Advertised reference price and sales price as anchors of the latitude of expected price and its impact on purchase intention

Abstract

PurposeThis paper aims to investigate the influence of advertised reference price (ARP) and sales price (SP) as anchor points on the latitude of expected price, and subsequently on purchase intention (PI). The research involves the theoretical lens of selective anchoring mechanism, which allows investigation of the influence of ARP and SP in a situation where price estimation task is a “non-thoughtful processes”.Design/methodology/approachOn the basis of quasi-experimental design, the study involves intercept survey of 142 shoppers.FindingsThe study finds that due to anchoring effect, the highest and the lowest expected prices shift toward ARP and SP, respectively. Consequently, it influences the latitude of expected price, which in turn influences purchase intention. In addition, the study proposes and tests a method to forecast expansion and contraction of the latitude of expected price.Research limitations/implicationsIt suggests a new mechanism to understand the simultaneous influence of ARP and SP, provides a mechanism to understand shifts in price latitude’s end-points and investigates a phenomenon with two externally provided anchors.Practical implicationsThe study highlights the role of the latitude of expected price in understanding consumers’ response. Results suggest that a plausible ARP, when joined with an above-expectation SP, can fetch better consumer responses.Originality/valueThe study uniquely investigates a problem with two anchor points and two estimation targets, and proposes a construct of internal price uncertainty (IPU).