Comparative Price Advertising: An Integrative Review

Abstract

After two decades of research, public policymakers, researchers, and managers still have questions regarding the use, abuse, and overall effectiveness of comparative price advertising. Using an integrative review of the literature as a basis, the authors examine the state of substantive knowledge regarding comparative price advertising effects. They use meta-analytical procedures to assess the effects of (1) presence of an advertised reference price, (2) advertised reference price levels, and (3) advertised sale price levels on consumers’ internal reference price, perceived value, price offer believability, purchase likelihood, and search intentions. Evidence indicates that comparative price advertising is a powerful advertising tool, with a strong opportunity for deception, that requires careful management and monitoring.

Anchoring effects of advertised reference price and sale price: The moderating role of saving presentation format

“…Prior research also offers ample evidence to indicate that the ARP level influences consumers' IRP positively (Biswas et al, 1993;Compeau and Grewal, 1998). We argue that any categorization of ARP as "high" or "low" represents a subjective judgment that occurs relative to a person's IRP.…”

“…Generally speaking, IRP adjusts in the direction of the external anchor (ARP), but if consumers doubt the credibility of an exagerated reference price, they may exhibit a negative reaction (see Lichtenstein and Bearden, 1989). Urbany et al (1988) suggest a relatively straightforward process to describe how ARP influences consumers' IRP: Consumers adjust their IRP to accommodate, either partly or wholly, the externally supplied information according to their subjective assessments of whether the ARP is a reasonable and credible substitute for their IRP (Compeau and Grewal, 1998). More recent research (Chandrashekaran and Grewal, 2003;Koppale and Lindsey-Mullikin, 2003) reveals that the extent of change in IRP is a nonlinear function of the perceived discrepancy between the ARP and IRP.…”

“…Several meta-analytic reviews of prior research on comparative price advertising (Biswas et al, 1993;Compeau and Grewal, 1998;Grewal and Compeau, 1992;Krishna et al, 2002) conclude that retailers can improve consumers' perceptions of discounted sale prices by providing reference prices in their advertisements. The purpose of these external anchors is to raise consumers' internal reference prices (IRP), which determine how consumers evaluate posted sale prices (SP).…”

The influence of redemption time frame on responses to incentives

“…This is thought to occur, because a high face value inflates the attractiveness of an incentivized purchase in relation to what a consumer might expect to pay (i.e., a "reference price"). The result of this positive comparison, in turn, encourages purchase (Briesch et al 1997;Compeau and Grewal 1998;Mazumdar et al 2005;Schindler 1992).…”

“…Marketing academics have devoted significant attention to understanding how the details of a promotional offer may influence consumer behavior (for reviews, see for example, Compeau and Grewal 1998;Krishna et al 2002). Some research has examined prominent aspects of the content of a deal, such as the face value of the discount (Leone and Srinivasan 1996), the percent of purchase price that is offered back (Della Bitta et al 1981) and the size of the associated product bundle (Yadav and Monroe 1993).…”