Price Awareness and Consumers’ Use of Deals in Brand Choice

There is evidence that consumer knowledge of prices is limited, implying that, on occasions, consumers may not be fully informed of prices when making a brand purchase. On such occasions, how do consumers make their brand choice decision? One possibility is that consumers use their expectation of prices. This raises an interesting question. To what extent is brand purchase either a function of preferences and posted prices or, of preferences and expectation of brand prices? Another important issue relates to the role of displays and features in simplifying consumer brand choice. First, do promotions cause consumers to restrict their attention to only promoted brands? Second, do promotions affect the price aware consumers more than the price unaware consumers? Our study uses scanner data on ketchup and peanut butter categories to answer the foregoing questions. We find that between 40 and 50% of the purchases are made by consumers using expectations of prices rather than posted prices. Consumers using price expectations may be thought of as being “unaware” of prices. We also find that promotions cause some consumers to focus exclusively on promoted brands, and this effect is greater on the price aware consumers than on the price unaware consumers. Our findings have an important bearing on the rationality of consumer expectation of prices, especially of the promoted brands. Price aware consumers act as a check against firms promoting without accompanying price cuts.     

Consumer price awareness in food shopping: the case of quantity surcharges

Quantity surcharges, higher unit prices on larger sizes than smaller sizes, are often found among grocery items. In this study we consider the question of why consumers buy surcharged goods. We hypothesize that it is the consequence of a failure to price search, and that some buyers purchase larger sizes in the belief they are cheaper, thus avoiding the need for price comparisons. In the analysis we examine canned tuna, using 1990 data from 54 grocery regions on sales, prices, and consumer demographics. Results support the hypothesis. We find evidence that buyers of surcharged items are mainly those with high time and information costs.     

I guess that is fair: How the efforts of other customers influence buyer price fairness perceptions

Past research has demonstrated that consumers' price fairness judgments are influenced by comparisons between the offer price they receive and the prices paid by other consumers for the same product offering. In today's digital age, reference points for purchases are more prevalent than ever. However, investigations on how certain inputs of the transaction affect these judgments is lacking. Specifically, extant research has failed to account for how the purchase efforts of other consumers can influence one's own price fairness evaluations. Moreover, relatively little empirical research has endeavored to understand the simultaneous cognitive and affective processes that explain how consumers arrive at price fairness judgments. To address these gaps in the literature, we introduce two studies aimed at understanding the process through which the salient efforts of referent consumers serve to mitigate perceptions of price unfairness when two customers pay different prices for the same product. The findings support a dual‐process model whereby the efforts of other (referent) customers serve to simultaneously reduce buyer anger and increase buyer understanding of the price disparity, ultimately mitigating perceptions of price unfairness.     

Loyalty differences in the use of internal and external reference prices

Recent findings in reference price research suggest that consumer characteristics may affect whether they use an internal reference price (IPR) or an external reference price (ERP) in price judgments. In this paper, we investigate the role of one such characteristic, brand loyalty, in the use of either type of reference price. Specifically, we employ a latent class-type approach to divide consumers on the basis of their brand loyalty into an ERP and an IRP segment. Analysis of the margarine and liquid detergents categories shows that consumers who are highly loyal to a brand are likely to use external reference prices whereas less brand-loyal consumers rely on internal reference prices. We discuss the implications of this finding and suggest directions for future research.     

Investigating the unobserved heterogeneity in consumers’ sensitivity to the price of gasoline

We empirically examined how gasoline prices impact consumers’ shopping behaviors. Using individual panel data on gasoline transactions, we found that gasoline prices generally have a statistically and economically significant impact. However, our disaggregate analysis indicated that, across consumers, considerable heterogeneity was present in the underlying sensitivity to the price of gasoline and in the income effect, resulting from fluctuating gasoline prices. More interestingly, the significant effect of gasoline prices was largely driven by the consumers with large purchase volume, and consumers with the highest level of gasoline consumption remained almost perfectly insensitive to the price of gasoline. Such heterogeneity is also present in the effect of gasoline prices on grocery expenditures, and notably, consumers with the largest purchase volume were not associated with statistically significant changes in grocery expenditures. Theoretical background suggests that the financial constraints of consumers and primary vehicle use may explain about the differences in responses to gasoline prices. Results based on individual-level data allowed for a comprehensive understanding of how and how much gasoline prices affect consumer behaviors and showed that inelastic gasoline demand and the considerable income effect due to gasoline prices may not best describe the effect of gasoline prices.     

Purchase frequency,sample selection,and price sensitivity: The heavy-user bias

We study the relationship between purchase frequency and volume and choice behavior as summarized by brand preferences and price sensitivity. Our most striking finding is that consumers with high purchase frequency or high purchase volume are much more price sensitive and have more sharply defined preferences for national brands than consumers with low frequency or low volume of purchase. In much of the choice literature, analysis is confined to households that have on average a larger number of purchases than is representative of the ERIM panel. Our findings suggest that some caution should be exercised in interpreting studies that employ purchase-frequency or purchase-number sample inclusion rules. Our findings also support an information theoretic point of view in which households become more price sensitive via costly acquisition of information about the distribution of prices.We acknowledge helpful comments from Greg Allenby and Bob Blattberg. Support from the Micro-Marketing Project at the Graduate School of Business at the University of Chicago is gratefully acknowledged. Byung-Do Kim is the corresponding author.     

Increasing Price Transparency: Implications of Consumer Price Posting for Consumers' Haggling Behavior and a Seller's Pricing Strategies

In an attempt to gain a better position in haggling, consumers often seek a seller's pricing information (e.g., whether the posted price is negotiable, the discount and transaction prices) before going to that seller. Although traditionally difficult to obtain, such information is becoming increasingly available due to consumer price posting (CPP), whereby consumers post and share their purchase price information on the Internet. In this analytical study, we consider a market in which a seller, who chooses between a fixed price policy and a haggling policy, serves two types of consumers who differ in their willingness to pay and haggling costs. We explore how CPP can affect consumers' behavior and the seller's pricing strategies (i.e., pricing policy and the associated prices). In the absence of CPP, our model features a two-sided uncertainty: the seller does not know individual consumer's type and thus may find it optimal to use a haggling policy to price discriminate consumers, whereas consumers do not readily observe the seller's cost type and pricing policy, and thus are uncertain whether their haggling will be fruitful. In the presence of CPP, consumers' uncertainty about the seller's pricing policy is resolved. Because CPP can improve price transparency, inhibit consumers' acceptance of a posted price and spur price haggling, it seems apparent that it should benefit consumers and hurt the seller. However, our analysis shows that CPP can lead to fewer purchases, higher prices and even a greater seller profit. It further shows that although CPP surely increases information accessibility, it can also reduce the amount of information available to consumers. These results are in sharp contrast to the conventional wisdom in the literature.     

Retail Market Power in a Shopping Basket Model of Supermarket Competition

Supermarket retailers typically operate with relatively low margins, suggesting a highly competitive retail environment. However, despite the fact that consumers purchase an entire shopping basket at a time from supermarkets, this evidence is largely based on models of retail competition with single-category purchases. In this paper, we develop and test an empirical model of retail price competition that explicitly accounts for the effect of demand complementarity among items in consumer shopping baskets. Relative to the case where consumers purchase products with independent demands, we demonstrate that equilibrium prices are higher for all items when retailers take demand-complementarity into account. Our findings indicate that non-price strategies intended to encourage complementarity, such as co-merchandising, strategic shelf-positioning, or featuring complementary goods tend to soften price competition, and lead to higher equilibrium prices.     

Does consumer knowledge affect consumer responses to advertised reference price claims?

As expected, internal reference prices (IRPs) and purchase intentions for two product categories (microwave ovens and disposable razors) differed according to whether consumers possessed a high or low level of consumer knowledge about the product in this factorial design experiment. Contrary to theory and expectations, neither internal reference points nor purchase intentions were affected by exposure to comparative price advertisements. Students were used as subjects in a before-after procedure with approximately two weeks between pre- and postmeasures of IRPs and purchase intentions. Postmeasures were taken immediately after exposure to ads containing three levels of advertised reference prices. t tests indicated differences between high and low knowledge group IRP means before ad exposure. However, no ANOVA differences were detected in change in IRP or purchase intention scores after ad exposure. © 1994 John Wiley & Sons, Inc.     

Currency Substitution and Price Endings: Right Digit Effect

ABSTRACT

The strategic manipulation of prices. rightmost digits has been a tactic used by retailers in the western world for decades. By studying the internationalization of pricing tactics in a global economy, our research adds a much needed contribution to the literature of price endings and pricing tactics in global markets. We find that at lower price levels, consumers exposed to a 99 ending price in a currency substitution market are more likely to purchase the product compared to consumers in the US market. At higher price levels, on the other hand, consumers in either market situation exhibit no change in purchase intentions. Thus, the 99 ending tactic has no effect on consumers when the product is expensive. The use of the right digit effect by managers in a currency substitution/ dollarized economy as a way of persuading consumers to buy is still likely to be more successful compared to the USA market. As such, firms in a dollarized economy should structure their pricing strategies while taking into consideration the type of product they are offering and the consumer market they are dealing with.     

Internal reference price response across store formats

Reference price models have a long tradition in marketing and consumer research. Pricing strategies can utilize consumer response to gains and losses relative to internal reference prices, which are price expectations developed from past-observed prices. Consequently, many previous studies have been devoted to analyzing differences in internal reference price response across product categories and consumer characteristics. However, knowledge about internal reference price response across different store formats is missing. Our study aims to fill this research gap. To do so, we estimate a reference price model for the same set of brands and the same sample of consumers across two store formats (discount chain vs. supermarket chain). The prices for the brands in our model are similar across store formats. Results from our proposed model show that the same consumers are loss-averse at the discount chain while gain-seeking at the supermarket chain. Predicted by previous literature, we attribute the difference in internal reference price response to the different price image of the store formats. Overall, our research contributes to the reference price literature and provides important implications for pricing strategies at stores with different price image.     

Price-aware enhanced dynamic recommendation based on deep learning

Price is one of the essential elements influencing consumer purchase behavior. Like consumers’ preferences in products, their price preferences also dynamically change over time. However, dynamic price preferences haven’t been fully considered in existed recommendation studies. In this study, we propose a deep learning-based dynamic recommendation model by considering consumers’ dynamic preferences in both product and price. We specially design a review-and-rating-based sequence generator to select products whose prices the consumers are satisfied with to form the new purchase sequence. We also develop a multi-level attention mechanism in the transformer layer to explore the correlations between consumers’ price choices and to combine the price preferences with the product preferences. Experimental results show the proposed model outperforms the state-of-the-art models on some real-world datasets. Our findings can help retailers understand consumers’ price preferences and make informed decisions related to pricing, discounting, and bundle sales strategies.     

The Impact of Store-Price Signals on Consumer Search and Store Evaluation

Always low price (ALP) and low price guarantee (LPG) are store-price signals that retailers frequently use to induce favorable store-price image and discourage consumers from comparing prices across stores. Although both policies signal low prices, only LPG is an obligatory promise to beat rival stores’ prices. Results of two shopping simulations show that when consumer search costs are relatively low, ALP may effectively discourage consumer search whereas LPG may trigger more search. Paradoxically, consumers tend to evaluate ALP stores less favorably (as having lower integrity and higher self-serving intention) than LPG stores even when both signals appear to be credible. These findings suggest that LPG is a superior tactic for creating a favorable store image while ALP is more effective for discouraging consumer search. The results also indicate that consumers visit fewer stores when the LPG is not a credible signal of lowest market price than when it is credible. This is because consumers are inclined to either claim discounts or refunds at the non-credible LPG store or to purchase at the competing store with a lower price rather than continue searching.     

Purchase Behavior and Psychophysiological Responses to Different Price Levels

The aim of the study was to examine emotional processes when product prices for different brands were changed. In a within‐subjects design, the participants were presented purchase decision trials with 14 different products (seven private label and seven national brand products) whose price levels were changed while their facial electromyography (EMG) and electrodermal activity were recorded. The results suggest that low prices and national brand products induce higher positive emotions indexed with zygomatic EMG compared to high prices and private label products. Also, positive emotions are related to greater purchase intent. Naturally, a low price has also a direct positive influence on purchase intent. However, the involvement of emotions and the influence that price and brand have on elicitation of emotions may be one explanation for consumers’ varying purchase behavior. The results highlight the importance of emotional factors in pricing research and support the usefulness of psychophysiological measures in the consumer research.     

Consumer responses to characteristics of price-matching guarantees: The moderating role of price consciousness

The present study develops and tests a conceptual model of consumer response to different types of price-matching characteristics (i.e., refund depth, length, and scope) across consumer segments with varying levels of price consciousness. A computer shopping simulation results show that a deep refund is interpreted as a signal of low prices by nonprice conscious consumers. However, price conscious consumers are found to associate deep refunds with increased prices, an unintended outcome for the retailer. The effects of price-matching characteristics on search and purchase behavior were also found to vary across more and less price conscious consumer segments.     

Can't Buy Me Green? A Review of Consumer Perceptions of and Behavior Toward the Price of Organic Food

Support for organic farming is a promising policy for improving sustainability in the food sector. Further consumer demand, however, is hindered by high prices. We review research from 2000 to 2014 on the role of perceived price, income, price knowledge, willingness to pay, and reactions to price changes on organic food. We find that price is the major perceived barrier to purchase. Income is only a partial explanatory factor and is superseded by psychographic variables. Willingness to pay a premium is around 30% (ranging from 0% to 105%) and depends on consumer segments and product category. Price knowledge is vague, and organic consumers' price sensitivity is relatively lower than that of occasional or nonorganic consumers. The results suggest that further market differentiation in terms of organic consumer segments and food categories is necessary. Furthermore, we discuss detailed implications for public policy and practice and present a future research agenda.     

Consistent price endings increase consumers perceptions of cheapness

Should marketers make the last digit of a sale price consistent with that of its original price? Across multiple studies, including field studies and studies using student and non-student samples and various product categories, this research shows that price perception and purchase intention are related to consistency between the sale price and original price. The price perception of the deduction is moderated by the consistency between the final digit in the prices. First, consumers perceive sale prices as cheaper and have a higher purchase intention when the rightmost digit in a sale price is the same as in the original price—a phenomenon this study refers to as the “consistent ending price effect.” Second, the consistent ending price effect occurs when prices are at least three digits long, but not for two-digit prices. Finally, the study demonstrates the mediating role of processing fluency in the link between consistent ending price and price perception.     

Empirical Testing of the Reference-Price Effect of Buy-Now Prices in Internet Auctions

Retailers selling items through Internet auctions frequently use buy-now prices (BNPs), which allow the immediate selling of an item to consumers at a fixed price. Previous research has proposed several theories of the usage of BNPs by bidders. We study the usage of BNPs from a seller's point of view. We propose that a retailer may use BNPs as external reference prices, influencing bidders’ valuations in Internet auctions. We focus on the effect of BNPs on bidders’ willingness to pay (WTP) and study under what conditions a BNP can be effectively used as an external reference price. Results of two empirical studies clearly indicate that BNPs have a reference-price effect. In addition, we find that this effect is moderated by (1) the difficulty of value assessment and (2) product value.     

高价值农产品价格的波动特征与传导效应——基于中国荔枝市场的经验研究

借助2012—2019年中国荔枝龙眼产业技术体系的公开价格数据,采用时间序列相关模型对荔枝产业链上下游价格的波动特征与传导效应进行实证分析。研究表明,收购价格和零售价格存在波动集聚的特征,收购价格波动存在负的非对称性。收购价格和零售价格之间存在格兰杰因果关系,且相互影响具有一定的时滞性。从短期看,零售价格受到收购价格冲击的影响更大;从中长期看,零售价格对收购价格的冲击持续时间更长。     

Do Consumers Care about how Prices are Set?

Using a survey approach, we ask consumers to reveal their preferences over pricing schemes that may differ in terms of the average price of consumption, the amount of price variation, and the probability of being rationed. We find that consumers dislike pricing schemes that vary prices more but that they are willing to trade off price variation and rationing. Surprisingly, they are not willing to trade off an increase in price variation for a decrease in expected prices. We discuss the implications of these findings for firm pricing policies.