The dual role of price: decomposing consumers’ reactions to price

Abstract

Price plays two distinct roles in consumers' evaluations of product alternatives: as a measure of sacrifice and as an informational cue. This article merges two streams of empirical research into the effects of price on consumers' product evaluations by combining stated preferences, obtained from conjoint measurement, with data on self-reported measures in the form of beliefs or attitudes. It thus offers new, substantive insights into the dual role of price. Specifically, it differentiates between the informational and sacrifice effects of price using a choice-based conjoint approach and differentiates further among different subcomponents of these two main effects by combining choice-based measures with self-reported measures that pertain to potential sources of the dual role of price (price response drivers) and underlying consumer characteristics. Thus, this article presents a general procedure to quantify the impact of the dual role of price on choice shares for product alternatives within a market simulation. This procedure enables managers to simulate the choice share effects of changes in price response drivers, as well as modifications in segmentation and targeting strategies that involve changes in the levels of the price response drivers and thus the levels of the informational and sacrifice components of the price response of demand.

Value‐driven Internet shopping: The mental accounting theory perspective

“…Previous research (e.g., Dodds, Monroe, & Grewal, 1991;Grewal, Monroe, & Krishnan, 1998;Urbany et al, 1997;Volckner, 2008) has focused mainly on the monetary aspect of transaction utility, measured as the difference between the objective price and the customer's reference price. Non-monetary aspects (e.g., time, effort, and risk) of transaction utility also may be critical to customer purchase decision making at an online store (Zeithaml, 1988).…”

Price coordination in distribution channels: A dynamic perspective

“…3 This will also dictate whether firms should practice a skimming or a penetration strategy by pricing the products above or below the consumers' reference price (Völckner, 2008). The importance of considering both the immediate and long-term effects of prices increases in a channel's context where channel members pricing decisions and profits are interdependent.…”

The expected benefit as determinant of deal-prone consumers' response to sales promotions

“…First, high deal-prone consumers do not always respond more positively to price discounts, as it depends on the expected saving (low, moderate or high). Whether we have traditionally assumed that deal-prone consumers seek to pay reduced prices, and the finding of a lower price for particular item causes them to feel proud, smart, and competent (Lichtenstein et al, 1990, Völckner, 2008, now we posit that the propensity to respond to a price offer is closely related with the level of the saving obtained.…”