulate points at each visit. As a frequent guest, you have collected abundant points over the past few years, and you have sufficient cash too. So tonight you have 3 CHOICES while paying for your dinner ($150).

The exchange rate: $10 = 100 points

Please answer the following questions

1. How likely that you agree to pay for this fine-dining experience with the following choices?

Very Unlikely Very Likely $150 1 2 3 4 5 6 7 $75 + 750 points 1 2 3 4 5 6 7 1500 points 1 2 3 4 5 6 7

2. Paying for this fine-dining experience with the following choices is -

Poor Choice Excellent Choice $75 + 750 points 1 2 3 4 5 6 7 $150 1 2 3 4 5 6 7 1500 points 1 2 3 4 5 6 7

3. How do you prefer to pay for this fine-dining experience with the following choices?

Least Prefer Most Prefer 1500 points 1 2 3 4 5 6 7 $75 + 750 points 1 2 3 4 5 6 7 $150 1 2 3 4 5 6 7

4. How likely that you will pay for this fine-dining experience with the following choices?

Very Unlikely Very Likely $75 + 750 points 1 2 3 4 5 6 7 $150 1 2 3 4 5 6 7 1500 points 1 2 3 4 5 6 7

5. Please briefly explain the rational behind your choice.

____________________________________________________________________

____________________________________________________________________

145

TREATMENT C

Fine-Dining Restaurant Dining Alone

146

Dear Participant,

o We are seeking your true reactions to a situation that you might actually experience

in daily life.

o After reading the scenario, please respond to the questions in a natural manner

--the way you believe you would actually react.

Please imagine yourself in the following situation

You opened your mail yesterday. You were pleasantly

surprised and delighted to learn that you were selected as the “Outstanding Student of the Year” from your college. You will receive the award during the university graduation ceremonies. To celebrate this accomplishment, you want to take one of your friends to dinner to a fine-dining restaurant in town. You made the reservation for 2 people for 6 pm. You arrived early and were waiting for your friend. You ordered your favorite drink while waiting. Around 6:10pm, you receive a call from you friend and s/he sounds very upset. S/he has to take her/his father to the emergency room right away. S/he is unable to join you for dinner. Since you are already at the restaurant, have a reservation and ordered the drinks already, you have decided to order the meal anyway. From your past experience, you know that the restaurant bill would be around $70 for one person.

147

This fine dining restaurant has a loyal customer reward program for customers to accumulate points at each visit. As a frequent guest, you have collected abundant points over the past few visits, and you have sufficient cash too. So tonight you have 3 CHOICES while paying for your dinner ($70).

The exchange rate: $10 = 100 points

Please answer the following questions

1. How likely that you agree to pay for this fine-dining experience with the following choices?

Very Unlikely Very Likely $70 1 2 3 4 5 6 7 $35 + 350 points 1 2 3 4 5 6 7 700 points 1 2 3 4 5 6 7

2. Paying for this fine-dining experience with the following choices is -

Poor Choice Excellent Choice $35 + 350 points 1 2 3 4 5 6 7 $70 1 2 3 4 5 6 7 700 points 1 2 3 4 5 6 7

3. How do you prefer to pay for this fine-dining experience with the following choices?

Least Prefer Most Prefer 700 points 1 2 3 4 5 6 7 $35 + 350 points 1 2 3 4 5 6 7 $70 1 2 3 4 5 6 7

4. How likely that you will pay for this fine-dining experience with the following choices?

Very Unlikely Very Likely $35 + 350 points 1 2 3 4 5 6 7 $70 1 2 3 4 5 6 7 700 points 1 2 3 4 5 6 7

5. Please briefly explain the rational behind your choice.

____________________________________________________________________

____________________________________________________________________

148

TREATMENT D

Causal-Dining Restaurant Dining with the Boss

149

Dear Participant,

o We are seeking your true reactions to a situation that you might actually experience

in daily life.

o After reading the scenario, please respond to the questions in a natural manner

--the way you believe you would actually react.

Please imagine yourself in the following situation o

o

o

o

You are the general manager of an upscale department store in upper-Midwest part of the United States. The district manager of your company is in town for his market inspection and also visits your market. He has been extremely busy working all day. He spent the whole day in reviewing sales reports, financial reports and personnel documents in your market and meeting with the managers in your unit. So your district manager is looking for someplace to relax and also wants to get to know the town. He doesn’t want to dress for the evening and wants a casual atmosphere so that everyone is at ease and comfortable. You know he enjoys good food more than a fancy place. So, you want to take him to a popular causal-dining restaurant in town to welcome him. From your past experience, you know that the restaurant bill would be around $70 for the two of you.

150

This casual dining restaurant has a loyal customer reward program for customers to accumulate points at each visit. As a frequent guest, you have collected abundant points over the past few visits, and you have sufficient cash too. So tonight you have 3 CHOICES while paying for your dinner ($70).

The exchange rate: $10 = 100 points

Please answer the following questions

1. How likely that you agree to pay for this causal-dining experience with the following choices?

Very Unlikely Very Likely $70 1 2 3 4 5 6 7 $35 + 350 points 1 2 3 4 5 6 7 700 points 1 2 3 4 5 6 7

2. Paying for this causal-dining experience with the following choices is -

Poor Choice Excellent Choice $35 + 350 points 1 2 3 4 5 6 7 $70 1 2 3 4 5 6 7 700 points 1 2 3 4 5 6 7

3. How do you prefer to pay for this causal-dining experience with the following choices?

Least Prefer Most Prefer 700 points 1 2 3 4 5 6 7 $35 + 350 points 1 2 3 4 5 6 7 $70 1 2 3 4 5 6 7

4. How likely that you will pay for this causal-dining experience with the following choices?

Very Unlikely Very Likely $35 + 350 points 1 2 3 4 5 6 7 $70 1 2 3 4 5 6 7 700 points 1 2 3 4 5 6 7

5. Please briefly explain the rational behind your choice.

____________________________________________________________________

____________________________________________________________________

151

TREATMENT E

Causal-Dining Restaurant Dining with a Friend

152

Dear Participant,

o We are seeking your true reactions to a situation that you might actually experience

in daily life.

o After reading the scenario, please respond to the questions in a natural manner

--the way you believe you would actually react.

Please imagine yourself in the following situation

You and your best friend from high school are going to graduate from college next week. You both are very excited. It is like a dream come true. After the graduation, your Best Friend will be leaving town to join a major corporation in Boston. And you will be heading west to Los Angeles to work with a major consumer corporation. You may not see each other for a while as you both pursue careers at the opposite ends of the country. It will be a long time before you both have a dinner together. So you have decided to take your Best Friend to a casual dinner to catch up on old time stories. You want a relaxed atmosphere with a few drinks. You want to take her/him to your favorite ‘hang out’ restaurant. From your past experience, you know that the restaurant bill would be around $70 for the two of you.

153

This casual dining restaurant has a loyal customer reward program for customers to accumulate points at each visit. As a frequent guest, you have collected abundant points over the past few visits, and you have sufficient cash too. So tonight you have 3 CHOICES while paying for your dinner ($70).

The exchange rate: $10 = 100 points

Please answer the following questions

1. How likely that you agree to pay for this causal-dining experience with the following choices?

Very Unlikely Very Likely $70 1 2 3 4 5 6 7 $35 + 350 points 1 2 3 4 5 6 7 700 points 1 2 3 4 5 6 7

2. Paying for this causal-dining experience with the following choices is -

Poor Choice Excellent Choice $35 + 350 points 1 2 3 4 5 6 7 $70 1 2 3 4 5 6 7 700 points 1 2 3 4 5 6 7

3. How do you prefer to pay for this causal-dining experience with the following choices?

Least Prefer Most Prefer 700 points 1 2 3 4 5 6 7 $35 + 350 points 1 2 3 4 5 6 7 $70 1 2 3 4 5 6 7

4. How likely that you will pay for this causal-dining experience with the following choices?

Very Unlikely Very Likely $35 + 350 points 1 2 3 4 5 6 7 $70 1 2 3 4 5 6 7 700 points 1 2 3 4 5 6 7

5. Please briefly explain the rational behind your choice.

____________________________________________________________________

____________________________________________________________________

154

TREATMENT F

Casual-Dining Restaurant Dining Alone

155

Dear Participant,

o We are seeking your true reactions to a situation that you might actually experience

in daily life.

o After reading the scenario, please respond to the questions in a natural manner

--the way you believe you would actually react.

Please imagine yourself in the following situation

You opened your mail yesterday. You were

pleasantly surprised and delighted to learn that you were selected as the “Outstanding Student of the Year” from your college. You will receive the award during the university graduation ceremonies. To share this news, you want to take one of your friends to dinner to a casual-dining restaurant in town. S/he was supposed to meet you at the restaurant around 6.00pm. You arrived early and were waiting for your friend. You ordered your favorite drink while you were waiting. Around 6:10pm, you receive a call from you friend and s/he sounds very upset. S/he has a family emergency and s/he has to take care of it right away. So s/he is unable to join you for dinner. Since you are already at the restaurant and ordered the drinks already, you have decided to order the meal anyway. From your past experience, you know that the restaurant bill would be around $30 for one person.

156

This casual dining restaurant has a loyal customer reward program for customers to accumulate points at each visit. As a frequent guest, you have collected abundant points over the past few visits, and you have sufficient cash too. So tonight you have 3 CHOICES while paying for your dinner ($30).

The exchange rate: $10 = 100 points

Please answer the following questions

1. How likely that you agree to pay for this causal-dining experience with the following choices?

Very Unlikely Very Likely $30 1 2 3 4 5 6 7 $15 + 150 points 1 2 3 4 5 6 7 300 points 1 2 3 4 5 6 7

2. Paying for this causal-dining experience with the following choices is -

Poor Choice Excellent Choice $15 + 150 points 1 2 3 4 5 6 7 $30 1 2 3 4 5 6 7 300 points 1 2 3 4 5 6 7

3. How do you prefer to pay for this causal-dining experience with the following choices?

Least Prefer Most Prefer 300 points 1 2 3 4 5 6 7 $15 + 150 points 1 2 3 4 5 6 7 $30 1 2 3 4 5 6 7

4. How likely that you will pay for this causal-dining experience with the following choices?

Very Unlikely Very Likely $15 + 150 points 1 2 3 4 5 6 7 $30 1 2 3 4 5 6 7 300 points 1 2 3 4 5 6 7

5. Please briefly explain the rational behind your choice.

____________________________________________________________________

____________________________________________________________________

157

TREATMENT G

Quick Service Restaurant

Dining with the Boss

158

Dear Participant,

o We are seeking your true reactions to a situation that you might actually experience

in daily life.

o After reading the scenario, please respond to the questions in a natural manner

--the way you believe you would actually react.

Please imagine yourself in the following situation

You and your boss just finished a meeting with a client.

It was a long presentation, and you both are tired. It is lunch time, and both of you are very hungry. You have another major presentation tomorrow with a new client, and you and your boss still have a lot to discuss about the presentation and strategies. Since there is so much work to be done, you don’t want take too long for lunch. So you both have agreed to go to the soup-and-sandwich deli located in the first floor of the corporate office. As a frequent customer, you know that the lunch would cost around $14 for the two of you.

159

This quick service restaurant has a loyal customer reward program for customers to accumulate points at each visit. As a frequent guest, you have collected abundant points over the past few visits, and you have sufficient cash too. So tonight you have 3 CHOICES while paying for your dinner ($14).

The exchange rate: $10 = 100 points

Please answer the following questions

1. How likely that you agree to pay for this experience in quick service restaurant with the following choices?

Very Unlikely Very Likely $14 1 2 3 4 5 6 7 $7 + 70 points 1 2 3 4 5 6 7 140 points 1 2 3 4 5 6 7

2. Paying for this experience in quick service restaurant with the following choices is -

Poor Choice Excellent Choice $7 + 70 points 1 2 3 4 5 6 7 $14 1 2 3 4 5 6 7 140 points 1 2 3 4 5 6 7

3. How do you prefer to pay for this experience in quick service restaurant with the following choices?

Least Prefer Most Prefer 140 points 1 2 3 4 5 6 7 $7 + 700 points 1 2 3 4 5 6 7 $14 1 2 3 4 5 6 7

4. How likely that you will pay for this experience in quick service restaurant with the following choices?

Very Unlikely Very Likely $7 + 70 points 1 2 3 4 5 6 7 $14 1 2 3 4 5 6 7 140 points 1 2 3 4 5 6 7

5. Please briefly explain the rational behind your choice.

____________________________________________________________________

____________________________________________________________________

160

TREATMENT H

Quick Service Restaurant Dining with a Friend

161

Dear Participant,

o We are seeking your true reactions to a situation that you might actually experience

in daily life.

o After reading the scenario, please respond to the questions in a natural manner

--the way you believe you would actually react.

Please imagine yourself in the following situation

o

You and your friend are taking a course together. It

is a senior-level course. You and your friend are working at your apartment on a class project for that course which is due at 5:00 this afternoon. It is lunch time and both of you are hungry. You both agree to take a quick break and don’t want to waste too much time. It is your turn to buy the lunch as your friend paid for it yesterday. To save time, you decide to go to a quick service restaurant located a block from your apartment. You know that the bill for lunch would be around $14 for the two of you.

162

This quick service restaurant has a loyal customer reward program for customers to accumulate points at each visit. As a frequent guest, you have collected abundant points over the past few visits, and you have sufficient cash too. So tonight you have 3 CHOICES while paying for your dinner ($14).

The exchange rate: $10 = 100 points

Please answer the following questions

1. How likely that you agree to pay for this experience in quick service restaurant with the following choices?

Very Unlikely Very Likely $14 1 2 3 4 5 6 7 $7 + 70 points 1 2 3 4 5 6 7 140 points 1 2 3 4 5 6 7

2. Paying for this experience in quick service restaurant with the following choices is -

Poor Choice Excellent Choice $7 + 70 points 1 2 3 4 5 6 7 $14 1 2 3 4 5 6 7 140 points 1 2 3 4 5 6 7

3. How do you prefer to pay for this experience in quick service restaurant with the following choices?

Least Prefer Most Prefer 140 points 1 2 3 4 5 6 7 $7 + 700 points 1 2 3 4 5 6 7 $14 1 2 3 4 5 6 7

4. How likely that you will pay for this experience in quick service restaurant with the following choices?

Very Unlikely Very Likely $7 + 70 points 1 2 3 4 5 6 7 $14 1 2 3 4 5 6 7 140 points 1 2 3 4 5 6 7

5. Please briefly explain the rational behind your choice.

____________________________________________________________________

____________________________________________________________________

163

TREATMENT I

Quick Service Restaurant Dining Alone

164

Dear Participant,

o We are seeking your true reactions to a situation that you might actually experience

in daily life.

o After reading the scenario, please respond to the questions in a natural manner

--the way you believe you would actually react.

Please imagine yourself in the following situation

You and your friend are taking a course together. It is a senior level course. You and your friend have decided to work at your apartment on a class project for that course which is due at 5:00 this afternoon. He is supposed to meet you around 2:00 pm. You have been working on this project all morning. It is lunch time and you are little hungry. So you want to take a little break and eat lunch quickly before your friend arrives. To save time, you decide to go to a quick service restaurant located a block from your apartment. You know that the lunch would cost around $6.

165

This quick service restaurant has a loyal customer reward program for customers to accumulate points at each visit. As a frequent guest, you have collected abundant points over the past few visits, and you have sufficient cash too. So tonight you have 3 CHOICES while paying for your dinner ($6).

The exchange rate: $10 = 100 points

Please answer the following questions

1. How likely that you agree to pay for this experience in quick service restaurant with the following choices?

Very Unlikely Very Likely $14 1 2 3 4 5 6 7 $7 + 70 points 1 2 3 4 5 6 7 140 points 1 2 3 4 5 6 7

2. Paying for this experience in quick service restaurant with the following choices is -

Poor Choice Excellent Choice $7 + 70 points 1 2 3 4 5 6 7 $14 1 2 3 4 5 6 7 140 points 1 2 3 4 5 6 7

3. How do you prefer to pay for this experience in quick service restaurant with the following choices?

Least Prefer Most Prefer 140 points 1 2 3 4 5 6 7 $7 + 700 points 1 2 3 4 5 6 7 $14 1 2 3 4 5 6 7

4. How likely that you will pay for this experience in quick service restaurant with the following choices?

Very Unlikely Very Likely $7 + 70 points 1 2 3 4 5 6 7 $14 1 2 3 4 5 6 7 140 points 1 2 3 4 5 6 7

5. Please briefly explain the rational behind your choice.

____________________________________________________________________

____________________________________________________________________

166

APPENDIX C

EXPERIMENT INSTRUMENTS FOR POSTSCRIPT

167

AIRLINE CONTEXT

TREATMENT A

High-Priced Airline Ticket

168

Dear Participant, o We are seeking your true reactions to a situation that you might actually experience in

daily life.

o After reading the scenario, please respond to the questions in a natural manner --

the way you believe you would actually react.

Please imagine yourself in the following situation How would you like to pay for the airline ticket? [Exchange rate: $10 = 500 miles] Please rank the following 5 options on a scale of 1 to 5:

1 = most preferred 5 = least preferred

$1,200

$860 +

17,000miles

$600 +

30,000miles

$240 +

48,000miles

60,000 miles

_______

_______

_______

_______

_______

You are on the phone with an airline, securing a roundtrip ticket to visit your uncle whom you really like and admire. Since it is not an

advance purchase, you must pay full price for the ticket. The price of the ticket is $1,200.

You have a frequent flier account with this particular airline. You have 60,500 miles in your frequent flier account, and you have

sufficient cash too.

169

AIRLINE CONTEXT

TREATMENT B

Mid-Priced Airline Ticket

170

Dear Participant, o We are seeking your true reactions to a situation that you might actually experience in

daily life.

o After reading the scenario, please respond to the questions in a natural manner --

the way you believe you would actually react.

Please imagine yourself in the following situation How would you like to pay for the airline ticket? [Exchange rate: $10 = 500 miles] Please rank the following 5 options on a scale of 1 to 5:

1 = most preferred 5 = least preferred

$560

$420 +

7000miles

$280 +

14,000miles

$140 +

21,000miles

28,000 miles

_______

_______

_______

_______

_______

You are on the phone with an airline, securing a roundtrip ticket to visit your uncle whom you really like and admire. Since it is not an advance purchase, you must pay full price for the ticket. The price

of the ticket is $560.

You have a frequent flier account with this particular airline. You have 28,500 miles in your frequent flier account, and you have

sufficient cash too.

171

AIRLINE CONTEXT

TREATMENT C

Low-Priced Airline Ticket

172

Dear Participant, o We are seeking your true reactions to a situation that you might actually experience in

daily life.

o After reading the scenario, please respond to the questions in a natural manner --

the way you believe you would actually react.

Please imagine yourself in the following situation

How would you like to pay for the airline ticket? [Exchange rate: $10 = 500 miles] Please rank the following 5 options on a scale of 1 to 5:

1 = most preferred 5 = least preferred

$180

$135 +

2250miles

$90 +

4,500miles

$45 +

6,750miles

9,000 miles

_______

_______

_______

_______

_______

You are on the phone with an airline, securing a roundtrip ticket to visit your uncle whom you really like and admire. Since it is not an advance purchase, you must pay full price for the ticket. The price

of the ticket is $180.

You have a frequent flier account with this particular airline. You have 9,500 miles in your frequent flier account, and you have

sufficient cash too.

173

RESTAURANT CONTEXT

TREATMENT A

Fine-Dining Restaurant

174

Dear Participant, o We are seeking your true reactions to a situation that you might actually experience in

daily life.

o After reading the scenario, please respond to the questions in a natural manne r--

the way you believe you would actually react.

Please imagine yourself in the following situation

How would you prefer to pay?

[Exchange rate: $10 = 500 points] Please rank the following 5 options on a scale of 1 to 5:

1 = most preferred 5 = least preferred

$68

$52 +

800 points

$34 +

1,700 points

$18 +

2,500 points

3,400 points

_______

_______

_______

_______

_______

You are a member of the student association. It is the end of the quarter. As usual, the association holds a party at a fine dining

restaurant for all members to celebrate this year’s achievements. Everyone gets a separate check to pay his/her meal. Your bill for

the meal in this fine dining restaurant is $68.

This fine dining restaurant has a loyal customer reward program for customers to accumulate points at each visit. As a frequent guest, you have collected 3,500 points in your account over the

past few years, and you have sufficient cash too.

175

RESTAURANT CONTEXT

TREATMENT B

Casual-Dining Restaurant

176

Dear Participant, o We are seeking your true reactions to a situation that you might actually experience in

daily life.

o After reading the scenario, please respond to the questions in a natural

manner--the way you believe you would actually react.

Please imagine yourself in the following situation How would you prefer to pay?

[Exchange rate: $10 = 500 points] Please rank the following 5 options on a scale of 1 to 5:

1 = most preferred 5 = least preferred

$32

$24 +

600points

$16 +

800points

$8 +

1,200 points

1,600 points _______

_______

_______

_______

_______

You are a member of the student association. It is the end of the

quarter. As usual, the association holds a party at a casual dining restaurant for all members to celebrate this year’s

achievements. Everyone gets a separate check to pay his/her meal. Your bill for the meal in this casual dining restaurant is $32.

This casual dining restaurant has a loyal customer reward

program for customers to accumulate points at each visit. As a frequent guest, you have collected 1,700 points in your account

over the past few years, and you have sufficient cash too.

177

RESTAURANT CONTEXT

TREATMENT C

Quick-Service Restaurant

178

Dear Participant, o We are seeking your true reactions to a situation that you might actually experience in

daily life.

o After reading the scenario, please respond to the questions in a natural

manner--the way you believe you would actually react.

Please imagine yourself in the following situation

How would you prefer to pay?

[Exchange rate: $10 = 500 points] Please rank the following 5 options on a scale of 1 to 5:

1 = most preferred 5 = least preferred

$6

$4 +

100points

$3 +

150points

$2 +

200points

300 points

_______

_______

_______

_______

_______

You are a member of the student association. It is the end of the

quarter. As usual, the association holds a party at a quick service restaurant for all members to celebrate this year’s achievements.

Everyone gets a separate check to pay his/her meal. Your bill for the meal at this quick service restaurant is $6.

This quick service restaurant has a loyal customer reward

program for customers to accumulate points at each visit. As a frequent guest, you have collected 400 points in your account over

the past few years, and you have sufficient cash too.