Examining framing effect in travel package purchase: An application of double-entry mental accounting theory

doi:10.1016/j.annals.2021.103265

Annals of Tourism Research

Volume 90, September 2021, 103265

https://doi.org/10.1016/j.annals.2021.103265 Get rights and content

Highlights

•
Subtractive framing is more favorable for customized travel package purchase.
•
Subtractive framing generates smaller pleasure attenuation and greater pain buffering.
•
Smaller pleasure attenuation leads to more favorable travel package decisions.
•
In the distant future, additive framing generates higher purchase intention.
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Pleasure attenuation only influences travelers with high price sensitivity.

Abstract

Based on the double-entry mental accounting theory, we explore the effect of option framing on travelers' purchase decisions regarding customized travel packages through three experiments. The results confirm that subtractive framing leads to higher purchase intentions and willingness to pay than additive framing. However, in the distant future, additive framing leads to higher purchase intention. Pleasure attenuation mediates the option framing effect on travel package purchase decisions, especially for travelers who make travel plans for the near future and those with higher price sensitivity. Pain buffering only plays a mediator role in student samples. The findings provide implications for travel agencies to adopt subtractive framing for customized travel packages and improve the hedonic experiences embedded in packages.

Introduction

With the advancement of information and communication technology and the increased use of the Internet, a growing number of travelers search for information and make travel bookings online. In 2018, a whopping 82% of all travel bookings were made on the Internet, usually via online travel agencies, and travel bookings accounted for 63% of all revenue in the travel industry (Condor Ferries, 2020). By world region, recent research on online travel agency revealed that the Asia-Pacific had the largest online travel agency market, with a 31.3% share in 2019, followed by Western Europe and North America (Research and Markets, 2020). By country, China, a significant player in the Asia-Pacific market, had the world's second-largest online travel agency market, trailing only the United States (Phocuswright Research, 2019).

A major product that online travel agencies provide to independent leisure travelers is the travel bundle, or travel package, which usually includes transportation, accommodation, and tourist activities at a discounted price. The advantages of travel packages include providing lower prices in packages and saving travelers the time and effort of searching for and evaluating various components of trips (Kim et al., 2020; Tanford et al., 2012). For online travel agencies, by comparison, offering travel packages increases the attractiveness of travel options and lowers operating costs associated with promotion, distribution, and transactions (Kim et al., 2018). In China, travel package sales remain one of the three largest revenue segments for online travel agencies, including Trip.com, which accounted for 13% of the total revenue in 2019 (Trefis, 2020). For years, travel packages have been popular in China's travel market because they reduce the uncertainties of travelers without travel experience as they expose themselves to unfamiliar destinations (Jin et al., 2014). Today, as online travel agencies in China slowly recover from the restrictions of the COVID-19 pandemic, sales of travel packages as a cost-saving revenue maker have become undeniable (Wei, 2020).

Because China's online travel agency market is highly competitive with both Western online travel agency giants such as Booking Holdings and Expedia and local online travel agencies such as Trip.com and Fliggy (PATA, 2020), online travel agencies have felt compelled to design and offer more appealing travel packages. Among them, customized travel packages, which give travelers options to tailor personal travel packages by adding or removing components, have become an emerging trend in China's online travel market. China's largest online travel agency, Trip.com, reported triple-digit annual growth since having introduced its customized travel packages in 2016 (Lubin, 2019). However, relative to abundant early research on all-inclusive package tours (e.g., Heung & Chu, 2000; Theuvsen, 2004; Wang et al., 2000), literature addressing customized travel packages has been scarce. The extant literature mainly proposes online travel packages as predetermined and explores how package features (e.g., pricing and product) influence purchase intention (e.g., Chiam et al., 2009; Tanford et al., 2012). As a consequence, research has failed to address the complex process of travelers' decision-making in customizing online travel packages by, for example, adding, removing, upgrading, and/or downgrading products (Jin et al., 2012).

Therefore, to fill that gap in the literature on customized travel packages, we aim to clarify how travelers perceive and respond to different methods of customizing packages in an experimental research design. Because travel package sales remain a significant revenue source for online travel agencies in China, we conduct experiments with Chinese travelers to provide online travel agencies with valuable insights and practical guidance on how to better frame and present customized travel packages online and thereby gain a competitive edge. In general marketing field, scholars have applied prospect theory (Kahneman & Tversky, 1979) to gauge the impact of product framing on consumers' purchase decision-making regarding customized products (e.g., Biswas & Grau, 2008 ; Levin et al., 2002 ; Park et al., 2000 ; Park & Kim, 2012). Thus, the first objective of our study is to examine the framing effects on travelers' purchase decisions when it comes to online travel packages. Because online travel packages are considered hedonic products, our study could contribute new knowledge to the literature on general marketing, which predominantly focuses on the framing effects of utilitarian products (Biswas & Grau, 2008; Levin et al., 2002; Park et al., 2000; Park & Kim, 2012).

We also explore the underlying mechanism of travelers' decision-making based on double-entry mental accounting theory (Prelec & Loewenstein, 1998). Based on prospect theory, double-entry mental accounting proposes two coupling coefficients—the pleasure of consumption and the pain of payment—as divergent routes underlying consumers' decisions when given the choice of multiple events that will provide various gains and/or losses (Prelec & Loewenstein, 1998). Because our study examines travelers' purchase decisions regarding customized travel packages, the mediating roles of the two coupling coefficients in double-entry mental accounting are investigated to elucidate why travelers make certain decisions when given different option frames. In addition, two propositions derived from Thaler's (1985) mental accounting theory are particularly germane to our study: consumer choice, influenced by temporal proximity, and diminished sensitivity to price based on a reference point.

Supported by those two propositions, we analyze how temporal distance and price sensitivity moderate travelers' decision-making processes in purchasing customized travel packages. The findings contribute to tourism literature by offering new knowledge about customized travel packages and expanding current understandings of travelers' decision-making processes and decision-making frames using classical mental accounting theory. In turn, the results could have meaningful implications for online travel agencies as they seek to optimize the design and sale of their online travel packages.

Section snippets

Framing effect and option framing

Coined by Kahneman and Tversky (1979), framing effects refer to differences in decision-making due to the way in which a problem or situation is formulated or described. The theoretical foundation of framing is prospect theory, which codes options as gains or losses relative to a neutral reference point (Kahneman & Tversky, 1979). Prospect theory explains the most famous, widely used type of framing, known as risky-choice framing, which proposes that individuals are risk-averse when the

Study 1

The chief purpose of Study 1 was to test both the main and mediation effects proposed in H1 and H2.

Study 2

The chief purpose of Study 2 was to test the moderation effect of temporal distance in the relationship between option framing and travel package decisions. Additionally, replication of Study 1 with a different sample (i.e., adult travelers instead of students). To increase the generalization of the results, we also changed the route from Guangzhou–Sanya to Guangzhou–Beijing, because Beijing was another top domestic destination for Chinese travelers at the time of the study (China Tourism

Study 3

Although Studies 1 and 2 both indicated the main effect of option framing on travel package decisions, the mediation effects of double-entry mental accounting on the relationship between option framing and travel package decisions were inconsistent between the studies. In response, the chief purpose of Study 3 was to test the mediation effects of double-entry mental accounting using another sample of real customers at a real travel agency. To further improve the generalizability of the results,

General discussion

The overarching purpose of this research was to explore whether and, if so, how option framing influences travelers' purchases of customized travel packages. Drawing from double-entry mental accounting theory, we develop a theoretical framework to reveal the underlying mechanism of travelers' purchase decision-making. Table 1 shows the results related to the hypotheses tested in the three experiments.

We verify the applicability of option framing effects in the context of purchasing customized

Declaration of competing interest

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

Acknowledgement

The authors gratefully acknowledge financial support from the National Natural Science Fund of China (NSFC) (grant number: 71601084). This work was also partial supported by Foundation of Institute for Enterprise Development, Jinan University, Guangdong Province (grant number: 2021MYZD01, 2020CP04, 2019GBAZD01), Jinan University Management School Funding Program (grant numbers: GY21011, GY21017), and Research Institute on Brand Innovation and Development of Guangzhou. The funding source had no

Tong Wen is a professor. His research focuses on small and medium tourism enterprises, corporate social responsibility, and tourist behaviors.

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Tong Wen is a professor. His research focuses on small and medium tourism enterprises, corporate social responsibility, and tourist behaviors.

Xi Y. Leung is an assistant professor. Her fields of expertise are information technology, social media, destination marketing, and experiment design.

Bin Li is an associate professor. His interest is the intersection of social and economic decision-making and well-being, mental accounting, purchase style, and happiness consumption.

Lingyan Hu is a PhD Student. Her interest is tourist consumer behaviors.

View full text

Examining framing effect in travel package purchase: An application of double-entry mental accounting theory

Highlights

Abstract

Introduction

Section snippets

Framing effect and option framing

Study 1

Study 2

Study 3

General discussion

Declaration of competing interest

Acknowledgement

Tourism Management

Journal of Retailing and Consumer Services

Journal of Retailing

Journal of Retailing and Consumer Services

Annals of Tourism Research

Tourism Management

Organizational Behavior and Human Decision Processes

Cornell Hotel and Restaurant Administration Quarterly

Journal of Experimental Social Psychology

Annals of Tourism Research

Annals of Tourism Research

Annals of Tourism Research

Annals of Tourism Research

Tourism Management

Organizational Behavior and Human Decision Processes

Annals of Tourism Research

Annals of Tourism Research

Tourism Management

A comparison of tourists’ valuation of climate change policy using different pricing frames

Journal of Travel Research

Soon or later? The effect of temporal distance on travel decisions

Journal of Travel & Tourism Marketing

Consumer choices under product option framing: Loss aversion principles or sensitivity to price differentials?

Psychology & Marketing

Online and off-line travel packages preferences: A conjoint analysis

International Journal of Tourism Research

Survey of Chinese urban and rural residents' traveling willingness in 2018

Online travel booking statistics 2020

The effect of price bundling on tourists’ extra expenditure: A mental budget approach

Current Issues in Tourism

Consumer choice between hedonic and utilitarian goods

Journal of Marketing Research

How does public recognition affect price sensitivity to green products? The role of self-construal and temporal distance

Psychology and Marketing

Framing effects in mixed price bundling

Marketing Letters

Innovative consumers and market mavens

Journal of Marketing Theory and Practice

Innovativeness and price sensitivity: Managerial, theoretical and methodological issues

The Journal of Product and Brand Management

Loss or gain? The role of message framing in hotel guests’ recycling behaviour

Journal of Sustainable Tourism

Introduction to mediation, moderation, and conditional process analysis: A regression-based approach

Mental accounting and changes in price: The frame dependence of reference dependence

Journal of Consumer Research

Important factors affecting Hong Kong consumers’ choice of a travel agency for all-inclusive package tours

Journal of Travel Research