Paying less as a signal of competence

Abstract Past research suggests that cost‐saving behaviors such as couponing can trigger negative trait perceptions (e.g. that the consumer is being miserly), and consumers purchasing gifts may avoid use of coupons so as not to appear ungenerous. In contrast, we contend that cost‐saving can also send a positive signal. In five studies we show that cost‐saving enhances perceptions of consumer competence and financial management skills, which, in turn, can lead to more favorable brand perceptions. Using costly signaling theory, we further identify two boundary conditions for these signals to be perceived as genuine: (a) absence of ulterior motives (e.g., sponsored social media posts that diminish the authenticity of the signal) and (b) the presence of the quality being signaled (as higher‐class consumers are typically seen as competent). Our findings extend the scope of signaling theory to consumer behavior contexts, showing that costly signals must honestly convey positive qualities.