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Consumers' utilization of reference prices: the moderating role of involvement

Rajesh Chandrashekaran (Silberman College of Business, Fairleigh Dickinson University, Teaneck, New Jersey, USA)

Journal of Product & Brand Management

ISSN: 1061-0421

Article publication date: 24 February 2012

Abstract

Purpose

The purpose of this article is to investigate whether involved consumers utilize the same set of reference prices to evaluate an offer as compared to those who are less involved. Additionally, this study aims to investigate whether the processes employed in the two groups are different.

Design/methodology/approach

A total of 200 students were enrolled to participate in a realistic shopping experience over a two‐week period. In the course of the study, subjects were asked to provide information on their reference prices. They were also asked to evaluate an advertised offer for a pair of jeans. The data were analyzed using a structural equations methodology.

Findings

Under high involvement, consumers utilize perceived normal price, an external market‐based reference price, to adjust their internal standards, which in turn is used to evaluate retail price. In contrast, low‐involvement consumers do not use their internal standards. Rather, they evaluate retail prices directly against external market‐based references.

Originality/value

Despite decades of research on the role of reference prices, the moderating role of involvement on reference price utilization has not been researched adequately. The findings reported here add to existing knowledge in the field and shed additional light on the process by which consumers evaluate posted prices. The findings also emphasize the need to segment the market on the basis of reference price utilization and to design appropriate communication strategies for each.

Keywords

Citation

Chandrashekaran, R. (2012), "Consumers' utilization of reference prices: the moderating role of involvement", Journal of Product & Brand Management, Vol. 21 No. 1, pp. 53-60. https://doi.org/10.1108/10610421211203141

Publisher

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Emerald Group Publishing Limited

Copyright © 2012, Emerald Group Publishing Limited