Outwitting the rational mind: How effortful thinking influences price cognition

Prior research presents mixed findings on how people's degrees of effortful thinking influence their reliance on heuristics and biases. Although the tenets of dual process theory would argue that effortful thinking should attenuate people's reliance on heuristics, a number of contemporary findings suggest otherwise: Effortful thinking may, in fact, enhance biased processing of information in certain instances. This research shows how, in the context of pricing, people's degrees of effortful thinking can amplify their inclination towards biased processing of price information. In five studies (n = 1,339), we find that effortful thinking induces a greater preference for nine‐ending (vs. zero‐ending) prices, and the effect is mainly driven by people's greater propensity for argument‐based decision making. Such predilection to nine‐endings attenuates with lower cognitive effort in processing price information. Moreover, when locus of deliberation shifts from price to quality, consumers' preference for nine‐ending priced options is subdued.     

True Context‐dependent Preferences? The Causes of Market‐dependent Valuations

A central assumption of neoclassical economics is that reservation prices for familiar products express people's true preferences for these products; that is, they represent the total benefit that a good confers to the consumers and are, thus, independent of actual prices in the market. Nevertheless, a vast amount of research has shown that valuations can be sensitive to other salient prices, particularly when individuals are explicitly anchored on them. In this paper, the authors extend previous research on single‐price anchoring and study the sensitivity of valuations to the distribution of prices found for a product in the market. In addition, they examine its possible causes. They find that market‐dependent valuations cannot be fully explained by rational inferences consumers draw about a product's value and are unlikely to be fully explained by true market‐dependent preferences. Rather, the market dependence of valuations likely reflects consumers' focus on something other than the total benefit that the product confers to them. Furthermore, this paper shows that market‐dependent valuations persist when – as in many real‐life settings – individuals make repeated purchase decisions over time and infer the distribution of the product's prices from their market experience. Finally, the authors consider the implications of their findings for marketers and consumers. Copyright © 2013 John Wiley & Sons, Ltd.     

How valuable is a well‐crafted design and name brand?: Recognition and willingness to pay

Preferences for similarly designed consumer products, evaluated blind and branded and also with and without prices, were tested in a consumer setting. The consumer's perceptual experience led to preference of the well‐crafted high‐priced option. This preference was enhanced by priming consumers with background information about the brand, perhaps causing the subjects to guess which choice was the well‐known brand before evaluation. Preferences for that choice increased again when brand names were visible during evaluation. When actual prices were added to the evaluations, preferences for the well‐known brand were very robust to high prices, indicating the strength of the brand name. Using the least preferred option and the lowest price as an anchor, the consumers' price threshold to pay for the preferred design and the brand name was computed. Attempts to explain and predict individual differences of choices using measures of inherent design acumen, prior experience, and purchasing behavior were largely unsuccessful. Copyright © 2011 John Wiley & Sons, Ltd.     

Is Salesperson Attractiveness a Boon or a Bane? The Moderating Role of Perceived Labor Cost‐To‐Price Ratio in Retail Bargaining

This research examines the important but unexamined effects of salesperson attractiveness on consumer bargaining behavior in retail contexts. In line with our theorizing, three studies demonstrate that the effect of salesperson attractiveness on consumer bargaining depends on their general beliefs regarding the impact of labor costs on retail prices. While consumers bargain less with an attractive salesperson when their labor costs‐to‐price (LP) ratio beliefs are relatively low, they bargain harder with an attractive, as opposed to a less attractive, salesperson, when their LP ratio beliefs are relatively high. As well, we provide evidence for the process, based on the salesperson's perceived trustworthiness and consumers' consequent bargaining stance toward her.     

Low‐price guarantees as advertisement strategy and compensation policy: The more,the better?

Companies sometimes employ a “lowest price or more than the difference back” policy (i.e., a price‐beating guarantee). We investigated whether such a policy is more effective to attract and retain customers than when the exact price difference is promised (i.e., a price‐matching guarantee). The first study revealed that about 60% of the marketers and shop owners in our sample thought that beating price differences is a more effective strategy than matching price differences. However, the four subsequent studies challenged this assumption. Specifically, the advertisement as well as the provision of price‐beating refunds did not have an incremental positive effect on customers' general attitudes in terms of trust, brand perception, loyalty, and shopping intentions beyond the level that was already reached by price‐matching refunds. Moreover, our mediation analyses revealed that the null effect of price‐matching versus price‐beating was mediated by fairness perceptions. From a theoretical perspective, these results are in line with a fairness account, which holds that people do not only evaluate the economic value of an outcome, but also take equality considerations into account. Because price‐beating is literally more expensive than price‐matching, from a practical point of view, companies should be informed that the employment of a price‐beating guarantee is a cost‐ineffective advertisement strategy and compensation policy.     

A qualitative study of adaptation to the euro in the Republic of Ireland: I. attitudes,the ‘euro illusion’ and the perception of prices

This is the first of two reports of a study using semi‐structured, in‐depth interviews to explore the current and recollected experiences of Irish people for the period before, during, and after the introduction of euro notes and coins (1 January 2002). Twenty‐four adults, 12 males and 12 females, covering a range of ages and educational attainment, were interviewed between October 2002 and February 2003. We found that most had welcomed the new currency initially, though some had felt less positive about it, whilst current experiences were more mixed. People's explanations for their attitudes seemed to focus more on the economic and practical aspects of currency change rather than symbolic meanings. Initially, most had experienced a euro illusion (prices in euros seeming to be more expensive than in punts). However, for most, the strength of the illusion appeared to diminish quite quickly. Nonetheless, current prices were believed to be higher, and many respondents attributed this either directly or indirectly to the change of currency. Although independent evidence found that there had been price increases in certain sectors, it was concluded that perceived price rises were, in part, illusory, and driven by expectations and selective price monitoring. Copyright © 2005 John Wiley & Sons, Ltd.     

Expectancy confirmation in spite of disconfirming evidence: The case of price increases due to the introduction of the Euro

People in Germany overwhelmingly believe that the Euro introduction caused an overall price increase, however, no such increase actually took place. To investigate whether this disparity could be based on biased perceptions of the average price trend, four studies were conducted. Participants received two menus from a restaurant (one ‘old’ menu with German Mark (DM) prices and one ‘new’ menu with Euro prices) and were asked to estimate the price trend (in per cent). In all of these studies, price trend judgements were biased towards rising prices. If the prices had in fact been raised, the magnitude of this price increase was overestimated. If the prices had remained stable, significant price increases were perceived. And if the prices had fallen, they were perceived as having remained stable. The bias was systematically related to participants' expectations concerning price increases. A ‘selective outcome correction’ hypothesis proved to best fit the data: incorrect calculation outcomes that are in line with one's expectations are overlooked, whereas incorrect inconsistent outcomes are detected and corrected. The results imply that expectations can influence judgements even when clear disconfirming evidence is available that can be compared with an objective standard, thus leaving no room for interpretation. Copyright © 2004 John Wiley & Sons, Ltd.     

“We want the world and we want it now”: Materialism,time perspectives and problem spending tendency of Chinese

Chinese consumers' spending has been expanding rapidly in the past decade, and along with it household and credit card debt. The present research collected evidence to triangulate the contention that materialism is positively related with Chinese's problem spending tendency (PST), and that present‐time‐perspective (PTP) and future‐time perspectives (FTP) interact systematically with materialism to affect PST. A survey of the general population in Macao, China (Study 1; N = 239) confirmed that materialism was positively correlated with PST. An interaction between materialism and PTP intensified the relationship, whereas an interaction with FTP weakened the relationship. Another survey with a sample of university students (Study 2; N = 223) again found positive relationships among PST, materialism, and PTP, as measured by temporal discount rate. But further exploration showed that PST was only related with temporal discounting among high materialists, but not among low materialists. Study 3 experimentally examined the causal effects of materialism and FTP on PST. When being primed of an orientation towards materialism (n = 33), the participants' planned consumption doubled that of the control group (n = 31). A FTP prime interacted with materialism prime and put a “damper” on participants' planned spending (n = 29), compared to their counterparts who were not primed of such a time perspective.     

Determinants of brand switching: the role of consumer inferences,brand commitment,and perceived risk

Previous research in the area of price discounts has generated a rich, but diverse and mixed body of literature. This research examines the role of consumer's brand commitment and product category risk in influencing the nature as well as valence of the inferences generated by consumers in response to price discounts. Our results provide insights regarding how consumers' responses to competitor inducements vary depending upon their brand commitment for the incumbent brand and perceived risk. Furthermore, we show that higher commitment consumers could resist an inducement from a competitor when they are able to generate negative, marketer‐related inferences. Our research suggests that consumers' inferences are critical than pure economic benefits in determining the effectiveness of discounts.     

Context‐induced placebo effects—An investigation of contrast effects in response expectations and actual product efficacy

Recent research on the placebo effect of marketing actions has demonstrated that characteristics that are not inherent to a product's physical properties per se, such as its price, brand, or packaging can considerably shape consumers' expectations about and actual efficacy of a marketed product. However, potential contextual effects that other products may have on the construction of consumers' efficacy beliefs and objective consumption outcomes remain unexplored. Across two experimental studies, we show that people's response expectations regarding a focal product are inversely related to the alleged superiority of context options and that such context‐induced expectations can carry over to behavioural performance metrics; a phenomenon we refer to as context‐induced placebo effects.     

Losing more than gaining from overall stable prices: the differential perception of increasing versus decreasing prices made the Euro look like a price booster

The present research examined whether price trend misperceptions can be explained by the differential perception of increasing versus decreasing prices. We expected price increases (losses to consumers) to be perceived as being more intense than price decreases (gains to consumers) of the same magnitude. This tendency, in turn, should be positively associated with how people perceive the overall price trend. To test this reasoning, participants in the first two studies were asked to compare German Mark (DM) and Euro prices. First, participants received a menu containing 21 dishes with DM prices, and their price trend expectations were assessed. Then, participants indicated for each dish to what extent the price had changed. Finally, participants' overall price trend judgments were assessed. In both studies, results indicate that price trend judgments were biased toward rising prices. In addition, price increases were perceived as rising more than price decreases of the same magnitude were perceived as falling. This tendency was positively associated with overall price trend judgments, even after controlling for expectations. Study 3 was to replicate these findings in a different domain to demonstrate the general nature and impact of the hypothesized effect. Copyright © 2007 John Wiley & Sons, Ltd.     

Who I am and how I think: The impact of self‐construal on the roles of internal and external reference prices in price evaluations

Drawing from self-construal studies on cognitive styles as well as reference price literature, this research investigates the impact of independent versus interdependent self-construal on consumers' use of internal reference prices (IRPs) and external reference prices (ERPs) during price evaluations. Three experiments reveal that IRPs have a larger impact on price evaluations for participants who are primed with an independent (vs. interdependent) self-construal, whereas ERPs have a larger impact for participants who are primed with an interdependent (vs. independent) self-construal. The differential impact of self-construal on the use of IRPs and ERPs seems to be mediated by a generalized, perceived sense of connectedness/separateness. Implications on reference price research, self-construal and cognitive styles are discussed.     

Building trust to increase purchase intentions: The signaling impact of low pricing policies

We examine the differential signaling impact of two low pricing policies, Price Matching Guarantees and Everyday Low Prices, on consumers' trusting beliefs and purchase intentions. We demonstrate that both PMG and EDLP pricing policies signal stores' ability to offer lower prices. However, whether these sellers were perceived as benevolent, and—consequently—consumers' purchase intentions, varied critically depending upon price uncertainty. Perceived benevolence and purchase intentions were significantly higher [lower] for sellers offering PMG than EDLP when price dispersion was high [low]. Our findings offer insights into whether and under what conditions firms should adopt these low pricing policies.     

Spanish consumers' perceptions of US apparel speciality retailers' products and services

Apparel speciality retailers' success in international markets is contingent upon their knowledge of culturally‐defined values, norms and behaviour that influence consumer decision making and impact acceptance of products and services. An integrated theoretical framework of retail internationalisation guided this investigation of the viability of the Spanish market for US retailers. This study examined consumers' store patronage and apparel purchase behaviour, acceptance of US apparel brands, perceptions of retailers' products and services, and perceptions of the impact of foreign retailers on local communities. Data were collected from 375 consumers in Barcelona, Madrid and Valencia. The influence of retailer characteristics on consumers' store patronage varied by age and income. Product characteristics that influenced apparel purchases varied by gender, income and age, while acceptance of US brands differed by gender and age. The perceptions of Spanish, European and US retailers differed regarding quality, fashionability, product assortment, extent and quality of customer service, convenience of location, payment options, national brands and store layout. Consumers' acceptance of US apparel brands was a function of age, household income, apparel product country of manufacture and price. Perceptions of US retailers were a function of household income, selected apparel characteristics and consumer acceptance of US apparel brands. Differences among perceptions of the impact of retail development were found by city. The findings provide insights into the opportunities and challenges for US apparel speciality retailers as they contemplate entry into the Spanish market. The affinity for US apparel among young Spanish consumers, particularly males, suggests optimism regarding opportunities in this market. Copyright © 2005 John Wiley & Sons, Ltd.     

Romantic Crushes Promote Variety‐Seeking Behavior

Consumers making repeat consumption choices often need to decide whether to stick to their favorite option or to select something different. Understanding the situational factors that influence their willingness to seek more or less variety in consumption is of both theoretical and practical importance. The current research proposes that a salient relationship state—romantic crush—can increase consumers' variety‐seeking tendency in unrelated consumption situations. Building on the compensatory consumption literature, we suggest that the lack of reciprocal response in the romantic crush experience may lower consumers' sense of control in the romantic relationship. Therefore, they are motivated to restore their sense of control by making more varied choices in consumption domains. Five studies provide support for this hypothesis. In line with our control‐restoration account, the effect disappears when consumers' sense of control is boosted via other means. Moreover, the effect is specific to the experience of a romantic crush and cannot be generalized to other types of romantic relationship (e.g., initial stage of love).     

Acceptance of a price discount: the role of the semantic relatedness between purchases and the comparative price format

Two studies are reported where people are asked to accept or not a price reduction on a target product. In the high (low) relative saving version, the regular price of the target product is low (high). In both versions, the absolute value of the price reduction is the same as well as the total of regular prices of planned purchases. As first reported by Tversky and Kahneman ( 1981 ), findings show that the majority of people accept the price discount in the high‐relative saving version whereas the minority do it in the low one. In Study 1, findings show that the previous preference reversal disappears when planned purchases are strongly related. Also, a previously unreported preference reversal is found. The majority of people accept the price discount when the products are weakly related whereas the minority accept when the products are strongly related. In Study 2, findings show that the classic preference reversal disappears as a function of the comparative price format. Also, another previously unreported preference reversal is found. When the offered price reduction relates to a low‐priced product, people are more inclined to accept it with a control than a minimal comparative price format. Findings reported in Studies 1 and 2 are interpreted in terms of mental accounting shifts. Copyright © 2002 John Wiley & Sons, Ltd.     

Does the introduction of the Euro have an effect on subjective hypotheses about the price‐quality relationship?

• Product prices are often considered to be an indicator for quality. In our experiment we focussed on the question if consumers' hypotheses can be biased by exchanging the digits on price displays due to currency changes. We found that high numbers in a price expressed in terms of a currency with a relatively low value (German Mark) lead to a higher perceived quality level than an equivalent price expressed in terms of relatively high listed currency (Euro). Contrary to our expectations we could not prove that this effect is stronger for premium than for low‐budget products.

Copyright © 2006 John Wiley & Sons, Ltd.     

Consumer misbehaviour: an exploratory study of shopliftin

Although customer theft is traditionally researched from a criminological or psychological perspective, this paper investigates shoplifting as consumer behaviour, demonstrating that well‐defined models of normal consumer behaviour can be applied to aberrant behaviour such as shop theft. Empirical research is used to show how adults and teenagers form belief systems that amount to rational intentions in the decision to shoplift. The theory of planned behaviour (Ajzen, 1991) was used as the basis for two self‐report surveys which investigated the interaction between consumers' attitudes and beliefs about shoplifting and their perceptions of retail security. The first survey utilised a sample of shoppers from the South East Midlands; the second a sample of school students from the same area (861 respondents in total, 109 respondents admitting to shoplifting in the previous year). Both studies indicate that the decision to shoplift is influenced by pro‐shoplifting attitudes, social factors, opportunities for shoplifting and perceptions of low risks of apprehension. This implies that the deterrent messages we use must be reassessed. Copyright © 2002 Henry Stewart Publications.     

To Partition or Not to Partition: Role of Trade-in Price on Consumer Evaluations of Purchases Involving Trade-Ins

Many new purchases involve consumers trading in their old product at the same time, requiring them to assume the dual role of a buyer and a seller in the overall exchange. This research examines how framing the overall exchange as a partitioned transaction with separate prices for the new purchase and the trade-in, or a consolidated transaction with a single net price after accounting for the trade-in price, affects consumer preferences. We find that consumers prefer a partitioned (consolidated) transaction when the relative trade-in price is high (low). Unlike previous explanations based on heuristic processing and differential importance of the trade-in price, our reasoning is that partitioning (vs. consolidating) prices makes salient and enables evaluability of the trade-in price. In the absence of specific referents, consumers rely on the new purchase price to evaluate the merits of the trade-in price. Consistent with our reasoning, we identify boundary conditions for the findings. The presence of a favorable referent for the trade-in and whether the new purchase and the trade-in are (perceived to be) in the same product category attenuate the reliance on the new purchase price as a referent. Our findings have important theoretical and managerial implications.     

Perceived brand authenticity: Examining the effects of inferred dedication and anticipated quality on consumers' purchase intentions and actual choices

This research investigates both the downstream effect of perceived brand authenticity on consumers' actual, consequential choice and the important role of inferred brand dedication in the relationship between perceived brand authenticity, anticipated quality, and purchase intentions. We also investigate the interactive effect of two source-related factors—intrinsic motivation and congruity—on consumers' brand authenticity perceptions. We present findings from three studies using different product categories (utilitarian/consumable: hand sanitizer; hedonic/consumable: chocolate; hedonic/non-consumable: sunglasses). Study 1 shows that consumers use information regarding the intrinsic motivation of those behind the brand and congruity between the brand's actions and what it represents to consumers when forming brand authenticity perceptions and that intrinsic motivation and congruity interact to increase authenticity perceptions. We anticipate that consumers' positivity toward brands perceived as authentic will extend to actual choice through anticipated quality. Study 2 demonstrates that consumers choose authentic brands over inauthentic brands above what chance would dictate and anticipated quality can forecast this choice. Next, we extend our collective process knowledge by exploring an underlying reason why consumers anticipate that brands presented through marketing communications as authentic will have higher quality. We suggest that when managers present brands as authentic, consumers infer greater dedication of those behind the brand and inferred dedication influences anticipated product quality. Study 3 provides support and uncovers a serial mediation process, highlighting the importance of inferred dedication. Specifically, perceived brand authenticity increases consumers' brand dedication inferences, which in turn increases anticipated product quality, and ultimately purchase intentions.