The "fees - savings" link, or purchasing fifty pounds of pasta
By: Michael I. Norton and Leonard Lee .
Contributors: Lee, Leonard Whee-Chuen Lee-Loon; Harvard Business School. Division of Research
Series: Working paper / Division of Research, Harvard Business School -- 08-029; Working paper (Harvard Business School. Division of Research) -- 08-029
Publisher: Division of Research, Harvard Business School
Published: 2007
Place of publication: Boston]
Language: eng
Number of pages: 32
Description: Many consumers have had the experience of entering discount membership clubs to make a few purchases, only to leave with enough pasta to outlast a nuclear winter. We suggest that the presence of membership fees can lead consumers to infer a "fees - savings" link, spurring them to increase their spending independent of the actual savings afforded by such clubs. Using both field data and studies in which we created our own "membership clubs," we show that 1) fees serve as a signal of price discounts, such that stores that charge fees are perceived as offering better deals for identical items; 2) the presence of fees can increase consumer spending and overall store profitability; and 3) the presence of fees can drive choice of retail outlets, such that stores with membership fees are more popular even when they offer the same goods at the same prices as stores without fees.
Notes: "November 2007"--Publisher's web site.

Includes bibliographical references.