Advertised Reference Price Research Articles

The Moderating Role of Point-of-Purchase Price Information in Consumer Price Perception and Purchase Intention

Aims: Advertised reference prices are one of the contextual prices that have attracted substantial interest. This research proposes the moderating effect of point-of-purchase price information related to product line and other brand prices on consumers’ price perception and purchase intention.
 Methods: Using the literature review of reference prices as a method, it was found that contextual moderators that influence consumer perceptions of point-of-purchase price information were limited. Consequently, integrating the literature of advertised reference prices and the literature gap in this field leads to the proposition.
 Conclusions: As a result, we propose that product-line prices and prices of other brands moderate the effect of an advertised reference price on the perceived value of consumers, the benefits of search, and the intention to purchase. Hence, the impact of advertised reference prices may be mitigated to a certain extent, which may reduce the deceptiveness of the advertised reference prices.

The CSR Spillover Effect on Consumer Responses to Advertised Reference Price Promotion

This paper highlights the moderating effect of retailer CSR perception and CSR contribution type on the relationship between advertised reference price (ARP) and consumer evaluations. A two-by-three between-subjects factorial design is employed with the manipulation of ARP and CSR contribution type for hypothesis testing. Experimental results show that internal reference price, value of the deal, attitude towards the deal and purchase intention are higher for the exaggerated ARP than for the plausible ARP in the high CSR perception condition. Similar effects also occur when the retailer CSR contribution type is present in the reference price advertisement. Specifically, in-kind contribution exerts larger effects than money. This study contributes to a better understanding and crafting of integrative ARP and CSR strategies to influence consumers’ price perceptions, evaluations and intentions.

Perceived Versus Negotiated Discounts: The Role of Advertised Reference Prices in Price Negotiations

Retailers routinely present a posted or sale price together with a higher advertised reference price, in an effort to evoke a perception of the discount the consumer is receiving. However, if prices can be negotiated, what impact does this initial perceived discount (IPD) have on the ultimate discount, demand, and revenue? With data from consumers of a large durable goods retailer, in a natural decision-making environment, this study provides evidence that a greater IPD is associated with smaller negotiated discounts. Then, a lab experiment involving negotiation and purchase decisions for multiple products, with randomly assigned values of the IPD, establishes that a $1 increase in IPD lowers the negotiated discount by 5.7 cents. Furthermore, 55% of this decrease can be attributed to reduction in the participants’ likelihood to initiate a negotiation. Under bargaining, almost one-third of the increase in revenue from a higher IPD stems from an increase in the negotiated price, which is unlike fixed pricing, in which setting an increase in IPD affects revenue only through changes in demand. Finally, the optimal advertised reference prices a seller would post under bargaining and fixed pricing are similar, but the benefit from posting this price is significantly higher under bargaining. These findings in turn have implications for researchers, retailers, consumers and policy makers.

Strategic Communication before Price Haggling: A Tale of Two Orientations

Sellers may display unreasonably high prices (in high-cost oriented contexts) that are never accepted or would surely be discounted through bilateral bargaining. Conversely, general or vague prices with incredible appeals may be advertised (in low-cost oriented settings) as a range or for a category but not tied to specific items. Nevertheless, these seemingly irrelevant or unbinding prices can affect buyer behavior and bargaining outcome. This paper presents a new explanation for these puzzling phenomena. We propose that advertised reference prices can be a strategic tool to communicate privately known seller costs to influence optimal buyer strategy to search value information. We show that cheap-talk communication via uncommitted prices can be endogenously credible, because optimal buyer search strategy can be imperfectly aligned with seller preference. In particular, a high-cost seller may prefer the buyer to acquire information in a more cautious manner (i.e., less willing to stop at good news but more eager to quit at bad news) than a low-cost seller, which may coincide with the buyer's optimal search strategy. We demonstrate that endogenous buyer search can serve as a two-way discipline to regulate both high- and low-cost sellers' incentive for deception, which thus can sustain credible communication for high-cost and/or low-cost oriented settings.

Effectiveness of monetary discounts: comparing quantity scarcity and time restriction

Purpose This study aims to examine whether adding a quantity scarcity message to a monetary discount helps to improve consumers’ offer-related perceptions and intentions, and how the effectiveness of that message compares with adding time restriction to the offer. Design/methodology/approach Two experiments, where participants evaluated retail ads and responded to relevant measures, were conducted in two country markets. Findings Adding either a quantity scarcity message or time restriction to a monetary discount increases the potency of a retail offer. Further, when an offer ad emphasizes product and price-related cues in a balanced manner, time restriction results in more favorable consumer perceptions than scarcity. However, this difference in the messages’ efficacy disappears when the offer strongly emphasizes price-related cues. Research limitations/implications The US market sample is more homogeneous than the Indian one. Discounts were presented in terms of advertised reference prices; further research with other discount formats is desirable. Practical implications Understanding the relative efficacy of quantity scarcity message and time restriction in discounted retail offers can give managers flexibility in the use of these tools. Originality/value This paper addresses scholars’ call for theory-grounded research that provides guidance to retailers on the use of sales promotional tools.

Reference Dependence and Price Negotiations The Role of Advertised Reference Prices

Retailers routinely present a posted or sale price together with a higher advertised reference price, in an effort to evoke a perception of the discount the consumer is receiving. If prices can be negotiated though, what impact does this initial perceived discount (IPD) have on the ultimate discount, demand, and revenue? With data from consumers of a large durable goods retailer, in a natural decision-making environment, this study provides evidence that a greater IPD is associated with smaller negotiated discounts. Then, a lab experiment involving negotiation and purchase decisions for multiple products, with randomly assigned values of the IPD, establishes that a $1 increase in IPD lowers the negotiated discount by 5.7 cents. Furthermore, 55% of this decrease can be attributed to reduction in the participants' likelihood to initiate a negotiation. Under bargaining, almost one-third of the increase in revenue from a higher IPD stems from an increase in the negotiated price, which is unlike fixed pricing, in which setting an increase in IPD affects revenue only through changes in demand. Finally, the optimal advertised reference prices a seller would post under bargaining and fixed pricing are similar, but the benefit from posting this price is significantly higher under bargaining. These findings in turn have implications for researchers, retailers, consumers and policy makers.

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

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).

The mediation effects of sticker shock

Purpose – This study aims to extend prior studies by examining the mediation effects of sticker shock on the relationship between price discount and buying intention. Sticker shock refers to the discrepancy between a brand’s sale price (SP) and an individual’s internal reference price (IRP) (Winer 1985). Design/methodology/approach – Prior marketing research on sticker shock is primarily model-based. The authors employed a between-subject experimental design, and hypotheses were tested using a series of regression functions (Baron and Kenny 1986). Findings – The results suggest the effect of price discount on buying intention is partially mediated by sticker shock. Practical implications – The research results suggest that consumers take into account price messages from different sources, such as advertised reference price, SP and IRP. IRP is a key reference point that consumers use to develop the “gain” or “loss” perception. Firms may apply different strategies to influence consumers’ internal reference point and, in turn, influence the perception of the attractiveness of the sale product. Originality/value – This study contributes to the literature by first testing the mediation effects of sticker shock on the relationship between price discount and buying intention.

Strengthening the Influence of Advertised Reference Prices through Information Priming

Abstract The use of advertised reference price promotions, such as “regularly $119.99, sale price $39.99,” is ubiquitous in the marketplace. Thirty years of research supports the conclusion that advertised reference prices (e.g., $119.99) exert an influence on consumers' responses to offer prices (e.g., $39.99) via their assimilative influence on consumers' internal reference prices. The present research provides an enriched account of this assimilation process. Specifically, three studies show that increasing the overlap in information made accessible by the advertised reference price and information made accessible by the offer price increases the influence of the information primed by the advertised reference price on the construction of the internal reference price. Consequently, the offer price is considered more attractive. The identification of this process provides insight into additional variables that moderate the influence of advertised reference prices on downstream deal evaluations. Implications for theory, practice, and public policy are discussed.

Source effect of advertised reference price influences on transaction value in online shopping environments

Prior studies examine whether or not using advertised reference price (ARP) increases consumers' perceived gain from the purchase decision. However, few studies address whether or not the ARP should involve an online or offline source. Present study thus investigates the influence of the APR source on consumer perceived value. Empirical results indicate that consumers would perceive higher transaction value when an online seller adopts another online retailer's sale price as ARP than when the online seller uses an offline competitor's sale price as the ARP.

Would you believe it? A detailed investigation of believability in comparative price advertising

The construct of believability has been shown to be a key variable in consumers' evaluations of comparative price offers. This paper provides a detailed investigation of believability in the context of such offers. In particular, it investigates the impact of the presence of, level of, and type of advertised reference prices (ARPs) on believability across a range of product contexts. An experimental methodology is adopted for the study. Findings show that the presence of an ARP does not enhance believability but that the presence of a time limit does. Believability is also shown to vary inversely with the level of ARP but is not related to semantic cues, such as list prices, contained within the offer. The study provides evidence that the product context of the offer impacts on believability. Two interaction effects are also identified. The paper contributes to the extant literature by providing new insights into how consumers' believability is influenced by how a comparative price offer is presented. Such insights will be of interest to academics interested in pricing, practitioners seeking to ensure that their promotions have maximum impact, and policymakers hoping to ensure that consumers are not misled by dishonest comparative price advertising.

Effectiveness of Exaggerated Advertised Reference Prices: The Role of Decision Time Pressure

Despite the prevalence of exaggerated advertised reference prices (ARPs) in retail ads and the potential for consumer vulnerability to false reference prices, research identifying boundary conditions to the effectiveness of exaggerated ARPs is scarce. We demonstrate that exaggerated ARPs are much more effective in favorably influencing consumers’ perceptions of retail offers when they feel time pressure while evaluating such offers. Further, although past research indicates that high promotion frequency weakens the effectiveness of exaggerated ARPs, we show that this is not observed when time pressure is present. We discuss the implications of this research and provide directions for future research.

The in-depth discussion on the promotional activities of reference price indication after the domino effects of consumers' perceived value

The correlation of customer satisfaction, purchase intention, purchase decision, and brand establishment are recently in-depth discussed in the most of previous studies and further, few studies specifically emphasize on the research of the effects of individual differences of cognition on reference price. This study takes tolerance of ambiguity as moderator variable aiming to examine the impact of different levels of tolerance of ambiguity on consumer cognition as consumers were provided with advertised reference price. The experiment was designed and conducted with the treatment of two factors and two levels. Furthermore, the data gathered was analyzed according to methodology of the t-test and the two-way ANOVA method. Results of this study indicated that offering reference price influenced consumers’ cognition of “shopping goods” rather than “convenience goods”, the promotion effectiveness of reference price correlated with different levels of tolerance of ambiguity on consumers’ cognition of “shopping goods”. Particularly, the goal of this study is to cross-analyze the individual differences of consumers and to further explore the correlation among individual differences, and the reference price. According to the results of this study, not only the enterprises are able to make the appropriate marketing strategy for consumers with a wide variety of personality traits and to enormously increase the sales volume. Key words: Reference price, consumer personality, individual cognition, tolerance of ambiguity.

The effects of reference prices on bidding behavior in interactive pricing mechanisms

We examine the effect of reference prices on consumer bidding behavior in interactive pricing mechanisms used in online retailing, e.g., auctions and name-your-own-price. We find significant influences of different reference price concepts on bid values. However, after controlling for internal and external reference prices, sellers only have a moderate ability to affect bid values via the provision of an advertised reference price. An exaggerated advertised reference price increases the bid value among consumers who consider it to be believable. However, its effect is reversed in the presence of an external reference price if consumers consider it unbelievable, decreasing bid values.

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.

Price perceptions, merchant incentives, and consumer welfare

PurposeThe purpose of this paper is to review the research demonstrating the consumer's erroneous and unfounded perceptions of prices, which can have severe negative consequences on consumer welfare.Design/methodology/approachThis is a review paper of previous research on the price/quality relationship and the effects of advertised reference price on consumer's price acceptance.FindingsThe major findings are that you do not necessarily get what you pay for and your idea of what an item should cost is influenced by advertised prices even when they are totally unbelievable.Originality/valueThe value of this paper is in sensitizing the reader to the ways in which sellers, perhaps unconsciously, can take advantage of consumers' price misperceptions.

Consumers’ evaluations of online reference price advertisement

The purpose of this study is to examine differences in consumers’ perceptions of an acceptable price range and their responses to the advertised reference price in terms of internal reference price, price‐search intention, and perceived value between online and offline retail channels. This research uses a 2 (plausible and implausible reference prices) x 2 (online and offline retail channels) between‐subjects experimental design. A convenient sample of 151 Taiwanese graduate students that have prior experience shopping online are recruited as subjects. Results are shown and managerial implications and directions for future research are then discussed.

Advertised reference prices in an Internet environment: Effects on consumer price perceptions and channel search intentions

This research examines the effects of inclusion of a reference price in an Internet advertisement on consumer price perceptions and price-search intentions both (1) on the Internet and (2) in brick-and-mortar retail channels. Proposed differences between Internet sites and brick-and-mortar channels are examined across three studies using different methodologies: (1) a survey administered in a classroom setting, (2) an Internet survey, and (3) a mail panel survey. Findings show that both price perceptions and price-search intentions differ for the Internet and brick-and-mortar retail channels. There is mixed evidence for the prediction that the reference price impact on price perceptions for the brick-and-mortar retailer is attenuated for the Internet channel. Finally, respondents with Internet access had different price perceptions and price-search intentions than those without access.

Assimilation of advertised reference prices: the moderating role of involvement

This study examines the hypothesis that the level of involvement influences the assimilation of advertised reference prices (ARPs) into consumers’ existing internal reference prices (IRPs). In addition, it investigates the nature of the relationship between the change in IRP and the perceived discrepancy between the ARP and IRP. Results from two different product categories are consistent with assimilation-contrast theory and reveal a nonlinear relationship between the change in IRP and the perceived ARP–IRP discrepancy. In addition, the results are consistent with involvement theory and with prior research on how involvement influences the extent to which consumers elaborate on and are persuaded by advertised information. Specifically, highly involved consumers assimilate a smaller portion of the ARP into their existing IRPs. Implications for research and practice are highlighted.

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.