The impact of external reference price on consumer price expectations

Comparative pricing practices are frequently used where actual product prices are accompanied by higher external reference prices. All types of stores, regular-price department stores as well as discount stores, use comparative price claims to frame price deals as attractive [Marketing Science 4 (1985) 199]. In this paper, a quadratic model is specified for the impact of external reference price (ERP) on consumer price expectations. Based on the research on communication discrepancy and advertising claim discrepancy, which in turn draw on assimilation-contrast, attribution, and prospect theories, we hypothesize a quadratic effect of external reference prices on consumer price expectations. An interactive, computer-controlled experiment using multiple levels of ERP is used to estimate the proposed model. As hypothesized, support for an inverted U-shape relationship is found between consumers’ updated price expectations and the difference between ERP and initial price expectations. That is, as the difference between ERP and subjects’ initial price expectations increases, subjects’ updated price expectations increase to a point and then start to decrease. We find that the fit of the quadratic model specification for the effect of external reference price on price expectations is noticeably superior to that of linear, logarithmic, square root, and S-shaped specifications. Finally, we provide implications of our results for both retail managers and for regulatory authorities alike.     

Product category determinants of price knowledge for durable consumer goods

Existing research in pricing has not extensively examined the impact of the product category on consumers’ knowledge of prices, especially for durable goods. In two empirical studies, this paper examines the influence of the product category on consumers’ knowledge of prices for durables. The first study utilizes data from the popular television game show The Price is Right to establish significant cross-category variations in price knowledge, while the second study links these variations to the specific characteristics of each product category. The results extend existing research findings by isolating the impact of product category determinants, such as purchase frequency, advertising exposure, and use of the price-quality cue, on consumers’ knowledge of prices.     

An examination of reference prices at factory outlet stores

The purposes of this research study were to (1) examine the use of reference prices by one segment of retailing – factory outlet stores and (2) explore related public policy considerations. The researchers found that there was a significant difference between advertised reference prices at factory outlet stores and the regular retail price found in department or specialty stores in the same market. Advertised reference prices in outlets were significantly higher – a 6.2 percent difference. For only two of the product categories studied were differences not significant – housewares and children's apparel. Since these comparative reference prices are not in line with the regular prices at traditional stores, there is a potential for deceptive price claims.     

Consumers’ perceptions of the fairness of price-matching refund policies

This paper examines the antecedents and consequences of perceived price-matching policy fairness. Among the antecedents, we study the effects of the refund depth if a lower competitive price is identified, the degree that the retail product assortment is available at competing retailers, and the consumers’ inference as to the retailer's motive for the price-matching policy. Product assortment uniqueness is identified as a key driver of fairness perceptions, both directly and indirectly through inferred motive. The three experiments show that consumers’ perceptions of the fairness of a store's pricing policy influence their price fairness perceptions, consequently influencing their retail shopping intentions.     

Consumers’ responses to price presentation formats in rebate advertisements

Although rebates offer an important and popular promotion tool in retailing, little research has investigated whether their presentation format can influence consumers’ evaluations of and purchase intentions toward products featured in rebate ads. Retailers generally use two different rebate ad formats: one that transparently shows both before- and after-rebate prices and the other that displays the after-rebate price in relatively large print and the before-rebate price in small print. Three experimental studies attempt to determine which format is more effective for eliciting favorable consumers’ responses, and the results show that the format emphasizing only after-rebate prices generally leads to lower purchase intentions because of the negative affect it elicits. Furthermore, the effect of a rebate presentation format is moderated by the rebate amount, consumers’ price knowledge, and rebate processing time. The results show that consumers’ responses to different rebate presentation formats entail both emotional responses and rational evaluations.     

Are temporally reframed prices really advantageous? A more detailed look at the processes triggered by temporally reframed prices

In this paper, we analyze effects of prices temporally reframed to a short period of time. We transfer a theoretical framework from a similar field of research to the context of temporally reframed prices. Based on this framework, we conduct a new empirical study. The results of the study show that temporally reframing prices leads to higher price attractiveness. However, this positive effect is overcompensated by negative effects of consumers’ feeling of being manipulated and of an increased perceived complexity of the price structure when temporally reframed prices are used instead of aggregate prices.     

Relative Price Level of 99-Ending Prices: Image Versus Reality

Consumer research has indicated that the use of the 99 ending in a retail price creates the impression of a price that is relatively low. A comparative price survey of a wide assortment of general merchandise products indicates that this impression does not match marketplace reality. On the contrary, the price survey showed that retail prices with 99 endings were less likely than prices with other endings to be among the lower prices for an item. The finding of this discrepancy has implications for consumers, public policy-makers, and our understanding of how consumers make inferences from price information.     

Understanding Money-Back Guarantees: Cognitive, Affective, and Behavioral Outcomes

Although money-back guarantees (MBGs) have a long tradition in marketing and retailing practice, a deeper understanding of how consumers value this instrument is still lacking. The results of two experimental studies show that in addition to cognitive effects, MBGs evoke a positive emotional response, thereby increasing consumers’ purchase intentions and willingness to pay a price premium. Moreover, MBGs positively affect consumers’ responses for search and experience goods, although for experience goods, MBGs should be designed with stricter return conditions as compared to MBGs for search goods. The results should help retail managers understand the consumer impact of MBGs, as well as assist them in pricing guaranteed items and designing effective MBGs according to the type of product.     

Shopping context and consumers’ mental representation of complex shopping trip decision problems

Depending on the shopping context, consumers may develop different mental representations of complex shopping trip decision problems to help them interpret the decision situation that they face and evaluate alternative courses of action. To investigate these mental representations and how they vary across contexts, the authors propose a causal network structure that allows for a formal representation of how context-specific benefits requirements affect consumers’ evaluation of decision alternative attributes. They empirically test hypotheses derived from the framework, using data on consumers’ mental representations of a complex shopping trip decision problem across four shopping contexts that differ in terms of opening hour restrictions and shopping purpose, and find support for the proposed structure and hypotheses.     

Is Africa integrating? Evidence from product markets

This paper presents a price-based assessment of product market integration in Africa using disaggregated retail prices for 91 products and 12 African cities from 1991 to 2008. We find evidence of substantial deviations from the law of one price ? product price differences between the cities averaged 76% over the period – a result that is consistent with the presence of large barriers to trade in the continent. Mean price differences across cities fell by close to a quarter over the period, but the decline was concentrated in the early 1990s with little progress subsequently, despite the regional trade policies implemented by the countries. Gravity-style estimates reveal that reductions in external tariffs and global trends towards price convergence in the early 1990s are the key contributors to the trend in price integration amongst the African cities.     

Reciprocal Effects of the Corporate Reputation and Store Equity of Retailers

Retailers aim to strengthen their ability to influence consumer behavior by building corporate reputation and store equity: for instance, by making promotional investments. However, little is known about the directionality of consumers’ corporate and store associations, that is, how reciprocal relationships between consumers’ perceptions of corporate reputation and store equity affect store loyalty. To illuminate this issue, we draw upon a study with a cross-sectional design and two studies with longitudinal designs. We find that retail store equity interacts with corporate reputation and is a more important driver of increased loyalty than corporate reputation. We conclude that retailers should pay attention to reciprocal effects, especially in determining the relative allocation of investments across corporate and store levels.     

The Contingent Effects of Semantic Price Cues

This research endeavors to understand the contingent effects of semantic price cues while taking into consideration several important contextual factors. These factors include where the customer encounters the semantic cue (in-store, at-home, online), whether the consumers’ shopping goal is hedonic or utilitarian in nature, the impact of shopping alone or with a companion, as well as the consumer's motivation to process the product information. Findings indicate that a within-store cue (compared to a between store cue) enhances evaluations when the shopping in a store with a utilitarian goal, when shopping alone, and when their motivation to process is low. A meta-analysis of the results demonstrates the robustness of the differential impacts of these semantic cues.     

Hedonic shopping motivations

Given the increasing importance of entertainment as a retailing strategy, this study identifies a comprehensive inventory of consumers’ hedonic shopping motivations. Based on exploratory qualitative and quantitative studies, a six-factor scale is developed that consists of adventure, gratification, role, value, social, and idea shopping motivations. Using the six-factor hedonic shopping motivation profiles, a cluster analysis of adult consumers reveals five shopper segments, called here the Minimalists, the Gatherers, the Providers, the Enthusiasts, and the Traditionalists. The utility of the proposed scale is discussed both for future research and retail strategy.     

Consumers’ multifaceted deal knowledge in a grocery retail setting

Despite its relevance to retailers, studies of consumers’ deal knowledge have been few. This study explores consumers’ deal knowledge before, during, and after the store visit applying a between-subjects field-study design with 1204 respondents. In particular, the authors investigate perception of deal price status, typical deal price knowledge, and deal-spotting ability. Results show reasonably stable knowledge of typical deal prices, while knowledge of deal price status and deal-spotting ability improves significantly during grocery shopping. Surprisingly, consumers’ deal knowledge is not conditional on purchasing a special thus indicating that most consumers, consciously or unconsciously, scan for promotion signals when shopping groceries. In addition, the results suggest consumers are not easily fooled, as the vast majority is able to spot ‘good’ and ‘bad’ deals, while also possessing typical deal price knowledge. Furthermore, the findings suggest that consumers store internal reference deal prices. Retailers are therefore well advised to consider mixed depth and creative discount patterns to prevent ‘perfect’ perceptions of typical deal prices.     

Situational price sensitivity: the role of consumption occasion, social context and income

Research on consumer reaction to price has been largely confined to examining consumers’ price information search, evaluation of price alternatives, and individual purchase behaviors without regard to situational influences. At the same time, consumption has often been dichotomized in terms of its functional-hedonic nature and has been examined with regard to social influence. Surprisingly, researchers have heretofore not examined the potential effect of the consumption occasion or social context on consumers’ price sensitivity. Further, research examining the effect of household resources on price sensitivity has produced mixed results. We argue that household income effects on price sensitivity are dependent upon the situation. This research addresses two key issues. First, we examine whether individuals are equally price-sensitive when purchasing products for functional (e.g., purchasing frozen vegetables or paper towels) versus hedonic (e.g., purchasing ice cream or cookies) consumption situations and whether social context (i.e., consuming the product alone or with others) influences price sensitivity. Second, we explore the interaction effects of household income and consumption context on price sensitivity. We examine these issues across a series of three studies, finding that consumers’ price sensitivity is in fact attenuated by both hedonic and social consumption situations and that income moderates these effects. Implications for researchers and practitioners are discussed.     

Prices and promotions in U.S. retail markets

We provide generalizable results on the price and promotion tactics employed in the U.S. retail grocery industry. First, we document a large degree of price dispersion for UPCs and brands across stores, both nationally and at the local market level. Base price differences across stores and price promotions contribute to the overall price variance, and we show how to decompose the price variance into base price and promotion components. Second, we document that a large percentage of the variation in prices and promotion tactics across stores can be explained by retail chain and especially market/chain factors, whereas market factors explain only smaller percentage of the variation. Third, we show that the chain-level price and promotions similarity can be explained by similarity in demand. In particular, a large percentage of the variance in price elasticities and promotion effects can be explained by retail chain and especially market/retail chain factors. Further, price elasticities and promotion effects across stores of the same chain are hard to distinguish from the chain-market-level mean, and cross-price elasticities are typically imprecisely estimated. These findings suggest that retail managers may plausibly consider price discrimination across stores to be infeasible.

     

The inter-store mobility of supermarket shoppers

The allegiance of a particular customer, and the distribution across customers of strength of affiliation to a store are important indicators of store health. It is therefore important to understand the extent and determinants of shopper mobility among competing retailers. While shoppers often patronize many stores, they typically have a primary affiliation to a “main store” that captures the majority of their purchases. We examine, in detail, the tendencies of shoppers to transition away from the current main store and adopt another in its place. That is, rather than study all types of store switching behavior, we focus on the decision to change primary allegiance. The model is established in a discrete time hazard framework and estimated as random-effects probit. Data from 548 households taking 88,945 shopping trips among five stores are used to calibrate the model.We find that state dependence is prevalent with nearly three quarters of the shoppers showing progressive attachment to their current main store. Interestingly, this finding is not simply driven by location (i.e., because shoppers are captive to a single store based on geographical distance). More likely, shoppers are unwilling to give up the benefits of store-specific knowledge of assortment, layout and prices. Second, the decision to transition from a current main store is not influenced by temporary price promotions on a common basket of items: Shoppers will cherry-pick, but this alone does not cause them to change primary allegiance. The majority of transitions occur across competing stores of the same price format, which suggests “format loyalty” is an important aspect of shopper behavior. After controlling for unobserved heterogeneity, we find little relationship between observable demographics and the transition probability. We do, however, find that shoppers who spend more per trip are less likely to change main stores, as are less frequent shoppers. Implications for retail management strategy are discussed.     

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。     

The influence of redundant comparison prices and other price presentation formats on consumers’ evaluations and purchase intentions

Two studies explore the conditions under which redundant reference price information (ARP) is likely to influence consumers’ perceptions of an advertised sale price. Study 1 suggests that an ARP enhances offer-value, but only for consumers who are not involved with the product. Study 2 incorporates a wider array of price presentation tactics (SP Only, SP+ARP, SP+%Saving and SP+ARP+%Saving) and investigates a range of responses (transaction value, acquisition value and subsequent purchase intentions). Again, results suggest that ARP only influences perceived transaction value, and saving information only impacts purchase intentions. Most importantly, these effects are seen only when involvement is low.     

Robustness of an Intermittent Program of Comparative Retail Food Price Information

This study compares the distribution of food-item market basket prices across stores and relative to a local newspaper retail food price report. Distributions of prices for market baskets comprised of national brands and cheapest alternative brands coincided closely with the intermittent retail food price report. This suggests that consumer organizations with limited resources can produce comparative food-store price reports that provide useful information to consumers.