PRICE EFFECTS ON CONSUMER BEHAVIOR: A STATUS REPORT Jerry F.Conover, University of Arizona INTRODUCTION The role of price in consumer behavior is certainly both influential and complex. As the four papers in this session demonstrate, this role can be explored in many ways, each leading to different insights about how price influences consumer decisions. The review that follows highlights some of the key issues and problems suggested by these papers, offering ideas for the further development of research and theory on consumer response to price. "ENTRY/EXIT DEMAND ANALYSIS" Dickson and Sawyer's (1984) exposition of "Entry/Exit Demand Analysis" presents a well documented review of previous attempts to assess a managerially important relationship: the response of consumer demand to various price levels for a product. As the authors point out, there are more troublesome limitations to those earlier approaches to estimating demand curves, and entry/exit demand analysis represents a technique for overcoming those difficulties. Among its advantages, Dickson and Sawyer note, is the technique's versatility of administration. It can be administered in person, in group settings, or by mail, which makes the approach valuable to pricing decision makers in a variety of situations. Moreover, the technique elicits information about all the competing brands, and thus gives managers more useful data on which to base pricesetting strategies than do demand-estivation techniques that refer to generic product categories. On the other hand, entry/exit demand analysis does have some inherent drawbacks that limit its utility. Perhaps most significant is the requirement that subjects be familiar with the brands being considered. In order to give meaningful answers to such questions as, "At what lower price would you buy Brand A?" the consumer subject must have some knowledge of Brand A's characteristics. Thus, A related problem is the laboriousness of collecting adequate data when the choice set is large (as is common with many consumer packaged goods).the technique would be of limited value for estimating demand for new or otherwise unfamiliar products. In addition to these concerns with administering the measure. however. and thus may lead to small price differences causing larger responses than they would in an actual marketplace situation. certain demand artifacts might complicate interpretation of its results. Although those prices were selected to represent actual market conditions. is an empirical question that could be addressed by comparing demand curves obtained through entry/exit analysis with corresponding curves from field experiments manipulating prices. this conceptualization of market response as influenced by different segments of consumers. "PRICE-QUALITY RELATIONSHIPS" In his analysis of market response in situations where price is used as a cue to quality. the problem of unfamiliarity with some brands could confound efforts to obtain a balanced set of responses for all the brands. Moreover. they may lead subjects to specify entry or exit prices in terms of odd-prices. The whole thrust of the questioning focuses the subject's attention on price. This. with appropriate sampling of brand subsets to which each subject could respond. leads to a . This problem might be overcome. Even so. whereas in a real choice situation. Thus. the precision with which entry/exit analysis identifies break points may be compromised. entry/exit analysis represents an important step forward in the development of a practical and meaningful basis for estimating price-response functions. (Such field experiments would also serve the valuable purpose of validating the general usefulness of this technique. they might enter or exit the brand's market before an odd-price level is reached. Shugan (1984) presents a theoretically sound logical development of factors influencing price-quality relationships. each with different perceptions of and preferences for product characteristics. pooling results from different subjects together.) One other possible bias in subjects' responses might result from the use of odd-prices as the starting points for the various brands' prices (as was the case in the example provided in this session). Despite these potential disadvantages. however. Thus. as . but for others that are difficult to describe explicitly (eg. How might the model be extended to account for such consumers? Another type of consumer who is currently unaccounted for in the model is the person who simultaneously seeks more than one quality from a product. The coefficient of sensitivity to changes in price could be determined from data collected in actual field manipulations of prices. further refinements of the model might be in order to adapt it to conditions typical of the real world. or from experimental simulations. Given adaptations such as these. and the model could probably be adapted to handle such consumers' existence. For instance. Shugan's model of market response to price and quality may well provide managerially useful insight into product demand. yet elegant account of the determinants of price-quality relationship in consumer purchases. many consumers may value both low price and high quality. Manipulations of product quality would. but not to both. however.. would be somewhat more difficult to determine empirically.managerially useful means for determining the optimum levels of price and quality to set for a product. in many cases. Such a consumer is likely typical for a large number of products. In order to apply Shugan's model to a real market situation. such as Dickson and Sawyer's (1984) approach. It represents a straightforward. The quality-response coefficient. requiring changes in production processes for small-scale testing. it would be hard to experimentally test quality-response via simulated choice conditions. such subjective characteristics as "styling" or "luxuriousness"). be rather impractical.. in its present form. the practical applicability of this model may be limited to products characterized by relatively simple. the model assumes that consumers may be sensitive to either price or to quality. Such questions of application notwithstanding. and thus may have to make tradeoffs in their choices. however. levels of quality might be described verbally for some product attributes. "b" in Shugan's equations) and quality ("c").e. easy-to-describe features. From this initial formulation. Realistically. one would need data about the market's response coefficients for both price (i. Shugan's formulation does have considerable theoretical appeal. In this "exchange-theoretic" model. That is. one wonders. but rather with respect to the value of "not getting" it. the consumer will evaluate each attribute separately. price is seen as a common (and perhaps the major) element on the "give" side of a give/ get equation that a buyer faces. If two attributes at a low level of the attribute hierarchy are seen as interacting. 2. If one adopts this point of view. assessment of their value occurs at the superordinate level. What. would happen in the evaluation process then? Would the value of each attribute be determined separately. or would a summary evaluation of the overall attribute-six occur? In addition to suggesting research questions based on the present model. if separate prices are known for each attribute (as might be the case for automobile options or pizza toppings). "PRICE AS A 'GIVE' COMPONENT" Ahtola-(1984) presents a view of price that is rather different from prior conceptualizations.well as offering a conceptually appealing account of why price-quality relationships occur. instead. It is easy to imagine a situation where these two propositions conflict. On the other hand. when prices are known for interactive lower-level attributes (for example. one gives up a certain price in return for a bundle of attributes that constitute the "get" package of the transaction. The propositions of Ahtola's model present some interesting research questions concerning situations in which the predicted outcome is not clear. As it now stands. two assumptions are stated in Ahtola's paper: 1. this work suggests extensions of the model. then they are not evaluated separately by the consumer. and the prices for both toppings are known). then Ahtola is correct in stating that the overall value of the "get" package should be measured without regard to a specific price. For example. when the value of getting anchovies on one's pizza depends on whether one also orders jalapeno peppers on it. Ahtola's model . The Jacoby and Olson (1977) framework for studying psychological response to price is an appropriate basis for organizing this literature. how much will he be willing to "give" up? Does the evaluation of one brand depend on what must be "given up" by not selecting another? And in what way? Such elaborations of the model are encouraged. Further development of the model might profitably address the question of choice among a set of brands. the stages of forming perceptions of prices. and to tie them together through the use of a common conceptual schema.. whether to buy d given brand or not. In particular. meta-analytic techniques. Zeithaml's call for refinement of our concepts and measures is very well taken. McGaw & Smith 1981. however. that is. Without the sort of work she encourages. it does help organize this body of work so that future research can better select appropriate measures with an eye toward establishing some continuity of usage of terms and operationalizations. is research area is characterized by a hodgepodge of concepts and measures. and Reilly & Conover 1983 for examples). many of which overlap each other. then the literature will become more amenable to techniques for assessing the general conclusions to be drawn from the entire body of research results (eg. see Class. is not always straightforward. and forming attitudes toward prices are often confusingly similar. Although the review of this literature is more descriptive than critical. they seem to share much in common with concepts such as "perceived savings." which is described by Zeithaml as . if a consumer declines one alternative to "get" another. "CONSUMER RESPONSE TO PRICE" Zeithaml's (1984) review of the literature on psychological response to price information has long been needed. and the boundaries of which are often indistinct.to the categories of this schema. If future work in this area does achieve some consistency in its measures.describes a consumer evaluating a given choice option. That is. The task of classifying a given concept or measure in. For example. our understanding of consumer response to price is bound to progress very slowly. This is the first published work to systematically explore the past constructs and measures of price response. when such concepts as "price acceptability" or "perceived value for the money" are classified as attitudinal responses. evaluating prices" (Nystrom. Zeithaml 198." referring to the perceived level of prices in ore store relative to other stores. consumer reactions to prices are caused by discrete items of Oprice. Ahtola. More work is needed. but rather to the task of processing price information. the Jacoby and Olson (1977) schema along with all the others reviewed by Zeithaml. 1984). savings relative to prior or usual prices. they are not really responses to prices. value-for-money implies more standard of comparison). The difficulty in placing different price-response concepts neatly into a single schema stems from the lack of such a schema in the original development of . is perhaps another concept that doesn't fit neatly into this overall schema.. the consumer is making judgments about a given price relative to other prices (i. That is. the price must be assessed relative to other product information (e. whereas "price image" refers to a global assessment based or perceptions of numerous products' prices (or possibly on other sources of information such as store advertisements).e..2) seem to be not so much measures of attitude toward price as they are self-reports of the consumer's processing abilities.g. to establish the parameters influencing consumer assessment of store price images and how those images affect processing of individual product prices within the store. In the former case. The "Integration of P-Price with Other Information" classification is one which might be extended to include additional concepts besides the relative salience of price vis-a-vis other attributes. The majority of concepts reviewed by Zeithaml reflect responses to prices of individual products. Tamsons & Thams 1975) and "confidence in price knowledge" (e. The consumer's "difficulty in. For example.. whereas "price image" is a response to less distinct stimuli.g. Perhaps these concepts should not be classified in. the consumer must integrate that price information with price knowledge accumulated from prior experience and from other information sources.perceptual response. in evaluating a given price at the time of a shopping decision. the "get" package. Another classification of variables as "attitude toward P-price" also seems somewhat dubious. And in making "value for money" judgments. in order to interpret it effectively. In both cases. The concept of "price image. per se. it is readily apparent that there is much to be learned about the influence of price on consumer behavior. For such a question. however. not on the relative price of every brand in the category. Or one right consider using a different sort of task. situational factors. Such a measure poses difficulties in comparing categories with different numbers of brands. but based on the same sort of task. and whether that accuracy is influenced by market conditions. or even comparing subjects within a category if they do not know the relative prices of more brands (and. a coherent framework for conceptualizing consumer response to price will greatly facilitate progress in this field. "price comparison error" was operationalized by counting the differences in rank positions between the correct rankings of brands within a category and the subject's estimated rankings. On the other hand. thus cannot rank some brands without sheer guessing). The "exact price recall error" measure discussed by Zeithaml (1984) appears to offer a conceptually appealing formula for assessing the error in one's estimate of a product's price-although there may be occasions in which it would he equally useful to study the direction of that error as well as its magnitude. A measure more amenable to such comparisons. As can be seen. if one is concerned with knowledge of relative prices. future research. it would he useful to know what determines the accuracy of price knowledge. The papers presented in this special topic session represent rather different approaches to studying this important . CONCLUSION In summary. In. especially if the focus is on knowledge of the relative price of a single brand within its category. One particularly interesting area for such investigation is the topic of how Pprice is encoded and stored. the researcher right ask the subject to estimate on a scale (ranging from "least expensive brand" to "most expensive brand") where a given brand fits in price. the best measure to use is less apparent. would involve calculation of the correlation between estimated brand ranks and actual ranks. For example. or individual differences among consumers. Is Zeithaml's earlier work (1982). Choosing the appropriate measure for studying price knowledge accuracy depends on just which aspect of it one wishes to explore. even the issue of investigating the accuracy of a consumer's price knowledge is not without its problems when it comes to selecting appropriate measures.those concepts. " Advances in Consumer Research. Valarie A. CA: Sa&e Publications. Class. Peter R. (1984). Moving Ahead with Attitude Research. "Consumer Response to In-Store Price Information Environments. (1984). Reilly. forthcoming. Michael D. 177-181. "Consumer Response to Price: An Attitudinal. Olson (1977). Jacob and Jerry C.. Beverly Rills. "An Experiment in Price Generalization and Discrimination. Nystrom." in Y. Sawyer (1484).area." Journal of Consumer Research. Hans Tamsons and Robert Thams (1975). Chicago: American Marketing Association. forthcoming. and Alan C. Information-Processing Perspective. and with extensions of prior conceptualizing such as those represented by the papers of this session. . 11. 11. Jacoby." Advances in Consumer Research. Zeithaml. (1982). Olli T. "Price as a Give' Component in an Exchange Theoretic Multicomponent Model. Gene V. and Jerry H. 8 (March). Through the development of standard price-response concepts and techniques for studying them. forthcoming. Wind and M. 11. Barry McGaw and Mary Lee Smith (1981). Meta-Analysis in Social Research. Dickson. REFERENCES Ahtola. As Zeithaml (1484) points out. 73-86. "Entry/Exit Demand Analysis. "Mete-Analysis: Integrating Results from Consumer Research Studies " Advances in Consumer Research. Harry. Shugan." Journal of Marketing Research. forthcoming. "Price-Quality Relationships. advancement of knowledge of consumer price response will surely follow. Greenberg. Conover (1984). 11. 7 (May). Advances in Consumer Research. 357-369.. Steven M. the benefits to be gained by pooling knowledge from a wide variety of independent studies will be greatly expedited to the extent that we who carry out the research adopt consistent concepts and measures for our work. eds. " Advances in Consumer Research. Valarie A. (1984). "Issues in Conceptualizing.Zeithaml. 11. . forthcoming. and Measuring Consumer Response to Price.
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