Advertised reference price and sales price as anchors of the latitude of expected price and its impact on purchase intention
TL;DR: In this article, the authors investigate the influence of advertised reference price and sales price as anchor points on the latitude of expected price, and subsequently on purchase intention (PI) in a situation where price estimation task is a non-thoughtful process.
Abstract: Purpose
This 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/approach
On the basis of quasi-experimental design, the study involves intercept survey of 142 shoppers.
Findings
The 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/implications
It 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 implications
The 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/value
The study uniquely investigates a problem with two anchor points and two estimation targets, and proposes a construct of internal price uncertainty (IPU).
Citations
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TL;DR: It is indicated that a negatively framed message induces a more favorable attitude and purchase intention than a positively framed message, a low anchor price is more favorable than a high one, and the interaction effect of framing and anchoring is not significant at the 1% level.
Abstract: This article explores consumers' attitude toward and purchase intention of organic food regarding the influence of the framing effect and anchoring effect and the role of knowledge. Our findings suggest that whether message framing describes the benefits of buying organic food or the loss resulting from a failure to buy organic food, significantly influences consumers' attitude and purchase intention. In addition, presenting an anchor price in advertisements also significantly influences consumers' judgment. These results indicate that a negatively framed message induces a more favorable attitude and purchase intention than a positively framed message, a low anchor price is more favorable than a high one, and the interaction effect of framing and anchoring is not significant at the 1% level. Finally, consumers with less organic food knowledge are more susceptible to framing and anchoring effects. These results provide suggestions for appropriate message framing and price anchoring to enhance consumption within the organic industry.
29 citations
Cites background from "Advertised reference price and sale..."
...Studies have examined framing and anchoring effects in investing, charitable donations, and consumption decisions (Levin et al., 2002; Sinha and Adhikari, 2017)....
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DOI•
TL;DR: In this article , the authors investigate how the combination of price and product attributes during the learning phase of internal reference prices influences reference price utilisation and find that the internal reference price is only utilised in price judgements when a consistent relationship between previously observed prices and attribute values exists in the learning process.
Abstract: ABSTRACT When is an internal reference price selected for price judgements? This paper analyses how the combination of price and product attributes during the learning phase of internal reference prices influences reference price utilisation. We apply an experimental approach that accounts for two mechanisms of reference price learning. In two experiments, we vary the relationship between price and product attribute value. The results show that the internal reference price is only utilised in price judgements when a consistent relationship between previously observed prices and attribute values exists in the learning phase. This paper provides a unique approach to study reference price learning, which contributes to research by offering insight into the utilisation of reference prices. Results enable managers to strategically influence reference price learning and utilisation.
3 citations
01 Jan 2018
TL;DR: In this paper, the authors analyse what the successful retailers have done right and why is it that when retailers try to expand into emerging markets, fail. But historical data suggests that there are more failure stories known to us than success stories.
Abstract: Emerging markets are more than a lucrative business opportunity for retailers in developed markets today. Retailers today see emerging markets as an irresistible opportunity to go global. Opportunities and growth rate of emerging economies provide a perfect platform for modern and traditional retailers to grow and expand their business. These markets are viewed as a fuel which will drive a retailer’s growth. But historical data suggests that there are more failure stories known to us than success stories. In this chapter, we are going to understand and analyse what the successful retailers have done right and why is it that when retailers try to expand into emerging markets, fail.
1 citations
TL;DR: In this paper , the authors investigate how price information in online display advertisements affects the consumer's internal reference price (IRP) and find that consumers allocate some of their attention to ads, but they do so incidentally.
Abstract: ABSTRACT The main objective of this research is to investigate how price information in online display advertisements affects the consumer’s internal reference price (IRP). The internet context differs from prior pricing research contexts in which consumers allocate all or none of their conscious attention to price stimuli. In this context, consumers allocate some of their attention to ads, but they do so incidentally. Across four studies, we show that these incidental exposures to price information in online ads influence the IRP. The results suggest that the price magnitude used in the online ad (either low or high) determines the price anchoring mechanism at play. The price magnitude in conjunction with ad repetition and ad type (price comparing ad vs. single price ad) also affect the consumer’s IRP. By uncovering these effects in online display advertising, this research contributes to pricing and online advertising research and provides specific insights for online marketers.
1 citations
References
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Book•
01 Jan 1974TL;DR: The authors described three heuristics that are employed in making judgements under uncertainty: representativeness, availability of instances or scenarios, and adjustment from an anchor, which is usually employed in numerical prediction when a relevant value is available.
Abstract: This article described three heuristics that are employed in making judgements under uncertainty: (i) representativeness, which is usually employed when people are asked to judge the probability that an object or event A belongs to class or process B; (ii) availability of instances or scenarios, which is often employed when people are asked to assess the frequency of a class or the plausibility of a particular development; and (iii) adjustment from an anchor, which is usually employed in numerical prediction when a relevant value is available. These heuristics are highly economical and usually effective, but they lead to systematic and predictable errors. A better understanding of these heuristics and of the biases to which they lead could improve judgements and decisions in situations of uncertainty.
31,082 citations
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01 Jan 1964
1,100 citations
TL;DR: In this article, two experimental studies reveal the existence of a strong, positive impact of customer satisfaction on willingness to pay, and they provide support for a nonlinear, functional structure based on disappointment theory (i.e., an inverse S-shaped form).
Abstract: Two experimental studies (a lab experiment and a study involving a real usage experience over time) reveal the existence of a strong, positive impact of customer satisfaction on willingness to pay, and they provide support for a nonlinear, functional structure based on disappointment theory (i.e., an inverse S-shaped form). In addition, the second study examines dynamic aspects of the relationship and provides evidence for the stronger impact of cumulative satisfaction rather than of transaction-specific satisfaction on willingness to pay.
1,044 citations
TL;DR: In this paper, the authors conduct a "netnographic" analysis of two prominent retro brands, the Volkswagen New Beetle and Star Wars: Episode I-The Phantom Menace, that reveals the importance of Allegory (brand story), Aura (brand essence), Arcadia (idealized community), and Antinomy (brand paradox).
Abstract: Retro brands are relaunched historical brands with updated features. The authors conduct a “netnographic” analysis of two prominent retro brands, the Volkswagen New Beetle and Star Wars: Episode I—The Phantom Menace, that reveals the importance of Allegory (brand story), Aura (brand essence), Arcadia (idealized community), and Antinomy (brand paradox). Retro brand meanings are predicated on a utopian communal element and an enlivening paradoxical essence. Retro brand management involves an uneasy, cocreative, and occasionally clamorous alliance between producers and consumers.
1,012 citations
TL;DR: This article showed that the anchor effect depends on the applicability of activated information, and that the activated information was not representative for the absolute judgment and the targets of the two judgment tasks were sufficiently different.
Abstract: Results of 3 studies support the notion that anchoring is a special case of semantic priming; specifically, information that is activated to solve a comparative anchoring task will subsequently be more accessible when participants make absolute judgments. By using the logic of priming research, in Study 1 the authors showed that the strength of the anchor effect depends on the applicability of activated information. Study 2 revealed a contrast effect when the activated information was not representative for the absolute judgment and the targets of the 2 judgment tasks were sufficiently different. Study 3 demonstrated that generating absolute judgments requires more time when comparative judgments include an implausible anchor and can therefore be made without relevant target information that would otherwise be accessible.
873 citations