EXECUTIVE SUMMARY

Prior research has examined marketers’ reasons for employing different pricing tactics, as well as consumers’ responses to individual tactics, such as comparative price claims, everyday-low pricing, pennies-a-day, and price matching.  Interestingly, the extant literature has not investigated directly consumer knowledgeof marketers’ pricing tactics, nor has it attempted to assess how this knowledge may affect consumers’ responses to such tactics.

Several theoretical perspectives that involve assumptions regarding underlying consumer knowledge of pricing tactics attempt to explain consumers’ reactions to marketers’ offers.  First, studies of price-fairness judgments implicitly assume that consumers know something about price-setting strategies.  This research suggests that what consumers know about how and why marketers determine prices and price changes can affect consumers’ perceptions of price fairness.   

Second, studies based upon attribution theory, in which consistency and distinctiveness of pricing tactics have been varied experimentally, support the premise that consumers possess knowledge schemata that they use to evaluate price promotions and that they hold these beliefs with varying levels of confidence.  Researchers have also investigated the varying personal tendencies of individuals to be aware of prices, and to have pricing knowledge.  For example, some consumers exhibit price mavenism, i.e., “the degree to which an individual is a source of price information regarding products and places to find low prices and responds to other consumers’ requests for information”.  Importantly, all of these theoretical perspectives suggest that consumers develop pricing tactic persuasion knowledge as a result of their marketplace interactions, but research has yet to directly study such knowledge (e.g., how such knowledge might affect consumer responses to price offers).

The current research investigates consumer knowledge of the pricing tactics that marketers frequently employ and the effects of that knowledge on responses to various price offers.  In the research, a series of studies were conducted to develop and validate a 17-item knowledge measure designed to assess pricing tactic persuasion knowledge (PTPK).  Consistent with the persuasion knowledge model, individuals with higher levels of PTPK were shown to have more knowledge-related thoughts regarding pricing tactic information than those with low levels of PTPK.  Additionally, pricing tactic persuasion knowledge was shown to more strongly affect consumer choices regarding quantity surcharge offers and purchase interest evaluations following exposure to tensile claim offers (e.g., “Save up to 50% Off”) than several competing constructs such as need for cognition and general persuasion knowledge confidence.

The present research not only enhances our understanding of consumer persuasion knowledge and consumer reactions to marketers’ tactics, it also has public policy implications.  Policy makers may feel that if knowledge differences affect consumer acquisition, comprehension, and interpretation of price tactics, it might be necessary to limit misleading impressions.  It has been argued that buyers who have less knowledge in terms of prices and products have greater potential for being deceived.  The current research supports the PKM arguments that persuasion knowledge indeed can enhance consumer decision-making. 

Our findings underscore the need to monitor promotional communications to limit the potential for marketers to deceive vulnerable consumers and to search for methods to enhance how consumers interpret and use marketplace information.  Like earlier efforts to improve consumers’ use of unit price information, it could be worthwhile to provide education, especially in areas where the population is relatively less educated.  For example, programs might help consumers recognize the persuasive techniques agents use, as enlightened consumers are more able to exert greater control in response to persuasion attempts.

            Finally, the research offers a valid and reliable scale to use in future research regarding pricing tactic persuasion knowledge.  The scale can be used as a whole for researchers interested in studying overall levels of pricing tactic persuasion knowledge.  In addition, the scale could be used to investigate potential other moderating effects it may have on marketplace offers not studied in the present research.