Reference Price and Its Asymmetric Effects on Price Evaluations: The Moderating Role of Gender

2017 ◽  
Vol 59 (2) ◽  
pp. 189-194 ◽  
Author(s):  
Choongbeom Choi ◽  
Sung Jun Joe ◽  
Anna S. Mattila
Keyword(s):  
Reference Price ◽  
Internal Reference ◽  
External Reference ◽  
Internal Reference Price ◽  
Scant Attention ◽  
Managerial Implications ◽  
Prior Literature ◽  
External Reference Price ◽  
Promotional Strategies ◽  
The Impact

Empirical research shows that customers form price evaluations by comparing the actual price with a reference price. The relative use of an internal reference price (IRP) versus an external reference price (ERP) is an important issue in the lodging industry due to the popularity of price-comparison–based advertising. Although prior literature shows that demographic factors influence the relative use of IRP and ERP, the impact of gender on the relationship between reference prices and price evaluations has received scant attention in both hospitality and marketing contexts. Drawing on the agency-communal theory, the current research examines the effect of gender on the use of IRP and ERP in price evaluations. The findings indicate that males are more susceptible to IRP than to ERP, whereas females are only influenced by ERP. Relevant managerial implications are drawn in terms of pricing and promotional strategies.

An Investigation of Reference Price Segments

2000 ◽  
Vol 37 (2) ◽  
pp. 246-258 ◽  
Author(s):  
Tridib Mazumdar ◽  
Purushottam Papatla
Keyword(s):  
Reference Price ◽  
Brand Choice ◽  
Internal Reference ◽  
External Reference ◽  
Proposed Model ◽  
Internal Reference Price ◽  
Managerial Implications ◽  
External Reference Price ◽  
The One ◽  
Better Than

Empirical research on reference price has typically assumed that consumers use either an internal reference price (IRP) or an external reference price (ERP), but not both, in brand choice decisions. In this article, the authors assume that consumers use both IRP and ERP but may consider one of them more salient than the other. The authors develop a model that segments consumers on the basis of the differences in the importance they assign to each type of reference price as well as in their brand preferences and responses to marketing-mix variables. The authors calibrate the model on data for four categories: liquid detergents, ketchup, tissue, and yogurt. In all four categories, the proposed model performs significantly better than the one that assumes that consumers use either IRP or ERP exclusively. The authors discuss the managerial implications of this finding.

The Effects of Internal and External Reference Prices on Travelers’ Price Evaluations

2017 ◽  
Vol 57 (8) ◽  
pp. 1068-1077 ◽  
Author(s):  
Choongbeom Choi ◽  
Anna S. Mattila
Keyword(s):  
Reference Price ◽  
Internal Reference ◽  
Reference Prices ◽  
Information Accessibility ◽  
External Reference ◽  
Hospitality Organizations ◽  
Managerial Implications ◽  
External Reference Price ◽  
Lodging Services ◽  
Tourism And Hospitality

The relative use of an internal reference price (IRP) versus an external reference price (ERP) becomes an important issue in the travel and lodging contexts as the increased promotional activity by destinations and hotels is likely to be based on price-comparison advertisements. However, there is little guidance on how tourism and hospitality organizations can use pricing structure to influence reference price, which is cardinal to travelers’ evaluation of price acceptability. Thus, the current research examines how pricing characteristics of the lodging services shift travelers’ sensitivity to two different types of reference prices, and therefore, influence their price evaluations. Compared with IRP, our findings indicate that individuals are more sensitive to and affected by ERP. The results also demonstrate that information accessibility and perceived diagnosticity are key mechanisms that lead to the differential effect of IRP versus ERP on travelers’ price evaluations. Relevant managerial implications are drawn regarding price and promotion strategies.

Effect of Attribute Complementarity on Consumers' Willingness to Pay for Bundled Products

2018 ◽  
Vol 46 (10) ◽  
pp. 1637-1645
Author(s):  
Chien-Huang Lin ◽  
Ming Chen
Keyword(s):  
Willingness To Pay ◽  
Free Product ◽  
Undergraduate Student ◽  
Reference Price ◽  
Underlying Mechanism ◽  
Public University ◽  
Price Theory ◽  
Internal Reference ◽  
Internal Reference Price ◽  
Managerial Implications

In a sales context, a common promotional tactic is to supplement a required purchase (i.e., the focal product) by offering a free product (i.e., the supplementary product). We examined the underlying mechanism driving consumers' evaluation of the supplementary product after such a promotion, with 120 undergraduate student participants at a large public university in Taiwan. Results showed that consumers demonstrated higher (lower) willingness to pay for a supplementary product that had higher (lower) levels of attribute complementarity with the focal product. However, this effect occurred only when the price of the focal product was much higher than consumer's internal reference price for the supplementary product. Our findings contribute to the literature on bundled products, reference price theory, and consumers' postpromotion perception of supplementary products' price. Theoretical and managerial implications are discussed.

scholarly journals Exploring the interactions among external reference price, social visibility and purchase motivation in pay-what-you-want pricing

2016 ◽  
Vol 50 (5/6) ◽  
pp. 816-837 ◽  
Author(s):  
Rajat Roy ◽  
Fazlul K. Rabbanee ◽  
Piyush Sharma
Keyword(s):  
Reference Price ◽  
Field Experiments ◽  
Future Research ◽  
Internal Reference ◽  
Content Type ◽  
Pricing Decisions ◽  
External Reference ◽  
Social Visibility ◽  
Pay What You Want ◽  
External Reference Price

Purpose The purpose of this paper is to investigate the direct and indirect effects of social visibility (private vs public), purchase motivation (intrinsic vs extrinsic vs altruistic) and external reference price (ERP) (absent vs present) on consumers’ pricing decisions in pay-what-you-want (PWYW) context. Design/methodology/approach Two empirical studies with a fitness gym as the research setting were used to test all the hypotheses; first, a lab experiment with undergraduate student participants and, the second, an online experiment with a consumer panel. Findings Both studies show that consumers allocate a higher share (RATIO) of their internal reference prices (IRPs) to the prices to be paid (PTP) in PWYW context, in private under intrinsic purchase motivation and in public under extrinsic or altruistic motivation and this effect is more pronounced in the absence of ERP. Research limitations/implications Future research may validate and extend the findings of this paper with other product or service categories, different manipulations for the key variables, other research methods such as field experiments and expand our model by including other relevant variables. Practical implications The findings of this paper will help managers understand how individual customers’ purchase motivation and the social visibility in the PWYW setting affect their pricing decisions and how providing external pricing cues may moderate these effects. Originality/value Prior research on PWYW shows mixed findings about the direct effects of many variables on consumers’ pricing decisions, but it ignores the differences in consumers’ purchase motivations and offers mixed evidence about the influence of social visibility and ERPs on payment decisions. The authors address all these gaps in this paper.

scholarly journals The effects of individual internal versus external reference prices on consumer decisions for pay-what-you-want payments

2019 ◽  
Vol 4 (51) ◽  
pp. 1-17 ◽  
Author(s):  
Anna Kukla-Gryz ◽  
Katarzyna Zagórska
Keyword(s):  
Reference Price ◽  
Book Production ◽  
Internal Reference ◽  
Reference Prices ◽  
External Reference ◽  
Pay What You Want ◽  
External Reference Price ◽  
Vignette Experiment ◽  
The Relationship

Abstract We empirically investigate the interaction between internal and external reference prices on stated payments in a Pay-What-You-Want (PWYW) scheme. Using results of a vignette experiment with e-books, we show that when an external reference price provided is lower than respondents’ internal reference prices, the average of PWYW payments significantly decreases compared with a situation in which the external reference price is not provided. The relationship is the opposite when the external reference price provided to respondents is higher than their internal reference prices. In such a case, upward pressure is created, thus the average of PWYW payments increases. These results remain true when we control for expected quality of e-books. Additionally, we find that when the external reference price is not provided, the size of PWYW payments depends positively on individual factors such as risk-taking propensity and perceived costs of e-book production.

The mediation effects of sticker shock

2015 ◽  
Vol 24 (4) ◽  
pp. 412-419 ◽  
Author(s):  
Weiling Zhuang ◽  
Bruce Alford
Keyword(s):  
Reference Point ◽  
Reference Price ◽  
Marketing Research ◽  
Price Discount ◽  
Internal Reference ◽  
Mediation Effects ◽  
Content Type ◽  
Internal Reference Price ◽  
The Relationship ◽  
Different Sources

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.

scholarly journals When Internal Reference Prices and Price Expectations Diverge: The Role of Confidence

2007 ◽  
Vol 44 (3) ◽  
pp. 401-409 ◽  
Author(s):  
Manoj Thomas ◽  
Geeta Menon
Keyword(s):  
Reference Price ◽  
Internal Reference ◽  
Price Expectations ◽  
Price Expectation ◽  
Reference Prices ◽  
Internal Reference Price ◽  
Pricing Theory

When do internal reference prices differ from articulated price expectations? The authors propose that the internal reference price depends not only on the magnitude of the expected price but also on the confidence associated with this expectation. Four experiments delineate the effects of price expectation and confidence on the internal reference price. In Experiments 1 and 2, the authors manipulate repetition and examine the effects of repetition-induced confidence on price judgments. In Experiments 3 and 4, they manipulate confidence directly to investigate its effects on judgments. The results from all four experiments suggest that consumers with less confidence have higher internal reference prices than more confident consumers, even when they do not differ in their articulated price expectations. The authors discuss the implications of these results for pricing theory.

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