Over the past few decades, considerable research has been done to understand the determinants of consumer price knowledge. This research stream has often concluded that consumers are generally not well aware of prices, and that the majority of consumers have little knowledge of the prices for many of the products that they frequently purchase. A core limitation in this line of research has been the dominant reliance on frequently purchased non-durable consumer goods as the basis of empirical investigation. The result has been a lack of understanding on the effects of the product category, and its intrinsic characteristics, on consumer price knowledge. While the majority of existing price knowledge studies have focused on consumer non-durables (e.g., bread, butter, laundry detergent, etc.), a relatively small body of research has examined the more complex case of durable consumer goods.

This paper therefore extends the current literature by examining price knowledge for durable consumer goods, and its determinants. In the first study, utilizing data from the popular television game show The Price is Right, consumer price knowledge levels for 51 product categories are estimated and profiled. The results indicate significant cross-category variations in consumer price knowledge. Products that are widely used in the marketplace and considered essentials (e.g., television sets, refrigerators, washing machines) exhibit significantly higher levels of price knowledge than non-essential and niche-market products (e.g., telescopes, pool tables, golf equipment).

In order to assess the product category drivers of price knowledge variations observed in the first study, the second study measures three possible predictors of consumer price knowledge through a consumer survey: purchase frequency, advertising exposure, and use of the price-quality cue in the category. Consistent with the theoretical foundation presented, purchase frequency and advertising exposure are found to have a positive impact on consumer knowledge of prices for durable goods. However, the use of the price-quality cue by the consumer exhibits only a weak impact on consumer price knowledge.

The results of both studies shed light on the extent of cross-category variation in price knowledge of consumer durables, and its underlying determinants. Considering the vital importance of durable consumer goods in the economy and the complexities associated with their marketing and retailing, an understanding of these determinants is essential to marketing managers utilizing consumer price knowledge (or lack thereof) as a driving force in their pricing tactics. Effective price management requires accurate measurement of not only the average level of consumer price knowledge within a given category, but also the distribution of price knowledge across consumers. Product categories in which consumers generally lack price information provide sellers with the opportunity for high-margin pricing. In these categories, lack of consumer knowledge about prices often translates into lower levels of price sensitivity and absence of reference price points, resulting in a high level of flexibility in setting prices.

In contrast, categories that exhibit high levels of consumer price knowledge dictate more competitive price setting strategies. In these categories, consumers are generally knowledgeable about prices, and price communications and the associated pricing tactics need to focus on increasing perceived value and reducing the perceived risks associated with purchase transactions. As a result, pricing tactics such as price-matching guarantees and comparative price advertising are more relevant in such categories, in order to increase consumers’ confidence in their purchase decisions.

Use of pricing tactics that depend on consumers’ ignorance of prices may have both ethical and legal consequences that should be carefully considered before the implementation of such tactics. The results presented here indicate considerable variation in consumers’ knowledge of prices, and therefore the potential use of poor consumer price knowledge in a given category by sellers may be an important consideration for public policy and consumer protection initiatives, as well as for the development of price communication strategies.