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The role of mood in price

Chung-kue Hsu and Ben S. Liu

In spite of the prevailing use of sales promotions in consumers’ purchase

environment, much research has relied on panel or scanner data to measure
the effects of price promotions on sales and market share (e.g. Blattberg and
Neslin, 1990). However, we know less about the underlying process by which
consumers are affected by price promotions and the factors which moderate
consumers’ responses to price promotions (Nowlis, 1996). Some of the
moderating factors include promotion intensity by a brand in the consideration
set, the composition in terms of price and quality of the choice set, consumer-
specific characteristics and situational variables (see Nowlis ,1996). This
paper suggests that consumers’ mood, among many other factors, may
influence their evaluations of price promotions through its effect on perceived
transaction value. In the consumer behavior literature, mood effects have been
identified to emerge on service encounters, point-of-purchase stimuli and
communications (Gardner, 1985). Nonetheless, to the best of our knowledge,
the effects of moods on price promotions have not been examined. The
purpose of this paper is to investigate the role of mood in price promotions.
This paper is organized as follows. First, mood effects identified in prior
literature are briefly reviewed. Subsequently, based on the conceptualization
and findings in pricing studies, in particular, Grewal et al.’s (1996) study,
hypotheses regarding mood effects on consumers’ value perception in a
price promotion context are proposed. Finally, experimental findings and
implications of this study are discussed.

Conceptual background
Mood effects
Mild, pervasive and Moods are defined as mild, pervasive, and generalized affective states (Isen,
generalized affective 1984) that are subjectively perceived by individuals (Gardner, 1985). Based
states on the accumulated research on affect and persuasion, individuals’ feelings,
moods and emotions can influence their evaluations of people, objects and
issues, regardless of the relevance between the affect and the attitude object
(Petty et al., 1991). Specifically, it has been suggested that people’s
judgments and evaluations tend to be congruent with their current mood
states (Clark and Isen, 1982; Gardner, 1985; Johnson and Tversky, 1983).
The effect of moods on judgments is explained in terms of the ability of
mood to enhance the accessibility of mood-congruent associations by
serving as a retrieval cue for similarly toned material stored in memory
(Clark and Isen, 1982; Isen et al., 1978). Thus, when evaluating an object,
people in a positive mood will more readily access material that is positive
in tone rather than negative or neutral. In contrast, people in a negative mood
will more readily retrieve information that is negative in tone rather than
positive or neutral. Bower et al. (1981) found that when reading a story,
happy readers paid more attention to affectively positive material of the

The authors thank Kent Monroe for guidance to the revision and the participants in
the Pricing Camp at the University of Illinois, September 25-28, 1997, for their
valuable comments.

story than did sad readers. Hence, mood may affect individuals’ evaluative
judgments through its influence on the attention paid to different aspects of
the information. Specifically, people in a positive mood may attend more to
favorable aspects of information whereas people in a negative mood may
attend more to unfavorable aspects (Adaval, 1996).
Based on the preceding discussions, consumers’ moods are expected to bias
their evaluations of price promotions in a mood-congruent direction.
However, this issue has not been empirically investigated. Furthermore, we
are interested in understanding the mechanism by which mood influences
consumers’ responses to price promotions.

Pricing research
Pricing research literature Price and quality have been identified as the two basic components of value
in pricing research literature (see Grewal et al., 1996). Dodds and Monroe
(1985) proposed a basic model for perceived value, in which perceived value
is positively influenced by perceived quality and negatively influenced by
perceived monetary sacrifice. The perceived value of marketers’ offerings
can be further promoted by comparative price advertising, in which the
marketers emphasize that their selling price is a bargain relative to a higher
reference price, i.e. the marketer’s regular or former price, a manufacturer’s
suggested retail price, or a competitor’s price (Biswas et al., 1993).
Monroe (1979) defined perceived value as the trade-off between perceived
quality and perceived sacrifice. Monroe and Chapman (1987) further
separated the overall perceived value of an offering into two elements –
perceived acquisition value and perceived transaction value. Perceived
acquisition value is conceptualized as the buyers’ perceived trade-off of the
gains or benefits received from acquiring the product or service relative to
the sacrifice incurred when making the acquisition. Perceived transaction
value is conceptualized as the evaluation of psychological satisfaction or
pleasure that would be obtained from taking advantage of the financial terms
of the price deal. Grewal et al. (1996) then developed a model of the effects
of comparative price advertising on consumers’ perceptions of value. Their
proposed model has three exogenous constructs: buyers’ perceptions of
product quality, advertised selling price and advertised reference price, and
five endogenous constructs: internal reference price, perceived acquisition
value, perceived transaction value, willingness to buy and search intention.
This model is shown in Figure 1.

Perceived + Perceived + Willingness

Quality Acquisition Value To Buy


Advertised – Perceived Search
Selling Price Transaction Value Intention

+ +

Reference Price

Reference Price

Source: Grewal, al. (1996)

Figure 1. Model of the effects of comparative price advertising on perceptions

of value


Transaction value In particular, perceived transaction value is relevant to our study. Grewal et
al. (1996) found that consumers’ perceived transaction value is influenced
by the advertised selling price. By definition, perceived transaction value
involves consumers’ assessment of psychological satisfaction or pleasure
from taking advantage of a price deal. It is likely that consumers’ subjective
mood states can either enhance or decrease this level of psychological
satisfaction. Furthermore, perceived transaction value has its significance in
influencing consumers’ final buying decisions. Across the four studies
Grewal et al. (1996) did to test their model, the relationships between
perceived transaction value and perceived acquisition value were found to be
significant, with standardized estimates ranging from 0.41 to 0.68.
Moreover, perceived acquisition value was closely related to willingness to
buy, with standardized estimates of 0.60 to 0.74. Consequently, an increase
in consumers’ perceived transaction value can positively affect consumers’
perceived acquisition value, which then will in turn enhance their
willingness to buy a product.
In Grewal et al.’s (1996) model, another construct, internal reference price,
was also found to be influenced by the advertised selling price. The next
question is: Will consumers’ internal reference price also be affected by
mood? Internal reference price has been defined in various ways, including
aspiration, market, and historical prices; adaptation-level, lowest, and
highest market prices; fair price; normal price perceptions; average market
price, expected future price and lowest market price (see Biswas et al.,
1993). However, all empirical studies of reference prices using scanner data
have assumed that past prices are important components of the reference
price formation process (Kalyanaram and Winer, 1995). Monroe (1984)
argues that internal reference price, existing as a point or a range, is stored in
consumers’ memory and helps them to evaluate the acceptability or fairness
of actual prices. Accordingly, observed prices, i.e. advertised selling price
and advertised reference price, are compared against the internal reference
price. And, buyers’ internal reference price adapts to the anchors (i.e.
advertised selling price and advertised reference price) presented in the
advertisements (Grewal et al., 1996). In view of the facts – (1) internal
reference price exists in consumers’ memory and (2) it is adaptive to
observed prices – we do not propose any specific mood effects on
consumers’ internal reference price.
Mood may influence In summary, we propose that mood may influence consumers’ responses to
consumers price promotions by affecting their perceived transaction value. Specifically,
since mood has been found to bias evaluations and judgments in a mood-
congruent direction, it is anticipated that consumers’ perceptions of
transaction value will be greater under positive mood than under negative
mood. Furthermore, shoppers in a positive mood are likely to attend more to
the favorable side of discount offerings (e.g. obtaining products at lower
costs) or they may retrieve positive-toned material from their memory at the
time of judgment. Consequently, even a small extra discount may add to
their pleasure. In contrast, it is likely that shoppers in a negative mood will
focus on the unfavorable side of discount offerings (e.g. the monetary
sacrifice of obtaining a promoted product); or their negative mood can
enhance the accessibility of negative-toned material from memory. In this
case, a significantly larger discount will be required to be appreciated by
these people. Based on previous discussions, the following hypotheses are


H1: When encountering a price promotion, consumers in a positive mood,
in contrast to consumers in a negative mood, will achieve a greater
perceived transaction value.
H2: Mood will influence the relationship between the level of price
discounts and perceived transaction value.
These two hypotheses are presented in our proposed model as shown in
Figure 2.

In Grewal et al.’s (1996) model, perceived quality is based on consumers’
previous knowledge or familiarity with the product category and the product
information presented in the advertisement. This present study follows their
conceptualization. Familiar, favorable brands as well as favorable attribute
information was used to engender good perceived quality for our test
products. A pretest was conducted to determine the two test products used in
the main study. Our goal was to select two products that were familiar to and
perceived to be of high quality to our subjects. The results indicated that GE
answering machine and Magnavox TV were consistently rated higher on all
items than the other two products. Therefore, these two products were
chosen to be used in the main study.

Subjects and design

Introductory business A total of 132 undergraduate students enrolled in introductory business
courses courses participated in this study to earn extra credit. A 2 (mood: positive or
negative) × 4 (discount level: 10 percent, 25 percent, 40 percent, 60 percent)
between-subject experimental design was employed. Subjects were
randomly assigned to one of the eight cells. Each subject was given
information about two test products. Order of presentation was balanced so
that half of the subjects read the information about TV first while the other
half the information about answering machine first.

Subjects were told that they would undertake two tasks in the experiment. In
the first task, subjects were asked to recall a recent life event (detail is
described in the manipulation section) to induce either a positive or negative
mood. After mood induction, their mood was measured, which will be
referred to as prior-to-promotion mood hereafter in this paper. In the second
task, they were asked to evaluate two of the promotional items. They were
exposed to an advertising copy for the first product, which contained the
brand name and five product attributes. Their perceived regular prices of the


Discount level + Perceived

transaction value

x : represents a moderating effect of mood on the positive relationship

between the discount level and perceived transaction value

Figure 2. Proposed mood effects on perceived transaction value


product were then measured. Subsequently, they were shown another ad
which included the same descriptions of the product with a discount
message. Perceived quality, perceived transaction value and knowledge were
measured. They were then exposed to an ad copy of the second product and
repeated the same process as they did for the first product. At the end of the
task, subjects were required to recall their mood at the stage of evaluating
the products.

Life event survey Mood: Life event survey (Schwarz and Clore, 1983) was used to induce
either a positive or negative mood. All subjects were told that a life-event
inventory was being developed. Subjects in the positive (negative) mood
condition were instructed that positive (negative) events were needed. They
were asked to recall in detail and write down a recent event in their personal
lives that made them feel either very positive or negative.
Discount level: Subjects were told that a local marketer was interested in
understanding consumers’ responses to the selected items for an upcoming
holiday sale. Two separate discount messages of two products, i.e. TV and
answering machine, were provided. Both products were on sale at the same
discount level (10 percent, 25 percent, 40 percent or 60 percent off the
marketer’s regular price).

Independent variables
Prior-to-promotion mood and discount level were the two independent
variables of interest in this study. Prior-to-promotion mood was measured by
two feeling items on an 11-point scale anchored by unhappy – happy and
bad – good. The mean of the two feeling items was then calculated. Discount
was divided into four levels – 10 percent, 25 percent, 40 percent and 60
percent off.

Dependent variable
Perceived transaction value was the dependent variable of interest. Based on
Dodds et al. (1991), four items were used to measure perceived transaction
value. Subjects were asked to report their perceptions of transaction value in
this promotion condition as opposed to a no-promotion condition. The
subjects were asked to indicate on –7 to +7 scales to what extent:
(1) taking advantage of a price-deal makes them feel better;
(2) they find the advertised price reduction will help them save money;
(3) they would gain pleasure knowing that they would save money at this
reduced sale price; and
(4) taking advantage of this price-deal will give them a sense of joy.

Manipulation checks
Mood manipulation Mood manipulation was checked right after subjects recalled a positive or
negative life event. Out of the 132 participants, the reported prior-to-
promotion moods of 13 subjects were not consistent with the manipulation –
four people in the positive condition reported their moods lower than or
equal to 3 (on a 0-10 scale) while eight people in the negative mood
condition greater than or equal to 7.5. Therefore, these data were excluded
from our analyses, resulting in a sample size of 119. Results revealed that
those subjects exposed to the positive mood manipulation felt significantly
more positive than subjects exposed to the negative mood manipulation
(mean = 7.67 vs. 3.66, p = 0.0001).


Measurement assessment
The two items used to measure prior-to-promotion mood were found to be
highly correlated (r = 0.88, p = 0.001). The four items used to measure
perceived transaction value were found to be internally consistent
(alpha = 0.89); as were the ten items used to measure recalled mood at the
stages of evaluating the products (alpha = 0.94). Subjects’ knowledge about
and their perceived quality of the test products were consistent with those in
the pretest. Again, measures for these two variables were internally
consistent (alpha = 0.88 and 0.91, respectively). The results suggested that
the subjects’ knowledge level about (5.03 and 4.85 on 1-7 scales) and
perceptions of product quality of TV and answering machine were relatively
high (5.27 and 5.09 on 1-7 scales). In conclusion, these results indicated that
our measurements were reliable.

Effects of mood on perceived transaction value

Data of the two test Data of the two test products were analyzed separately. After eliminating
products outliers, 118 responses were analyzed for the TV ad and 116 for the
answering machine ad. Based on the resulting mood measurement, subjects
were split into two groups – those subjects whose mood scored greater than
five were classified into the positive-mood group and those scored less than
five into the negative-mood group. Eleven subjects’ prior-to-promotion
mood fell on the central point of the 0-10 scales (i.e. 5). Their moods were
considered neither positive nor negative, and thus these responses were
excluded from our hypothesis testing. ANOVA was used to test the
Hypothesis 1: ANOVA results are summarized in Table I and show a
significant main effect of mood on perceived transaction value for both TV
and answering machine. The perceived transaction value under the positive-
mood condition was significantly higher than the perceived transaction value
under the negative-mood condition – 4.65 vs. 3.85 (p = 0.02) for TV and
4.41 vs. 3.45 (p = 0.002) for answering machine. Therefore, hypothesis 1
was supported. The effect sizes are 0.50 and 0.66 for TV and answering
machine, respectively (see Table II and Appendix). These two values
represent medium and medium to large effect size (Cohen, 1977).
Furthermore, multiple contrasts were performed across four discount levels.
As presented in Table II, for both TV and answering machine, when
encountering a 25 percent or 40 percent discount, subjects in a positive
mood, as opposed to subjects in a negative mood, reported a greater
perceived transaction value.
Hypothesis 2: A significant interaction effect between mood and discount
level exists for TV in ANOVA model (F = 2.51, p = 0.06). The means of
perceived transaction value of each of the eight cells for both TV and
answering machine are presented in Table II and Figure 3. It was found that

TV Answering machine
Source df MSE F-value p df MSE F-value p

Mood 1 14.66 5.74 0.02 1 21.29 10.11 0.002

Discount 3 5.37 2.10 0.10 3 7.65 3.63 0.02
Mood × discount 3 6.42 2.51 0.06 3 3.62 1.72 0.17
Error 99 2.55 97 2.11

Table I. Results of ANOVA


Positive mood Negative mood Effect
Mean SD Mean SD t-value p size (d)a

TV 4.65 1.72 3.85 1.57 2.47 0.02 0.50b

10 percent discount 3.27 1.68 3.95 1.37 –1.15 0.26
25 percent discount 4.72 1.60 3.55 1.34 1.90 0.07
40 percent discount 5.19 1.38 3.63 1.58 2.70 0.01
60 percent discount 5.13 1.73 4.17 2.02 1.35 0.19
Answering machine 4.41 1.58 3.45 1.44 3.20 0.002 0.66c
10 percent discount 3.15 1.49 3.25 1.30 –0.18 0.86
25 percent discount 4.48 1.33 3.06 1.35 2.53 0.02
40 percent discount 4.91 1.26 3.38 1.39 2.95 0.007
60 percent discount 4.85 1.73 4.04 1.70 1.22 0.24
a Calculations of the effect sizes are included in the Appendix.
b This is a medium effect size.
c This is a medium to large effect size.

Table II. Summary of perceived transaction value

Perceived Transaction Value

5 TV: positive mood
TV: negative mood
4 Answering Machine:
positive mood
Answering Machine:
3 negative mood

10% 25% 40% 60%
Discount Level

Figure 3. Perceived transaction value as a function of mood and discount level

in a positive-mood condition, a relatively large increase in perceived

transaction value occurred as the discount level increased from 10 to 25
percent for both TV and answering machine. However, no such remarkable
changes were observed when the discount level increased from 25 to 40
percent or from 40 to 60 percent. On the other hand, in a negative-mood
condition, perceived transaction value of TV and answering machine did not
change much when the discount level varied from 10 to 25 percent or from
25 to 40 percent. Conversely, perceived transaction value increased notably
when the discount level increased from 40 to 60 percent.
Trend analysis Given the findings described above, a trend analysis (including linear,
quadratic, and cubic trends) was performed according to the procedure
suggested by Keppel (1973) and the results are reported in Table III. The
results of this trend analysis show that the mood × discount level interaction
is due largely to the divergent quadratic trends (concave in positive-mood
condition and convex in negative-mood condition as shown in Figure 3).
Specifically, 85 percent of the interaction sum of squares is produced by the
interaction of the two quadratic trends for positive mood and negative mood.
This is an interesting finding worth paying attention to.


Source SSE df MSE F-value

A: Discount level 28.96 3

Linear 28.14 1 28.14 11.04a
Quadratic 0.006 1 0.006 <1
Cubic 0.81 1 0.81 <1
B: Mood 14.66 1 14.66 5.74a
A × B (Mood × discount interaction) 52.61b 3
Linear 7.84 1 7.84 3.07
Quadratic 44.71b 1 44.71 17.54a
Cubic 0.057 1 0.057 <1
S/AB (Error) 99 2.55
a p < 0.05
b The divergent quadratic trends account for 85 percent of the interaction sum of squares

(85 percent = 44.71/52.61)

Table III. Summary of trend analysis for televisions

Although the interaction effect between mood and discount level was not
significant for answering machine in ANOVA model (p = 0.17), the similar
divergent quadratic trends across mood conditions can clearly be observed
from the concave versus convex curves shown in Figure 3.
The above results consistently show that the effects of discount level on
perceived transaction value were different across the two mood conditions;
hence, they support our hypothesis 2 that the effect of discount level on
perceived transaction value will be influenced by mood states.

Effects of discount level on perceived transaction value

Discount level was found to have a positive main effect on perceived
transaction value for the answering machine (F = 3.63, p = 0.02) and the
effect was smaller for TV (F = 2.10, p = 0.10). This result is consistent with
Grewal et al.’s (1996) finding of a negative relationship between advertised
selling price and perceived transaction value.
It was also observed in Figure 3 that across all discount levels, perceived
transaction values were consistently higher for the TV than for the
answering machine for subjects in either a positive or negative mood. As a
TV has a higher unit price than an answering machine, the same discount
percent results in higher dollar savings for TV than for answering machine.
Therefore, although the differences in perceived transaction value between
the two products were not significant, the consistent pattern may suggest that
consumers’ perceived transaction values are also influenced by dollar
amount savings.

Price promotions Our results show that the mood effects do exist as hypothesized. Mood
influences the effectiveness of price promotions through consumers’
perceived transaction value in a mood congruent direction. Our results also
show that the mood effects are asymmetric in positive and negative
conditions. As demonstrated in Figure 3, perceived transaction value varied
with discount levels in a concave curve fashion in the positive-mood
condition and a convex curve fashion in the negative-mood condition.
Specifically, when subjects were in a positive prior-to-promotion mood, the


perceived transaction value increased in a larger magnitude when the price
discount level increased from 10 to 25 percent than when the price discount
level increased from 25 to 40 percent or from 40 to 60 percent. On the
contrary, when subjects were in a negative prior-to-promotion mood, the
perceived transaction value increased in a larger extent when the price
discount level increased from 40 to 60 percent (see Figure 3).
Such a result provides further evidence for the theoretical rationale of our two
hypotheses – when shoppers are in a positive pre-shopping mood, a small
extra promotion can be perceived to be very positive whereas when they are
in a negative pre-shopping mood, a significantly larger promotion incentive is
needed to engender a positive perception. This finding is consistent with real
world practice. For example, store managers arrange various in-store
activities such as warm greeters in front of stores, cheerful decorations,
pleasant background music, etc.; all are designed to raise shoppers’ positive
mood, which is expected to lead to greater sales in their stores.
A construction of stimuli Finally, consumers’ perceived product quality was treated as an exogenous
was carried out construct in our study and no mood effects were hypothesized for this
construct. A careful construction of stimuli was carried out to ensure good
perceived quality of both test products. A post hoc analysis revealed no
significant differences in perceived quality between the positive and negative
mood conditions (mean = 5.28 vs. 5.25 for TV and mean = 5.18 vs. 4.97 for
answering machine).

Contributions and limitations

This study makes several contributions. It represents an initial research effort
to integrate mood literature into the managerially relevant area of pricing.
Prior research in marketing has investigated mood effects in various contexts
such as product evaluations and advertising effectiveness. This study
generalizes the application of mood effects in marketing research to
consumers’ perceived transaction value in the context of price promotions.
Accordingly, our understanding about the influence of mood states on
consumer behavior is advanced.
Second, this study refines Grewal et al.’s (1996) model of comparative price
advertising on perceptions of value by adding consumers’ prior-to-
promotion mood into their model. Consistent with Grewal et al.’s (1996)
suggestion that it would be useful to look at how consumer characteristics
(e.g. involvement, price consciousness, knowledge and inclination to take
risks) might affect consumers’ value perceptions, we examined the effects of
consumers’ mood. A main effect of consumers’ mood on perceived
transaction value as well as a moderating role of mood on the effect of
advertised selling price on perceived transaction value were found. Results
of this study suggest that consumer-related factors are likely to be influential
to consumers’ value perceptions, in particular, perceived transaction value.
Important to marketers The findings in this study are also important to marketers. Grewal et al.
(1996) found that an increased perceived transaction value will positively
influence shoppers’ perceived acquisition value, which will in turn increase
shoppers’ willingness to buy. In addition, it was found in this study that a
positive mood state produces a greater perceived transaction value. In view
of the above findings, it is important for store managers to implement some
programs (e.g. hostess greetings as conducted in Wal-Mart; in-store pleasant
music) to induce shoppers’ positive mood in the store, which would
eventually increase shoppers’ willingness to buy.


Positive or negative This study also has its limitations. A life event survey was used to induce a
mood positive or negative mood in this study. However, such a mood induction
method appears to be impractical in the real world. Future research may
consider inducing consumers’ mood through manipulations of retailer
controllable, store-based atmospherics (e.g. give chocolate to subjects before
exposing them to price promotions). Doing this may add to external validity
and managerial relevance of such research.
Two utilitarian products – TV and answering machine – were used as test
products and mood effects were found in both cases. However, Adaval
(1996) pointed out that the effect of affect on product judgments is likely to
be less for utilitarian products than for image products. Thus, a more distinct
mood effect on perceived transaction value may be observed on non-
utilitarian products. Future research may extend this present study by
investigating the mood effects on image-oriented, hedonic, or experiential
In addition, this study exposed subjects to price promotions in the form of
percentage discounts (percent off regular price). In view of our finding that
consumers’ perceived transaction values may also be influenced by the
savings in terms of dollar amount, it would be useful to examine different
formats of price comparison advertising, in which marketers compare their
advertised selling price with a reference price, e.g. manufacturer’s suggested
price or competitor’s price.
Furthermore, this present study has examined the effect of mood only on
perceived transaction value. Future research may investigate the
pervasiveness of mood effects by testing mood effects on the entire Grewal
et al. model, i.e. measuring the effects of mood on perceived acquisition
value, search intention, and willingness to buy. Such a study is expected to
offer a more complete picture about how mood works on consumers’
responses to price promotions and in turn lead to fruitful managerial

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Psychology, Vol. 45 No. 3, pp. 513-23.

Based on the d parameter in Cohen’s (1977) definitions of levels of effects size, which is:
| Mean1 – Mean2 |
d= ,
we calculate the effect size of mood for TV as
4.65 – 3.85 0.8
dTV = = = 0.5
2.55 1.6
and that for answering machine as

4.41 – 3.45 0.96

d AM = = = 0.66.
2.11 1.45

(Chung-kue Hsu is a doctoral candidate at the Department of Business Administration, the

University of Illinois at Urbana-Champaign, Illinois, USA and Ben Shaw-Ching Liu is an
Assistant Professor of Marketing at the University of Illinois at Urbana-Champaign, Illinois,