The influence of price location on reference-price ads

Abstract

Purpose

Research has shown that when the original and the sale prices were displayed in a horizontal direction, with the sale price to the right (“Original price of $349.99/Sale price $239.99”), consumers are more likely to initiate a subtraction task to calculate the amount of the discount; and this subtraction effect would lead to better consumer value perception than if the sale price was to the left. However, fewer scholars have questioned whether the subtraction effect would still operate if the reference-price ads line up in a vertical direction? The aim of this research is to understand how different formations of reference-price ads may affect consumers' price perception and buying intention. Interestingly, positive effects on buying intention and value perceptions disappeared when buyers were shown a dollars-saved cue, rather than the lineup of original and sale prices.

Design/methodology/approach

Three experiments were conducted to test the hypotheses.

Findings

The results of the experiments demonstrate that when the sale price is displayed above the original price, consumers' price perception and buying intention are higher than what is placed below it.

Research limitations/implications

When written horizontally, Mandarin and Japanese language text are almost always written left-to-right, with multiple rows progressing downward, as in standard English text. Notably, the right-to-left written form for Mandarin and Japanese language only happens by writing in a vertically and multiple-columned context. In particular, the format of reference-price ads in our research is considered to be a generally single column text only. Therefore, its writing system has almost no difference from the English one. However, our hypothesis does not apply to the Arabic world due to the right-to-left nature of the Arabic writing system.

Practical implications

Our results may inform consumers whether their cognition, which influences them not to make irrational decisions, is in turn influenced by sale price display location. Consumers should be reminded that next time they see the smaller number (sale price) they should not be too excited and forget to properly consider the original price. They should think more and consider the distance to the shop or the quality of the product before buying anything. If a product is sold in two different shops and the farther one displays the sale price above the original price but the nearer one displays the sale price below the original price, prolonging the decision time enables consumers to decrease their buying costs, such as the cost of fuel.

Originality/value

This is one of the first studies to discuss the influence of the price location in a vertical direction on price perception and buying intention.

Citation

Cheng, Y.-H., Chuang, S.-C., Lee, C.-F. and Kao, C.-Y. (2023), "The influence of price location on reference-price ads", Marketing Intelligence & Planning, Vol. 41 No. 1, pp. 83-94. https://doi.org/10.1108/MIP-02-2022-0053