Low Prices are Just the Beginning: Price Image in Retail Management

Abstract

Recent managerial evidence and academic research has suggested that consumer decisions are influenced not only by the prices of individual items but also by a retailer's price image, which reflects a consumer's impression of the overall price level of a retailer. Despite the increasing importance of price image in marketing theory and practice, existing research has not provided a clear picture of how price images are formed and how they influence consumer behavior. This article addresses this discrepancy by offering a comprehensive framework delineating the key drivers of price image formation and their consequences for consumer behavior. Contrary to conventional wisdom that assumes price image is mainly a function of a retailer's average price level, this research identifies several price-related and nonprice factors that contribute to price image formation. The authors further identify conditions in which these factors can overcome the impact of the average level of prices, resulting in a low price image despite the retailer's relatively high prices, as well as conditions in which people perceive a retailer to have a high price image despite its relatively low average price level.

Consumer–brand identification revisited: An integrative framework of brand identification, customer satisfaction, and price image and their role for brand loyalty and word of mouth

“…For example, Matzler, Würtele, and Renzl (2006) highlight the effect of perceived relative prices of a bank on WOM. Moreover, we substantiate the assumption of a positive influence of price image on positive WOM with the inverse findings of Xia, Monroe, and Cox (2004), who observe that consumers tend to spread negative WOM in the case of unfair prices; according to Hamilton and Chernev (Hamilton and Chernev, 2013), price fairness is closely related to price image. In general, scholars agree that perceived price images depend on the way consumers process available information and that price evaluation is a subjective process (Zielke, 2006;Hamilton and Chernev, 2013;Padula and Busacca, 2005).…”

“…However, retailers and brand owners need to be cautious with price promotions because these make loyal, and particularly nonloyal, customers more sensitive to price (Mela et al, 1997). For these reasons, and in light of the recent technological advances that have empowered consumers with tools to gather price information (Hamilton and Chernev, 2013), continuously investigating strategies to manipulate consumers' price perceptions is important. Despite these considerations, price perception has been neglected in relationship marketing even though relationships can detract consumers' focus on price by building strong satisfaction-based relationships (Grönroos, 1997).…”

“…Behavioral pricing has demonstrated that when consumers compare and evaluate offers, price image in particular is important for their decisions (Matzler et al, 2006;Hamilton and Chernev, 2013;Zielke, 2010). Research has predominantly investigated price image for retailers, identifying it as consumers' perceptions of the price level or relative price level of a retail store (Zeithaml, 1984).…”

“…Thereafter, Nyström (1970, p. 134) defined price image as "buyer attitude towards price on the assortment level." Consequently, Hamilton and Chernev (2013) consider price image one particular aspect of a retailer's brand image.…”

“…Unlike price perceptions of individual items, which tend to be nominally scaled and expressed in terms of a particular currency, price image is measured using ordinal scales (e.g., expensive vs. inexpensive) (Hamilton and Chernev, 2013;Zielke, 2006). Therefore, in line with the definitions of retailer price image, we define "brand price image" as the general belief about the overall level of prices that consumers associate with a brand (Hamilton and Chernev, 2013). Thus, price image matches the idea that consumers tend to make purchase decisions as simple as possible.…”