Posted: June 27th, 2015
Toward an understanding of internal reference price differentials across strategic pricing frameworks.
Referencing pricing and its various subcomponents have long found prevalence in marketing and behavioural economic research. Given the extent to which it has been researched, many reviews (Mazumdar, Raj, & Sinha, 2005) have suggested the concept is to many extents without refute, although requiring foundations in variety of other sub-domains, for instance pricing. That being said, some strides have been made in helping to understand relevant consumer behaviours (Mazumdar, Raj, & Sinha, 2005; Ahmetoglu, Fried, Dawes & Furnham, 2010; Monroe 2003; Winer 1986) and the affects reference prices can have in a purchase lifecycle, which can be in turn applied to newer researcher streams. Previous work can be attributed to two such streams, those more generalistic in and those specific. While generalistic research has focused on the subjective nature of internal and external reference prices (Monroe, 1973; O’Neill & Lambert, 2001; Sinha & Smith, 2000) for instance its ability to change and rely of past experience, specific work has been done to a great extent in pharmaceuticals (Lee et al., 2012), but in few other domains. As a result, there seems to be a need to investigate this concept across a greater variety of product types considering more specific aspects of the consumer’s psychology. Scanner data research, a promising mixture of general and specific streams and of which is in healthy abundance (Mazumdar, Raj, & Sinha, 2005), has helped address some of these aspects by focusing on consumers willingness to pay in conjunction with brand loyalty. However, given that price components have been shown to reflect approximately 45% of the purchase decision (Inman, Winer and Ferraro, 2009), too little attention has been given to the relationships between reference pricing and price promotion given its seemingly importance (Lowe & Albert, 2010). While indeed some recent work (Lowe and Alpert, 2010) has made valid attempts at understanding reference prices in a promotions context it is still highly in its infancy (Lowe and Alpert, 2010) concerned itself with new pioneering products and their penetration to market, rather than strategies used for mature products. This investigation thus aims to look the potential changeability of internal reference prices on market established products as a function of commonly used pricing options. In turn then, we aim to add to the growing body of literature in this area, providing a framework for marketers to retain levels of brand perception.
One of the key assumptions surrounding pricing cognition research is that price evaluations are the comparison between external cues e.g. Advertised prices and a carefully crafted memory-based analogue perception, which is commonly referred to as an ‘internal reference price’ (IRP) (Kalyanaram & Winer, 1995; Adaval and Monroe, 2002; Monroe, 2003; Thomas and Menon, 2005). This IRP, essentially forming a mental price bnechamrk from which consumers can evaluate has been suggested to stem from two resounding types of theory, namely adaptation-level (Helson, 1964) and prospect theory (Kahneman and Tversky, 1976), which are fundamental in explaining its underlying mechanisms. The former posits that people can adapt to the level of past stimuli from which the reinforced level is used to compare the new, external one. These external stimuli, known as ‘external reference prices’, are observable throughout the environment in the form of anything from promotional flyers to the actual RSP’s on product tags are essentially seen as the stimuli requiring evaluation. The latter, i.e. prospect theory, is however considerably different suggesting that an evaluation varies depending on the framing method used in the comparison. Losses for instance are suggested to loom larger than gains, even if equal in absolute terms (Kahneman and Tversky 1979), thus possibly affecting the purchase likelihood at point of sale (POS) if externally presented prices are higher. In evaluation contexts however, utility, the benefits associated with the purchase, is the debated primary component (Thaler, 1985, Thaler, 2008) which drives choice. Being both consumption and transactional and like prospect theory is asymmetric, consumers evaluations are more an evaluation of pleasure than a complex memory recall and evaluation exercise. That duly noted such theories were however built upon the notion of a rational consumer i.e. one who could weigh all the options before making a decision (Simon, 1991; Gigerenzer et al., 2002). Since then, this notion has been widely rejected given the concept of bounded rationality, whereby it is accepted that decision makers can only make sound decisions from the information close at hand (Simon, 1991; Gigerenzer et al., 2002. Building upon these early theories the notion of ‘internal reference prices’ were formulated, for which the body of research was named ‘reference price effects in choice models’ (Winer, 1986).
Given the individualistic nature of consumer behaviour, reference prices can operationally materialise in many forms and thus may not simply be based on the recall of past price stimuli. While undoubtedly complex, recent comparative analysis has concluded that past prices, being the most accurate and predictive, are among the most important dimensions in IRP models (Briesch et al., 1997; Winer, 1986; Briesch et al., 1997; Mazumdar et al, 2005 ). Given these positive developments, review work of a more recent nature, has made strides in not only advancing past price research but developing our understanding of other dimensions needing consideration (Mazumdar et al, 2005).
Figure 1, an example of such work highlights the culmination of reference pricing research over the last three decades, providing an insight into the key areas important to reference pricing changes. That being said, some dimensions namely, past experience, purchase context and environmental moderators have always been important in research concerning promotions (Roberts, Lui & Hazzard, 2005; Heywood, 2011) and thus are not so much new but provide a link between potential psychological phenomena and organisational strategy. While indeed each dimension holds its own merit, of particular interest to this investigation are operational affects each can have to reference pricing after just short exposure and to promotions often used with mature products.
Fundamental to any consumer related paradigm, indeed being the initial causal dimensions in such a model, is the consumer itself i.e. personality and the sense of the ‘self’. While the fundamentals of such work are based upon self-report data it is hard to determine the extent to which this applies in real consumer situations (Haugtvedt et al., 1992; Albanese, 1993) so work in this area utilises demographic and personality components to help in explaining models. While demographics for instance, age, gender and socio-economic status have shown to be explanatory in most such models, ranging from promotion seeking (Hamon & Hill, 2003) to brand loyalty (Palumbo & Herbig, 2000) they are sometime but not often the focus. Given that work into potentially relevant theories, for instance commitment and consistency (Diewert & Parkan, 1985; Cialdini, 1999; Claiborne, & Sirgy, 2015), whereby people wish to act in a consistent manner so to reduce the need to process all the relevant information in future similar situations (Rosenberg, 1968; Cialdini, 2009), demographics such as age have played an important role (Brown, Asher, & Cialdini, 2005). For instance, increases in age have been shown to make people, be they consumers, more consistent with their actions, having linked this with experience (Brown, Asher, & Cialdini, 2005). In an IRP instance then, manipulated prices may not affect evaluation as much due to considerable past experience (Rose et al., 2012), although is still to be validated further. In relation to consumer memory biases though, not many demographic generalisations have been made, perhaps due to consistently changing demographics of consumers, and so while true that males are now as frequent consumers as females motivations have been suggested as a key driving forces behind many consumer behaviours (Pepper, Jackson & Uzzell, 2009). Such motivations have been suggested to be strongly linked to personality traits, with recent advances in such related research having helped predict such motivation (Mowen, 2000). These traits, definable by stable patterns of attitudes, emotions and thus behaviours, vary between individuals and have been consistently conceptualised by five dimension (Cobb-Clark & Schurer, 2012) These five, named the ‘big five’ (Costa & McCrae, 1992) include extraversion, neuroticism, conscientiousness, agreeableness and openness to experience and have been further conceptualised as chronic motivators driving decision making. Subsequent research has linked these to a plethora of outcomes ranging from buying tendencies to loyalty and switching (Lin, 2010), linking these back to demographics such as socio-economics. For instance, those from lower socio-economic communities have been suggested to be less open and extraverted when in larger mixed communities making them in turn less motivated to search and interact with others (Kraus et al., 2012), thus decreasing switching and attentiveness. What such traits have thus been conceptualised as are consumer related operational personality styles such as innovativeness, a combination of extraversion, openness to experience and low agreeableness, reflecting receptivity to new stimuli (Kim, Benedetto & Hunt, 2012; Singh, 2015). Such a receptivity towards new products and services as well as to changes in other strategic parts be it pricing, communication or distribution, thus influences the motivation to process product information especially for newer product segments. Dogmatism research, closely following suit, being the extent of rigidity within a consumer towards something new, lends validity to this idea by having consistently documented similar effects denoting that consumers with high rigidity are more likely to process and purchase traditional market mature products, whilst becoming brand loyal, in comparison to their counterparts (Singh, 2015). What could thus be suggested is that those low on innovativeness but high on dogmatism, are more likely to process the price information of mature products to greater extent, thus being open to susceptibility of promotions aimed at such.
That being said, while innovativeness has been suggested as one personality type in consumerism so has susceptibility. This susceptibility, a measure of a person’s receptiveness to social influence, has been successful in identifying differences amongst people with respect to social influence and consequentially their processing and acceptance of new products (Khare, 2014). In turn then it has been suggested that people who score highly on such a trait have been shown to be more self-confident but only through assuming a triad of susceptible influences, namely information, value expressive and utilitarian influences (ref). Information influence, being the inclination of a consumer to rely on other people or sources for information readily accepting said information without thought or deliberation, suggests that those with susceptible personalities are more likely to accept and process information from a source they trust (Khare, 2014). Furthermore through the acceptance by members of the consumer’s social class, the consumer respects the values, beliefs and notions of the other members, known as value expressive influence and thus results in utilitarian influence whereby a conventional mind-set is advocated to gain reward and avoid punishment. In practice then while indeed each consumer might be more or less susceptible to any one or more of these, supermarkets of choice, commanding loyalty, being demographically tiered and promoting utilitarian rewards are the ideal places for susceptibility traits to play a key role in biasing decision making. That being said while no work could be identified directly applying typical personality traits to reference price formation and change, it could be suggested that susceptible consumers are more likely to accept and process manipulated prices thus influencing IRP. Through the use of the big five we hope to establish some of these effects in due course.
Past price experience.
While rational thought may suggest that infrequent consumers may be more susceptible to price changes, perhaps due to their inexperience of both search and price knowledge, early studies have been contradictory (Rajendran and Tellis 1994; Breisch et al. 1997), implying that consumers use different price evaluations methods than memory recall. Although the case, recent work in conjunction with recall surveys (Dickson and Sawyer, 1990; Gabor 1988; Urbany and Dickson 1991; Vanhuele and Dreze, 2002) found relatively indifferent price expectation between consumerism levels, with those purchasing more frequently having more realistic expectations and price evaluations (Chandrashekaran, 2012; De los Santos et al., 2012). Consequentially an unclear picture has emerged, whereby past experience is brought into question.
In response to such debate, recently conducted investigations have shed light on some of the individual areas. For instance, both evaluations and expectations were suggested as products of past experience and thus consumerism (Rose et al., 2012), also concluding that IRP’s are among the most fluid & changeable of the dimensions in such paradigms (Kalyanaram and Winer, 1995; Mazumdar et al., 2005). To highlight this consider the difference between consumers who frequent retail outlets regularly and those who don’t. While both types of consumers might buy a hair shampoo for £3, rightfully so, past experience of regular consumers will justify the price via the retrieval of similar product and purchasing experience. As a result while expectations of the price might be the same between both types regular consumerism strengthens the reference price and increases confidence (Thomas, & Menon, 2007). While but addressing a few of the debated issues such situational contexts have promoted the utilisation of past consumer experience as the core determinant of IRP (Monroe 2003; Briesch et al., 1997; Winer 1986), with it ranging in effect size from .60 to .85 across product categories. That being said, prices experiences beyond three instances in the past had little direct influence on current IRP (Dickson and Sawyer 1990), with the same effect being found as a result of promotion encountering, creating an expectation that reflects the consumer’s interest in gaining a greater transactional utility (Lattin and Bucklin 1989). Although early theories seem to be of use in such a context, from a psychological perspective memory is the primary component of explanation, with reference prices being the result of price stimuli converting to long-term memory, reinforced via brand and pack specific stimuli and increased via exposure (Thomas and Menon, 2007). The exposure effect, a term coined from the positive effect on memory and recall of item repetition (Zajonc, 1968, 2001), can be presented via a variety of mediums from in store flyers to externally presented media outlets. Early work linking exposure to consumer behaviour suggested a link between confidence increases, purchasing frequency (Dickson and Sawyer, 1990; Dewhurst and Anderson 1999; Menon and Raghubir 2003) and price expectations (Urbany and Dickson 1991; Mazumdar and Jun 1993) yet revealed some discerning evidence against normal IRP theory. Creating a fierce debate as to the actual link between experience and IRP, research focusing on recall ability in relation to IRP, suggested that only between 20-45% of respondents got within a close range of recalling past purchased prices (Dickson and Sawyer, 1990; Krishna, Currim and Shoemaker, 1991; Vanhuele and Dreze, 2002), thus suggesting that findings of differences are more memory recall issues than a manipulation of an IRP. While indeed something to consider, such work at the minimum over a decade old, may need revision given the exponential increase in male shoppers, search platforms and social media of late, increasing the populations exposure of prices and brands tenfold. To this end, research has indeed suggested that bad recall may be a function of brand inexperience and is invalid in looking at actual behaviour in a purchase environment due to recall relying explicitly on declarative memory (Briesch et al., 1997; Ahmetoglu et al., 2010). Although perhaps the case, a wealth of support for good reference price recall in conjunction with product aspects such as brand and packaging type leaves little doubt that if consumers can accurately recall prices for such a specific product given the vastness of ranges, memory of some sort must be the primary component (Adaval and Monroe 2002; Monroe and Lee 1999; Thomas and Menon 2007; Thomas and Morwitz 2009). That being said, the speed of which this was done left it clear that it was not so much retrieval from the a long-term source but was rather suggested to be implicit (Adaval and Monroe 2002; Monroe and Lee 1999; Thomas and Menon 2007; Thomas and Morwitz 2009), an ability to know the price without recalling it.”(Monroe and Lee, 1999). Thomas & Menon (2005), who developed this concept further suggested that rather than verbal rehearsal of past prices consumers are able to associatively evaluate prices through repetition of price evaluations (Anderson 1993; Thomas and Menon, 2005, Ahmetoglu et al., 2010). In general the most cited approach it has helped provide insight into the process of IRP formation although is still by some considered questionable (Thomas, Manoj and Kyung, 2011) and needs further validation. that being said, this investigation’s focus is not so much into the memory aspect but the fluidity of reference prices given manipulated stimuli and thus psychological effects of such.
On that note, research stemming off from the former was able to extend these theories and indicate the significant effects of past experience, suggesting that frequent consumers are more sensitive to price changes but less so to contextual factors. As a result, what seemed to be concluded was that while infrequent consumers construct their evaluations at the point of purchase, frequent buyers retrieve pre-existing evaluations and so seem to utilise their IRP(s) to judge effectively (Thomas and Menon, 2005, Ahmetoglu et al., 2010). Further development of these earlier findings, suggested that price judgements and IRP knowledge uncertainty was found to increase with decreasing exposure, possibly shifting IRP upward (Thomas and Menon, 2007), although eventually ruling out the possibility that consumers differed in their prejudgement price expectations which may have biased these relationship. It was thus suggested that exposure affects internal price judgments even if their articulated judgement remained unchanged (Tomas and Menon, 2007). While being among the first to start to introduce such concepts to the literature, review of the material suggests sound theory (Ahmetoglu et al., 2010) and thus offers a sound link between past experience and the other dimensions yet to be highlighted. Given such findings, it seems logical that different promotional options, focusing on the increase of decrease of prices per unit will vary in their ability to change IRP. With little work having documented these commonly used strategies, an insight will undoubtedly aid in this understanding.
Purchase context moderators
Although frequently utilised models such as the one presented are common in the IRP literature (Mazmudar et al., 2005), the accounting for situation specific dimensions is often lacking. Given the vast variety of both higher and lower tiered contexts, for instance online vs. in store purchasing representing the former and pack quantity differentiations the later, IRP’s can be differentiated in innumerable ways. While this concept is by no means new to the area (Thaler, 1985), such early work in combination with newer (Kalyanaram & Winer, 1995; Thaler, 1999, 2008) clearly identified differences between contexts such as frequency of consumerism (e.g. planned vs. spontaneous). What such research has highlighted is the particular importance in the goal-orientation of planned, purposeful purchasing in the processing of prices and promotions (Bucklin and Lattin, 1991; Childers et al., 2002; Kim et al., 2012; Scarpi, 2012) which as a result offered new direction for those interested in price promotion. Such a focus has shown the positive effects of out-of-store promotions at POS points for regular, larger quantity consumerism, while an additionally strong effect for in-store promotions in smaller spontaneous purchasing instances (Kahn and Schmittlein, 1989, 1992). Furthermore price elasticity, an economic relationship between price change and demand, was also found to differ among contexts with regular consumers exhibiting less elasticity in individual category purchase decisions but more so in store choice ones (Bell and Lattin , 1998).
While not directly targeted at IRP per say, what such findings do provide is a rationale for considering purchase contexts as a moderating factor of IRP and thus should be explored individually or controlled for. It does however seem evident that there are as of yet undocumented contextual relationships towards promotional strategies, something future work may wish to consider.
Store environment moderators
The store environment, both internal and external, can be attributed to much of the variance of both the formation and flexibility of IRP. These environmental factors can be again tiered between internal and external levels with the former ranging from store types (e.g. outlet to megastores) to isle formats and the latter from store exposure to price exposure (Biswas and Blair, 1991; Rajendran and Tellis, 1994; Briesch et al., 1997). In a purchase context then, a new Audi for example, may be judged as more luxurious and expensive if bought directly from the Audi garage as opposed to from a cheaper second garage even if the price was the same. This price sensitivity can vary considerably given the speed at which a comparative search can be conducted, online for instance (Bakos, 1997; Lynch and Ariely, 2000a, 2000b), which when combined with the multitude of discount pricing options has been shown to lower IRP (Alba et al, 1999, Kalwani and Yim, 1992, Neslin, 2002, Lalwani & Monroe, 2005). Especially important however seems to be the frequency of which these discounted prices appear (Kalwani and Yim, 1990, 1992) which lowers IRP in conjunction with factors such as the randomness at which promotions occur (Krishna, Currim and Shoemaker, 1991). To this end a significant misjudgement effect seems to be consistently evident with consumers overestimating the frequency of promotions for lesser promoted brands (Krishna, Currim and Shoemaker, 1991) and in turn distorting IRP’s for brands with high exposure. Distortions may be further promoted by the framing method used by the marketer with some work suggesting that discounts presented as a percentage, as opposed to cents off, greatly and indeed especially increase price expectations for low priced product promotions as opposed to luxury (DelVecchio, Krishnan and Smith, 2003). Although promising, little research has applied this work to the formation of IRP especially in the differences between discount always stores such as Aldi and hi-lo such as Tescos (Mazmudar et al., 2005). The need in doing so will establish the extent to which effects are due to the promotions themselves or the image and strategy the store utilises, in effect potentially altering IRP’s based upon a stereotype.
Product category moderators
Given the vast variety of product categories, indeed quite endless, research into the relationships between product categories and IRP’s is sparse (Mazumdar et al., 2005). While earlier work suggested that price expectations differ considerably within the same product category groups, e.g. processor speeds in computers (Yim and Briech, 1995), this dimension, although needed considerable further work, indeed holds validity in IRP models (Mazumdar et al., 2005). Building upon this product trait research Lowe and Alpert (2007) focused directly on general category typologies subseqeuntly confirming that consumers can invoke differing forms of reference prices, e.g. ‘fair price’ averaging and stereotypical IRP, given the product’s experience in the market. Indeed meeting expectations, new products, not yet associated with an RRP due to their market inexperience, require an assimilation of similar products and features creating a fair price while existing products can rely on IRP’s from past price exposure. Confidence, found to play an additionally important role in these price expectations was also particularly important in mature products judgements providing a sense of assuredness when applying a price (Lowe and Alpert (2007). What such research has thus suggested and acknowledged is the significant difference between the psychological processes involved in pricing judgements between in/experienced products confidence highlighting the need of well-established products as part of IRP research (Lowe and Alpert, 2007). Most recently however a more behavioural economic approach to the dimension has been utilised, focusing on the effects of IRP if and when the product category has an individual or market level focus. Individual focused products, for instance targeting promoting self-esteem and social desirability, exhibited strong positive relationships between personal category desirability and reservation price, the lowest paid for an item, not extending to those targeted at a market level (Slonim, Wang and Garbarino, 2014). Contrastingly, IRP and the expectation of expense was found as a market-level judgement with changes in desirability not affecting this relationship (Slonim, Wang and Garbarino, 2014). While such research makes a sound attempt at assessing the importance of the product category dimension considerable further work will be needed before making assumptions about any given categorical level or focus. What thus seems prudent is an approach controlling for categorical dimensions and apply the results to promotional pricing, as of yet unexplored.
Application of IRP to pricing strategy
After considerable development, early studies did indeed start to link reference prices with promotions subsequently suggesting a ‘reference promotion effect’ whereby reference levels differ by promotion frequency and promotions are processed differently (Lattin and Bucklin, 1989; Alba et al., 1999; Danziger & Segev, 2006; Lowe and Alpert, 2007). Two overarching conclusions can be made from such research.
Firstly, display unit and methods by which promotions can be advertised can increase both utility and purchase likelihood considerably, reinforcing choice and reference prices (Grewal et al., 1999). As a result, a repurchasing reinforcement of the brand after a promotion was considerably less likely if reference price changes had occurred, indicating that ‘points of reference’ vary by increases, complexity and frequency of price promotions. From an applicability perspective, indeed much the cause of such work, marketers have gained much in the understanding of consumer behaviour and how to leverage their brand on a psychological level. That being said, while some work has doubted the realism and validity of IRP accuracy due to a limited ability to recall paid prices (Dickson and Sawyer, 1990), these doubts have for the most part been consistently proven unreliable given a deeper understanding of the promotion and pricing process (Mazumdar et al., 2005).
With a more specific focus on IRP research in relation to promotions, constituting the second of the more general conclusions, a specific focus has been directed towards consistency and/or promotional typologies. This consistency research, indeed built upon that of exposure theory, was able to highlight that increases in consistency of promotions decreased the value perceptions of subsequent promotions and that returning to the original RRP is seen as a price increase (Lattin and Bucklin, 1989; Mazumdar et al., 2005). As a result, increasing exposure via consistent promotions seems to have significant impacts on IRP’s that in turn yield evaluations that reflect not a realistic price but one built upon promotions. In contrast typology research focused more directly on the different types of strategy used and their effects on IRP related behaviours. Applying such findings to typology research (Lowe and Alpert, 2007, Danziger & Segev, 2006), being among the little that has been conducted, focused very much on pioneering products i.e. new entry market and the common strategy types like many others on bipolar strategy types, namely skimming and penetration, used accordingly. What did however emerge, being both applicable to both promotions and IRP theory , is the emergence of an averaging process whereby the high and low prices, presented by the former and latter strategies respectively, are averaged to create an IRP. Operationally then the new products initial price, higher or lower dependant on the strategy used, forms an initial IRP which indeed seems to be more influential and deeply processed in comparison with follower products, with its effect enduring at time points beyond the promotion (Lowe and Alport, 2007). What thus needs validation is if such a concept applies to promotional prices per say and if so the theories applicability to startegies used for market mature prodicts. Four such strategies, namely ‘buy one get one free’ (BOGOF), drip pricing, value based pricing and bundling will be investigated in this vein. While BOGOF has had little attention in the literature to date (Ahmetoglu et al., 2010), drip pricing, incremental price increase via ‘addons’, bundling, whereby similar products are grouped together, and value based pricing, whereby the value of the product compared to price is clearly indicated, are relatively well established (Ahmetoglu et al., 2010). That being said, little work as attempted at investigating IRP effects between such commonly used strategic options. What past research has however found in relation to these is are strong bias effects especially for drip and bundling pricing where anchoring and adjustment theory seem to play a strong role (Chakravati, Krish, Paul, & Srivastava, 2002). What was thus indicated and of potential relevance in this instance was that consumers experiencing drip pricing anchored on the initial lower price failing to adjust as the price rose (Madrian and Shea, 2001). Combining this with findings from bundling research, indicating that consumers often perceived bundles to be of better value than unbundled yet the same items (Arora, 2008), one could suggest that due to the complexity of such deals price perceptions will be altered significantly more than counterpart methods. While it is however in general clear that all pricing promotions yield some sort of bias (Ahmetoglu et al., 2010), the complexity of these, thus increasing cognitive load and predicting the use of heuristics, should allow for consumers who are exposed to altered prices to be more likely to attend to the various aspects of the price rather than the overall. While, this is the case for almost all promotion types, value based or ‘reference’ pricing often yields the opposite effect, with perceptions of value increasing due to the lower price highlighting the value of the product. Thus, when not in a promotional context products in such conditions have been perceived to be considerably more expensive (Ang et al., 1997). Again in the context of reference price formation however little work can apply such findings..Given that this literary gap has been to some degree indicated in previous reviews (Ahmetoglu et al., 2010), such warped price evaluations are by no means conclusive, thus resulting in our attempt to try and discern this to some degree.
Aim & Hypothesis
Given the prevalence of reference pricing research, yet little in relation to mature promotional strategies, we aim to investigate reference pricing change across pricing conditions. Given the important aspect of the price component in consumer choice, as well as the implications to both research in the area and industry, we hope to shed light on the impact of strategic pricing options often used with mature products. These, formerly described, have been associated with varying degrees of brand perception and thus should inflict similar levels of reference price change. In understanding the extent to which this change occurs across such options, marketers can leverage and link set prices and promotions together so as to raise or level the consumer’s internal price accordingly. Furthermore, an understanding of this nature will help develop the understanding of reference price in a contextual manner not often addressed, providing frameworks for future work of similar nature. Considering and indeed controlling for certain conditions including brand pionerrship, maturity and purchase conditions we hypothesis that a significant reference price effect will be found with evaluations for the control group being on average 5% within the original price stimulus and that those within the exposure condition showing even greater, significant changes. Furthermore, we expect to find that drip pricing, given its complexity, will show the greatest change in recalled price with BOGOF, bundling and value-based pricing following suit respectively. Given that exposure is a key element in this investigation we would also go on to suggest that the time spent studying the manipulated prices would both correlate with these recalled changes and be a significant factor throughout each’s model. Finally then given the importance of the consumer themselves, we would hypothesis that both demographics and personality play a significant role, with increasing age and consumer experience decreasing susceptibility to such manipulations. Furthermore, after considering personality research we would suggest that traits encouraging ‘innovativeness’ behaviours including higher openness to experience, extraversion and agreeableness would increase this likelihood of price difference per the manipulated prices. As a result what we hope to indicate is not only consumer’s ability to evaluate effectively, but that strategies can have at the very least a potential longitudinal effect on IRP.
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