Effect of consumer characteristics on optimal reference price

Abstract

His research interests include public policy, public choice and game theory, collective action, constitutional change, bargaining and conflict resolution. Research projects include: mathematical models of mass collective action and political change; higher education policy; marketing policy; and peace and conflict in the Middle East. ABSTRACT KEYWORDS: reference price, consumer loyaltyWhen enticing consumers to purchase a particular brand, marketers occasionally use various promotional schemes, including price cuts. Acknowledging that consumers use a reference price (RP) in their purchasing decisions, marketers have ample opportunity to manipulate the RP in order to create a gain in the perceptions of consumers. This paper presents a conceptual framework and an analytical model for calculating the optimal RP that can be set by retailers in order to maximise their utility, given two consumer characteristics, ie the level of loyalty and sensitivity to quality variations and one structural variable -brand proliferation. The model is followed by an empirical study showing that: as loyalty level increases, the optimal RP increases; as competition increases, the optimal price decreases; and as the quality sensitivity increases, the optimal RP decreases. In practice, when the difference between the price and optimal RP is small and scarcely detectable by consumers, retailers may do better not to practise RP manipulation. In other words, retailers can practise this strategy only when competition is relatively low,

The Importance of Ethics in Branding: Mediating Effects of Ethical Branding on Company Reputation and Brand Loyalty

“…For service quality , eight items were adapted from Jayawardhena et al (2007) and van Riel et al (2005). Examples included items that expressed “information service” and “excellent personnel service.” For perceived price, we generated five items to capture several aspects considered important in the branding and business buyer context, such as comparative and competitor pricing (Kukar-Kinney & Grewal, 2006), clear and good price information (Bolton, Kannan, & Bramlett, 2000), and high pricing as an indicator of product quality (Kukar-Kinney & Grewal, 2006; Lowengart, Mizrahi, & Yosef, 2003).…”

“…Finally, in this study, the perceived price refers to the price being charged to the buyer to cover the costs relating to enhancing the quality of the product and service. Lowengart, Mizrahi, and Yosef (2003) explain that reasonable or premium pricing relates to the quality offered by the brand. This is because the quality enhancement efforts (such as training of workers, new technology and equipment, cost of recruitment of new labor, and maintenance cost of new equipment) increase the average price of production (Story & Hess, 2010).…”

“…Thus, we posit that the benefits of product and service quality, and perceived price, determine the overall perceptions of the ethical brand (core value added), which influence the responses of industrial buyers, particularly their perception of the company’s reputation and subsequent brand loyalty. In addition, business buyers are willing to pay a higher price for brands provided by companies with a high reputation due to the higher price of a brand being equivalent to quality (Lowengart et al, 2003). A company producing high-quality products and services has a strong brand, which enables it to charge a premium price (Lynch & Chernatony, 2004) as customers may perceive that a strong brand enhances the trust or reduces the risk, especially for high-technology products that may suffer certain set identities due to their association with a specific industry (as highlighted by Melewar & Karaosmanoglu, 2006).…”

The mediating effect of satisfaction on consumers' switching intention

“…Gerrard and Cunningham (2004) show that pricing is one of the main incidents that provoke switching behaviors in the banking industry. Also, Lowengart, Mizrahi, and Yosef (2003) indicate that when the difference between the price and the optimal reference price is small and scarcely detectable by consumers, retailers may do better not to practice price manipulations. As for anger incidents, their stronger effect on switching intentions is predictable.…”

Local revenue response to service quality: spatial effects in seasonal ticket revenue data

“…Numerous publications on revenue management and pricing already exist (Talluri and Van Ryzin, 2005). The impact of ticket pricing on revenue has also been well studied in general (Lowengart et al, 2003;Eckard and Smith, 2012;Courty and Pagliero, 2012) and for non-for-profit organizations (Olson et al, 2005;Hume et al, 2006) as well as for (monopolistic) public transport service providers (Cervero, 1990;Dana, 2001) in particular. However, in our case study, prices are constant (we consider a cross-sectional study).…”