What consumers know or think they know about stores’ relative price levels is an important research area from both a societal as well as a retail perspective. Perceived price level, or price image, has been shown to be an important determinant of store choice. When such perceptions correspond poorly to actual price differences between stores, consumers could end up patronizing stores they might not have chosen with more accurate information. Given the potential implications for store choice, it is important to investigate factors that explain why some consumers would have better store-price knowledge than others.

From a retailer perspective, it is important to find out the degree to which its overall price strategy is reflected in consumer price perceptions, and whether there are systematic discrepancies in these perceptions. Also, assessing the level of store-price knowledge should enable retailers to understand better the effectiveness of price competition in a particular market. If overall objective store-price knowledge is low, this would indicate that in general consumers are unaware of the pricing strategies employed by retailers and that non-price factors could have a substantial impact on price perceptions. Under such conditions, it would be more difficult to manage a store’s price image. Thus in general, retailers should be better off when overall price knowledge is good.

This study investigates the determinants of objective store-price knowledge, that is, what consumers actually know, as well as subjective store-price knowledge, that is what consumers think they know about store-level prices in the context of grocery retailing. Both knowledge constructs were included in the study since past research has shown that what consumers think they know is not always a good indicator of their objective knowledge. Analyses were based on price data collected in-store that were aggregated into indicators of store price-levels, and questionnaire data that included consumers’ perceptions of the price levels of the five major stores in the surveyed market. The questionnaire also included possible explanatory factors of both subjective and objective knowledge including education, income, price-related experience, and price consciousness. 

The results indicate a large amount of variation in consumers’ objective store-price knowledge, with some consumers seemingly unable to provide price-level estimates of the major stores in the community, and other consumers demonstrating high accuracy. Furthermore, objective and subjective store-price knowledge were not significantly related in this study. This suggests that many consumers with low levels of actual knowledge still feel confident that they are knowledgeable about competing stores’ prices. From a retailer perspective, the variability in objective store-price knowledge confirms that price perceptions are fairly malleable and affected to a substantial degree by non-price factors. This suggests that store price perceptions are difficult to manage and that merely changing price levels is not likely to be an effective measure for obtaining a change in a store’s price image

The effects of the explanatory factors on the two knowledge dimensions were analyzed by means of structural equation modeling. Whereas price search in the form of reading fliers and ads had positive effects on subjective as well as objective price knowledge, two other types of price-related experience, number of stores shopped, and length of residence in the market, only affected objective price knowledge. This shows that the two knowledge dimensions are determined differently. Furthermore, price consciousness had a larger effect on subjective than on objective knowledge. Education had the expected positive effect on objective price knowledge, while income did not have the expected negative effect mediated through price search on either knowledge dimension. 

The current research shows the significance of investigating store-level price knowledge and offers some interesting explanations for why some consumers are more knowledgeable than others. The results should aid both retailers and marketers to understand better price-related shopping behavior. Given that previous research on this topic is very limited, there are several avenues for future research, such as looking at other possible explanatory factors of the knowledge dimensions and comparing store-level price knowledge across types of retail stores.