Retailers are increasingly using a genre of price-related guarantees commonly referred to as Low Price Guarantees (LPG) or Price Matching Guarantees (PMG). Although such guarantees vary in form and structure, they typically claim to offer the lowest market price for a product and in case a consumer can locate a lower price for an identical product in the local market within a specified time period, she is promised a refund that equals or exceeds the difference between the guaranteed price and the lower price. Past consumer research on LPG has generally indicated that consumers who are exposed to a retail offer accompanied by such a guarantee are likely to indicate a higher perception of offer value, lower search intention and higher shopping intention than consumers who are exposed to an offer that is not accompanied by an LPG, thereby suggesting that a retailers are likely to benefit from issuing such a guarantee.

In this research, we contend that one does not get a complete picture of the true effectiveness of an LPG by restricting focus to its pre-purchase effects and that one needs to consider probable post-purchase consumer effects of such guarantees. We predicted, and found, that following a purchase, highly value conscious consumers are likely to search more for lower prices when such a purchase had been accompanied by an LPG compared to when it was not. Thus, although LPG is seen to discourage pre-purchase search intention across all consumers, it is seen to encourage post-purchase price search among highly value conscious consumers. We also found that the higher the refund promised by an LPG, the higher is the likelihood of post-purchase search, especially among high value conscious consumers. Low value conscious consumers, however, do not indicate a higher intention to do a post-purchase search, in case of a purchase accompanied by an LPG.

Our findings have important implications for retailers who compete based on price.  With regard to low price guarantees, retailers face the strategic decision of whether or not to issue such signals, and such a decision is likely to be based on the anticipated benefits of issuing the signal. Post-purchase search is likely to be detrimental to high-priced retailers who might use the signal and hope to benefit from it by taking advantage of consumers’ restricted ability to search the market efficiently (especially when they target markets characterized by a large proportion of highly value conscious consumers), given the likelihood of a higher incidence of refunds and consequent monetary loss to these retailers. Post-purchase search for lower prices may be detrimental to low-priced retailers also, if the market is characterized by a high degree of price variation, a large number of competing retailers and frequent price changes. Thus, our research indicates that considered collectively, likely pre- and post-purchase effects of an LPG provide us with a more complete picture of the net benefit of issuing such a signal. Our findings indicate that if one takes into account probable post-purchase effects of an LPG, the signal may not prove to be beneficial to all retailers in all market conditions, contrary to the conclusion that one might draw from past research.

An explicit recommendation that follows from our findings is that before offering an LPG, retailers should be extremely confident of their position with respect to market prices and only relatively low-priced retailers should offer LPG. Simply put, our findings strongly recommend against opportunistic use of LPG.  On a similar note, our findings indicate that higher levels of refund should be attached to low price guarantees only when retailers are confident of being truly low-priced.