The influence of redundant comparison prices and other price presentation formats on consumers' evaluations and purchase intentions

Rajesh Chandrashekaran

Sale announcements by retail stores often include comparison prices (advertised reference prices, ARP) in conjunction with sale price and saving information. Under such conditions, an ARP does not offer additional information and, therefore, its presence seems redundant. Yet, a significant proportion of comparative price advertisements contain this redundancy. A crucial question is: Can the use of such a price presentation tactic be justified? Results from two separate studies confirm that some consumer groups are more prone to the influences of such contextual factors than others. Key findings are discussed below along with their practical implications.

The first study investigates whether an advertised reference price (ARP) enhances consumers’ evaluations even when this information is superfluous, i.e., when SP and Saving information are readily available. Results show that evaluations of an advertised offer are indeed significantly higher in the presence of an ARP, but only when the level of involvement is low, and at a relatively high sale price. However, involved consumers are not affected by ARP information. Therefore, it appears that retailers may be justified in implementing an undifferentiated strategy and offering redundancy (i.e., SP+Saving+ARP information) for all consumers. On the negative side, although retailers may not stand to gain among high involved consumers, they may be able to deceive consumers with low levels of involvement by simply including redundant (and possibly exaggerated) ARP information in conjunction with high sale prices and saving information. Further research on this issue is warranted.

Even a cursory glance at retail price advertisements will reveal that some retailers present information using a SP+Saving format. This study suggests that such a tactic is not likely to yield overall optimum results because, although evaluations made by involved consumers are not affected, individuals with low levels of involvement are likely to evaluate the offer less favorably.

The second study incorporates a wider array of price presentation tactics (SP Only, SP+ARP, SP+%Saving and SP+ARP+%Saving) and examines a wider range of responses (transaction value, acquisition value and subsequent purchase intentions). The intent is to understand how the presence of ARP and Saving information (both separately and together) influence consumers’ evaluations and subsequent purchase intentions. Results support the conclusion that retailers’ price presentation tactics are influential only in particular market segments, and only in particular stages of the evaluation process. For example, ARP influences only perceived transaction value (but not acquisition value), and saving information impacts purchase intentions directly, but has no effect on perceptions of value. Most importantly, these effects are seen only among consumers with low levels of involvement. In addition, crucial differences between high and low involvement groups are seen in their responses to the four price presentation formats.

An expanded conceptual framework and the inclusion of an exhaustive set of presentation formats in Study 2 helped uncover crucial differences in the roles of ARP and Saving information among consumers with differing levels of involvement. Results underscore the need for retailers to consider implementing different communications tactics in the two segments. For involved consumers, retailers cannot enhance evaluations and purchase intentions by including ARP and/or Saving information. Although perceptions of TV are generally unaffected by inclusion of additional/redundant information, these consumers’ express significantly lower intentions to purchase the product when any additional information is provided along with SP, i.e., these consumers prefer to evaluate SP in isolation (SP Only format). Therefore, for involved consumers, retailers must consider presenting information in SP Only format.

In contrast, the presence of ARP is crucial to communicate enhanced value when involvement is low. Retailers may accomplish this by utilizing either SP+ARP or SP+ARP+Saving formats. However, to encourage these consumers to purchase their products, retailers should emphasize the (relative) saving without providing ARP information. Together, these findings suggest that, for consumers with low levels of involvement, retailers need to include ARP information in store ads, newspaper inserts (FSIs) and other sale announcements that intend to enhance perceptions of value and attract consumers into the store. However, once these consumers are in the store, the signs posted inside the store should emphasize (relative) saving in conjunction with SP to nudge consumers into action. Furthermore, including ARP inside the store is likely to hurt evaluations that will yield sub-optimal results. Similarly, store (or manufacturer) coupons that are intended to induce trial, repeat purchase or brand switching should emphasize saving and not ARP information.

Finally, the findings reported here may have implications for public policy as well because increased vulnerability within some sub-segments of the population creates room for possible deception.