The impact of brand credibility on consumer price sensitivity

Abstract

Brands can affect various stages of consumer choice processes, and hence, various components of consumer utility functions. Previous conceptual and empirical work focused on the effects of brands on consumer perceptions of tangible and intangible product attributes. In this paper, we extend the work on brand effects with information economics underpinnings to analyze whether consumer price sensitivity, that is, the weight attached to price in a consumer valuation of a product's overall attractiveness or utility, is impacted by brand credibility. In other words, we investigate how the impact of product price on consumer utility is moderated by brand credibility. To explore the impact of brand credibility on consumer price sensitivity across categories that may involve different levels of consumer uncertainty, we conduct our analysis for four products: frozen concentrate juice, jeans, shampoo and personal computers. These categories vary in the degree of potential consumer uncertainty about product attributes, as well as in a number of other category-specific features that may affect consumer sensitivity to uncertainty. Our results indicate that brand credibility decreases price sensitivity. Our results also indicate that although the direction of the impact is the same, the magnitude of brand credibility's impact on consumer choices and price sensitivity vary across product categories, as a function of product category characteristics that affect potential consumer uncertainty and consumer sensitivity to such uncertainty.