Consumer Evaluation of Low Price Guarantees: The Moderating Role of Reference Price and Store Image

Abstract

This article reports the findings of 2 studies that examined the effects of low price guarantees (LPG) in retail advertisements within the framework of signaling theory. Overall, an LPG in an ad resulted in higher value perceptions and shopping intentions. Findings also suggest that the effect of an LPG is likely to be moderated by other price cues such as reference prices and by the price image of the store. An LPG resulted in higher value perception and shopping intention when reference prices were low or absent, but lowered search intention in the presence of a high reference price. Additional findings suggest that intention to search for a better price was lower, particularly when an LPG was offered by a low price image store. For high price image stores, an LPG increased value perceptions and shopping intentions, while also increasing search intentions, indicating the possibility that LPGs can act as a double‐edged sword in certain instances. Managerial and public policy implications are also noted.

An Assessment of Consumers’ Willingness to Patronize Foreign-Based Business Format Franchises: An Investigation in the Fast-Food Sector

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Do Low Price Signals Influence Online Purchases of Tourist Accommodation Services? The Moderating Role of Gender

“…Low price guarantee signals create increased credibility amongst consumers in that the perception of a false offer shall have an economic cost for the company making it and therefore, shall have a greater influence on the perceived value of the consumer and future buying intentions (Erevelles, Roy & Yip, 2001;Biswas et al, 2002;Dutta & Biswas, 2005;Lurie & Srivastava, 2005;Dutta & Bhomwich, 2009;Hardesty et al, 2012;Janssen & Parakhonyak, 2013). Thus, when the selling companies are faced with the choice of not making any sort of offer regarding low prices or, in the case that they do, selecting the most appropriate, the following hypotheses have been created:…”

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