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Paper: Compilation – Consumer Inferences and Processing of Price Information | American Marketing Association

Selections from Journal of Marketing

June 2014 | Pricing

The importance of price with regard to consumer store and brand choice decisions cannot be overstated. However, a widely known truth among marketing practitioners and academics alike is that consumers do not respond to price per se; rather, they respond to their mental representations of price. Thus, any factors that influence consumer price perceptions will necessarily affect purchase probabilities. For this reason, there has been a history of research investigating contextual influences that make prices appear more or less favorable to consumers. This collection features four recent articles from Journal of Marketing that provide valuable insights into factors that exert this kind of contextual and perceptual influence at the store level, the product category level, and the brand level. Two primary themes run through the four articles in this collection. First, Hamilton and Chernev (2013) and Miniard et al. (2013) explore how consumers form price inferences. These authors investigate the types of observable price- and non-price-related information consumers use when inferring important but unobservable prices, such as store-level and/or competitors’ prices. Second, Chen et al. (2012) and Biswas et al. (2013) explore the influence of promotional price presentation on consumers’ numerical (price) information processing. 

The other theme explored in this collection is how price perceptions are influenced by consumers’ abilities and norms in processing numerical information. Drawing on research that shows that many consumers are poor processors of numerical values presented in terms of percentages, Chen et al. (2012) advance the concept of “base value neglect” (BVN). The BVN phenomenon represents consumers’ tendency to ignore the base value to which percentages apply and instead focus their judgments exclusively on the percentages themselves. One marketing context in which this plays out (and is used as an experimental manipulation in Chen et al.’s studies) is marketers’ choice to provide a bonus amount of a product (50% more) versus a lower price (33% off) in a promotional context. For example, if coffee costs $12.00 per pound, a marketer can offer a promotion of 50% more (24 ounces) or sell the pound at 33% off (at $8.00). In both cases, the effective price would be $.50 per ounce. However, consumers overwhelmingly prefer the bonus amount because 50% > 33%. Consumers simply ignore the differences in base values (16 ounces, $12.00) when forming their preferences.

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Compilation: Consumer Inferences and Processing of Price Information.

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