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Focal and contextual components of price history as determinants of expected price

Focal and contextual components of price history as determinants of expected price Purpose – This paper aims to investigate how consumers adjust their price expectations for brands in response to previously encountered prices. The effects of two distinct components of price history, focal and contextual, are examined. The focal component represents the role of a brand's own previous price(s) in determining future price expectations. In contrast, the contextual component represents the impact of the prices of previously considered competing brands. Design/methodology/approach – A total of 60 subjects were enrolled to participate in a longitudinal, quantitative, survey‐based study that required them to provide information on brand perceptions, price expectations, brand consideration and choice. Findings – Empirical comparison of several model formulations confirms that both components are crucial in explaining how consumers adjust their price expectations in response to the prices of considered brands. Consistent with a wide body of research, a brand's own previous price exerts the greatest influence on price expectations. However, the extent to which contextual prices are assimilated depends on the composition of consumers' consideration sets. Avenues for future research and implications for brand pricing and positioning are discussed. Originality/value – The results offer several unique perspectives that stand out from (and build further on) previous research. First, although previous research has examined the effects of competing brands' current prices on brand choices, it has not incorporated the prices of competing brands that may have been observed on previous shopping occasions. Second, measures and assesses the perceived variability within the consumers' consideration sets influences the impact of the contextual component on a brand's current reference price. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Product & Brand Management Emerald Publishing

Focal and contextual components of price history as determinants of expected price

Journal of Product & Brand Management , Volume 20 (5): 12 – Aug 23, 2011

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Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
1061-0421
DOI
10.1108/10610421111157937
Publisher site
See Article on Publisher Site

Abstract

Purpose – This paper aims to investigate how consumers adjust their price expectations for brands in response to previously encountered prices. The effects of two distinct components of price history, focal and contextual, are examined. The focal component represents the role of a brand's own previous price(s) in determining future price expectations. In contrast, the contextual component represents the impact of the prices of previously considered competing brands. Design/methodology/approach – A total of 60 subjects were enrolled to participate in a longitudinal, quantitative, survey‐based study that required them to provide information on brand perceptions, price expectations, brand consideration and choice. Findings – Empirical comparison of several model formulations confirms that both components are crucial in explaining how consumers adjust their price expectations in response to the prices of considered brands. Consistent with a wide body of research, a brand's own previous price exerts the greatest influence on price expectations. However, the extent to which contextual prices are assimilated depends on the composition of consumers' consideration sets. Avenues for future research and implications for brand pricing and positioning are discussed. Originality/value – The results offer several unique perspectives that stand out from (and build further on) previous research. First, although previous research has examined the effects of competing brands' current prices on brand choices, it has not incorporated the prices of competing brands that may have been observed on previous shopping occasions. Second, measures and assesses the perceived variability within the consumers' consideration sets influences the impact of the contextual component on a brand's current reference price.

Journal

Journal of Product & Brand ManagementEmerald Publishing

Published: Aug 23, 2011

Keywords: Internal reference price; Price expectations; Prices; Consideration set composition; Consumers

References