How consumers form product quality perceptions in absence of fixed posted prices: Interaction of product cues with seller reputation and third-party reviews

The uncertainty about product quality has increased in online settings, and consumers' often use multiple product cues to assess product quality. The authors have tested the simultaneous effects of multiple product cues in Pay-what-you-want (PWYW) online settings. PWYW lacks posted prices and allows buyers to decide the prices. This paper investigates how consumers process multiple cues of varying diagnostic nature simultaneously and form product quality perceptions. Specifically, study 1 examines the interactions among seller reputation, online product presentation, and external reference price and study 2 examines the interaction effect of third-party reviews and online product presentation and the external reference price. The results add to the theoretical domain by suggesting that consumers' online cue processing behaviour is much more complicated than previously presented in the literature.     

The Impact of Item Price Removal in Scanner Supermarkets: A Survey Study of Los Angeles Shoppers

The practice of removing item prices in scanner-equipped grocery stores has raised an important public policy issue relating to the ability of individual consumers to engage in effective shopping with less available price information at the point of purchase. This study investigated the likely impact of item price removal in scanner-equipped grocery stores as a function of consumers' use of price information, general consumer predispositions, and consumers' experience with scanner technology. Particular emphasis was placed on the likely effects of item price removal on disadvantaged consumers. The implications of the study for public policy are discussed.     

Anchoring effects of advertised reference price and sale price: The moderating role of saving presentation format

This study investigates how consumers utilize an advertised reference price and the posted sale price (SP) as anchors to adjust their internal reference prices (IRP). As expected, the effect of SP on IRP depends on the magnitude and direction of deviation from the IRP. When the posted SP exceeds IRP, it exerts an upward pressure on IRP, whereas when it falls below IRP, it has a negative impact. Consistent with prior research, consumers rely at least partially on the advertised reference price to adjust their IRP. The saving presentation format also moderates the effects of gains and losses on IRP but does not influence offer evaluation directly. Results suggest that retailers can enhance evaluations directly by pricing their products appropriately relative to consumers' IRP and indirectly through the choice of saving presentation format.     

The effects of a “no-haggle” channel on marketing strategies

As sellers increasingly turn to multi-channel retailing, the opportunity to implement different pricing policies has grown. With the advent of the internet, many traditionally bargained products such as automobiles, jewelry, watches, appliances and furniture are now being offered online at a fixed pre-determined price. We explore the strategy of simultaneously offering two pricing formats (fixed and bargained) via two different channels (online and brick and mortar) and find that in a market where there are two types of consumers—those with a high cost of haggling and others with a lower cost—a dual-pricing strategy is optimal only when there are enough high haggling-cost consumers, but not too many, and when the haggling costs between the two types of consumers are sufficiently different. We also find that it is optimal for the seller to specify a higher-than-cost minimum acceptable price as the price floor of bargaining. By doing so, the seller increases the bargained price by complementing the salesperson's bargaining ability, and also softens the internal competition between the two channels. Finally, we find that, surprisingly, the dual-pricing strategy may serve fewer customers while still being more profitable than a single price structure. The implications for consumer surplus are also explored.     

Price image consequences

This study investigates the consequences of price image. Two conditions, a policy of intermediate price condition and a policy of low price condition, were distinguished in an experiment. Three moderators (consumers' price conscientiousness, retailer's motives perceived by consumers and consumers' familiarity with the retailer) were considered for these two conditions. Using partial least squares analyses (PLS), we propose integrated models of the consequences of price image highlighting the direct and indirect effects of this concept on consumers' satisfaction, trust, attitude and future behavioral intentions to the retailer. This research fills a gap in the literature since previous studies have mainly focused on the antecedents of price image or have only investigated specific links between the variables considered. Finally, considering our findings, we recommend to managers to favor either a policy of intermediate or low price depending of their consumers' characteristics.     

Weathering consumer pricing sensitivity: The importance of customer contact and personalized services in the financial services industry

In a low-cost switching environment, certain firm actions undertaken by service employees can improve consumer loyalty, satisfaction and reduce price sensitivity. Interestingly, consumers' satisfaction levels can actually increase when experiencing a price increase. Counterintuitively, when consumers experience a price decrease, their loyalty decreases, suggesting that it might be in the firm's best interest to not offer such pricing discounts as these customers may be hypersensitive to price. Overall, it appears much easier for service employees to positively influence customer satisfaction than customer loyalty; satisfied consumers do not necessarily become loyal consumers.     

On The Reference Point Effect of Reserve and Buy It Now Prices

In recent years, a trend in retail pricing has been to give consumers greater autonomy in setting their own prices, be it through auctions or other forms of participative pricing. Such consumer pricing autonomy often requires the seller to set limits in the form of price floors and price ceilings. Price floors and ceilings in our auction settings are referred to as reserve prices (RP) and Buy It Now (BIN) prices, respectively. We examine the effect of RP and BIN presence and magnitude on the number of bidders and ending price. Using auctions, we uncover consumers’ willingness to pay (WTP) through bids. WTP is malleable through reference cues. Our focus is on two such cues: BINs and RPs. Results of two field studies, augmented with a laboratory study, show that both BINs and RPs result in lower bidder entry, but have an overall positive effect on ending price. Furthermore, results show that RP is more effective than a comparable BIN magnitude and that these two pricing cues are substitutes. The study design allows the authors to rule out alternative explanations. Open RP and BIN's effect on ending price is due to a reference point effect rather than a price truncation effect. Thus, retailers can increase WTP through changing these reference cues and exploit a richer choice set over which to shape a malleable WTP. The quantification of the interaction between RP and BIN gives managers the ability to jointly take advantage of both RP and BIN.     

The effect of product touch information and sale proneness on consumers' responses to price discounts

Since price discounts are costly and can negatively affect consumers' perceptions of quality, it is crucial to identify the factors that make them effective in stimulating purchase behavior. Drawing on cue utilization theory, we examine price discount effectiveness in affecting consumers' reliance on the sale cue based on the provided product touch information as an intrinsic cue and individual consumer differences in sale proneness. Two experimental studies indicate that price discount information, product touch information, and sale proneness interact to determine consumers' responses. Perceived quality is the underlying mechanism behind the observed effects. For nonsale-prone consumers, product touch information favorably influences responses to large price discounts by addressing product quality concerns and enhancing purchase confidence, but has no effect for regularly priced or low discounted products. For sale-prone consumers, product touch information is not effective in increasing their responses regardless of the discount size. A qualitative study provides support for these results and highlights the role of perceived quality and purchase confidence. The research contributes to behavioral pricing, cue utilization theory, and sensory marketing and suggests that marketing managers should provide consumers with product touch information when implementing high discounts for products for which prepurchase touch is important.     

Analysing consumers' ‘activism’ in response to rising prices

The purpose of this paper was to compose the profile of active consumers in Greece during a period of rising prices taking into account shifts in their consumption. A survey was conducted from 1 September 2008 to 21 November 2008 to collect the primary data source for the study. Questionnaires were administered to 200 consumers. To our knowledge this was the first attempt to offer insight into the characteristics of the Greek consumer in a period of economic crisis. For this purpose, econometric analysis was employed. Empirical results suggested that high‐income groups spend more for food commodities and are less likely to be active consumers. It was concluded that consumers have reduced spending for some basic and semi‐luxury products like fruits, meat, alcohol, sweets and coffee, and entertainment activities. The main factor which affected the reaction to price increases, as expected, was the monthly private income. Twenty per cent of the consumers are members of a national consumer movement organization, and support their actions against rising prices. Women, who research the market before purchasing a product, are more likely than men to participate in economic boycotts. By examining the profile of non‐active consumers and the reasons for their behaviour, we are able to propose a policy for the activation of the Greek consumer movement, which is necessary for the consumers' resistance to rising prices. Taking into consideration that Greek consumers face increased prices for food commodities and services, a policy framework to activate consumers is among the main prerequisites for maintaining consumers' well being. We suggest that the Greek Consumer Protection Institutes should regain consumers' confidence and focus on the dissemination of information about organized economic boycotts.     

Retailer's decoy strategy versus consumers' reference price effect in a retailer-Stackelberg supply chain

Decoy strategy for bundling is an important marketing option because it can reflect the behavior resulting from consumers' reference price effect. This paper develops a game-theoretic model of a dyadic supply chain to study the joint decisions on pricing and decoy strategies in the presence of consumers' reference price effect. The retailer chooses one of the decoy strategies (phantom decoy-mixed bundling, decoy-mixed bundling) and selling prices to maximize her profit. Our study shows that: under both decoy strategies, the retailer and the manufacturer benefit from consumers' low reference price effect; however, the high reference price effect hurts their profits.     

To Defend or Not to Defend? How Responses to Negative Customer Review Affect Prospective customers' Distrust and Purchase Intention

Negative online reviews are a ubiquitous problem that affects every online seller at some point. It can lead to prospective consumers' distrust and decrease future purchase intention. Therefore, formulating a proper response is essential for minimizing these negative effects. Based on the ability–motivation paradigm and stability attribution, we find that apology works better when the alleged cause is relatively unstable (e.g., competence-based negative review) and when the seller has a high ability to change. However, when the alleged cause is relatively stable (e.g., integrity-based negative review) or when the seller has a low ability to change, we show that it is better for the seller to defend its reputation. In addition, we demonstrate that a remedial action plan in the seller's response can reinforce the motivation to change communicated through apology. Thus, coupled with a remedial action plan, apology works better than defending one's reputation, regardless of the negative online review type.     

Many a little makes a mickle: Why do consumers negatively react to sequential price disclosure?

Drip pricing (DP) is distinct from partitioned pricing as it sequentially discloses surcharges to consumers. Critics see DP as a deceptive pricing tactic because it obscures the final price of an offer. We examine the effects of the timing of the final price disclosure and the number of sequentially presented surcharges on consumers' attention to the final price and, ultimately, perceived price fairness. In an eye‐tracking study with 225 participants, we find that the sequential (vs. up‐front) disclosure of the final price lowers perceived price fairness by increasing consumers' attention to the final price, in particular, when the number of surcharges is high. In addition, the sequential disclosure of the final price lowers perceived price fairness because of higher perceived price complexity and lower pricing transparency perceptions. The findings suggest that firms need to be aware of both attentional and cognitive effects of the final price disclosure when designing DP.     

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.     

The promoter's role in ticket pricing: Implications of real options for optimal posted prices and rationing

We consider the problem of pricing event tickets for initial sale when demand is uncertain. It is a standard industry practice for a performer to contract with a promoter who underwrites the event and offers the tickets for sale at a posted price that is sticky in that it is either fixed or costly to adjust once sales begin. Promoters, therefore, bear price risk, and we show that bearing the risk associated with posting a sticky offer price amounts to writing a put option on the ticket revenue. Further, we show that optimal posted-offer prices can be expected to result in rationing (surpluses) if price uncertainty and price elasticity of demand are material (immaterial), even when the demand forecast is accurate. Our results have implications for a more general set of pricing problems in which items are offered for sale at sticky posted prices.     

The Showrooming Phenomenon: It's More than Just About Price

This paper examines the factors that influence competitive showrooming, whereby consumers visit an offline retail store to gather information but make their purchase online at a competing retailer. We survey 556 respondents to study how the benefits and costs of showrooming influence the consumer's decision to showroom. Not surprisingly, we find that expected average price savings from showrooming are positively associated with showrooming. In addition, however, the perceived dispersion in online prices is also positively related to showrooming. Moreover, we find that non-price factors play a key role in consumers' showrooming decisions: perceived gains in the quality of the product purchased when showrooming (measured as the fit with a consumer's need) and waiting time for service in the brick-and-mortar store are positively associated with showrooming. Online search costs are negatively related to showrooming. Time pressure that consumers face when shopping is negatively associated with their propensity to showroom. We discuss implications for researchers and retail managers. For example, managers of offline retail stores can curtail showrooming by increasing the number of sales personnel available in-store instead of providing currently employed personnel with more training. To encourage showrooming, managers of online retailers should make it easier for the customer to search online.     

Fairness perceptions of retail price increases by foreign and domestic brands: The roles of ethnocentric beliefs,profit stickiness,and contextual information

Although consumers do not usually take kindly to price increases, their perceptions of fairness of price increases are contingent on relevant factors. This study investigates consumers' perceptions of the fairness of retail price increase by a domestic versus a foreign brand, as moderated by consumers' ethnocentricity, bias toward inferring a profit motive from a price increase (i.e., “profit stickiness”), and relevant contextual information. Over the course of two sets of experiments, the authors find that ethnocentricity does not necessarily lead to the intuitively expected favorable (unfavorable) bias toward (against) a domestic (foreign) brand's decision to raise prices, subject to profit stickiness and contextual information. These findings have implications for theory, practice, and further research.     

The Impact of Comparative Food Price Information on Consumers and Grocery Retailers: Some Preliminary Findings of a Field Experiment

There is reason to believe that consumers face a difficult task in securing adequate and accurate information upon which to judge relative price levels of competing foodstores. The objective of the research reported here was to investigate the potential of retail food price reporting for correcting this information problem. Both consumer and grocery retailer responses to this comparative food price information were analyzed. A pretest-post-test design with four pairs of experimental-control cities (with replications at two levels of concentration) was employed to collect price data. A modified Solomon-four group design was used for surveys of food consumers in experimental and control cities. The results of analysis of variance models lend support to the hypothesis that price reporting can lower the relative level of food prices, both for items individually identified in a price report and items not identified in the report. The magnitude of this effect varied among the cities. It appears that consumers' role in this experiment was a passive one: consumer behavior and patronage patterns did not change in a manner that would consistently reinforce the competitive effects of the price reports.     

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.     

Price Intransparency,Consumer Decision Making and European Consumer Law

Price comparison is a basic element of competition. For comparison to work, at least prices need to be transparent. Moreover, price is usually a focal point in consumer thinking and deciding on transactions. Hence, obfuscating prices can be detrimental to consumers. Therefore, it is vital for policymakers to know how transparent pricing is in reality. Commercial practices involving price intransparency can be detrimental to consumer decision making and may be associated with market failure. So, legislative intervention to ensure price transparency is sometimes warranted. Suppliers may disclose and frame pricing information in such ways as to influence consumers. For some suppliers, advantages may be gained by obfuscating price—through practices ranging from the outright hiding of price terms in the small print to subtle ways of throwing in gifts or adding charges during the vending process. Do consumers appreciate the implications of the fact that by framing price in different ways suppliers actually try to influence their demand for products? And how does the law broadly speaking respond to problems of price intransparency? In this article, behavioural science insights are combined with a legal analysis of European consumer law in order to chart some of the detrimental influences of price intransparency on the consumer decision-making process and to answer whether and to what extent European consumer law addresses these issues. In doing so, this article first reviews research from consumer psychology, marketing, and behavioural law, and economics regarding the influence of presentation, framing, and transparency of price on the consumer decision-making process. Subsequently, it describes and evaluates the legal framework offered by European consumer law and how this framework responds to practices of price intransparency. Particular problematic pricing techniques are identified and discussed. In conclusion, attention is drawn to the disadvantages of the increasing full harmonization character of European consumer law for combating price intransparency at Member State level.     

EDITOR'S COMMENTS

ABSTRACT

The key to improving pricing methods lies in establishing a clear relationship between the price paid by customers and the value received. A company's understanding of how a decision in its pricing policy will affect the perceptions its potential consumers will have of these prices, is fundamental if it wishes to make sure that its offer is properly perceived. Thus, if companies identify the rules used by purchasers to price their products, they will be successful in getting the objective signal they send via their communication strategies to be perceived in the desired manner. This analysis shows that both monetary and non-monetary costs are considered by consumers when determining the final cost perception associated with the acquisition of a good, and that the understanding of the internal reference price is essential for determining the nominal price effect on the monetary component of total sacrifice.