Pricing Strategy and the Formation and Evolution of Reference Price Perceptions in New Product Categories

Lowe, B. and Alpert, F. (2010) Pricing Strategy and the Formation and Evolution of Reference Price Perceptions in New Product Categories. Psychology and Marketing, 27 (9). pp. 846-873. ISSN 07426046 . (The full text of this publication is not available from this repository)

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Official URL
http://dx.doi.org/10.1002/mar.20361

Abstract

This study examines the formation and evolution of reference price perceptions in new product categories. It contributes to our understanding of pricing new products by integrating two important research streams in marketing-reference price theory and the theory of pioneer brand advantage. Prior research has focused solely on products in existing or incrementally new categories, and has typically examined fast-moving consumer goods. Using a cross-sectional experiment to study the formation of reference price perceptions, and a separate, but related, longitudinal experiment to study the evolution of reference price perceptions, the findings suggest that the pioneer brand's initial price defines a consumer's initial reference price, whether the pioneer is following a skimming or a penetration strategy. This effect endures in later time periods where the initial price affects consumer perceptions of value and purchase intention. The study also finds that the pioneer, due to its prototypicality, has a stronger influence on reference price perceptions than the follower, creating a systematic bias to both the formation and evolution of reference price perceptions in new product categories. Thus, reference price perceptions are shaped by what the pioneer does, rather than what the follower does. Furthermore, category-level reference prices exist and explain purchase intention, but do not improve over brand-specific measures in this regard. These findings have implications for pricing strategy and the theory of reference prices. © 2010 Wiley Periodicals, Inc.

Item Type: Article
Additional information: Unmapped bibliographic data: PY - 2010/// [EPrints field already has value set] JA - Psychol. Mark. [Field not mapped to EPrints] AD - University of Kent, United Kingdom [Field not mapped to EPrints] AD - University of Queensland, Australia [Field not mapped to EPrints]
Subjects: H Social Sciences
H Social Sciences > H Social Sciences (General)
Divisions: Faculties > Social Sciences > Kent Business School
Faculties > Social Sciences > Kent Business School > Marketing
Depositing User: Cathy Norman
Date Deposited: 27 Sep 2012 15:05
Last Modified: 16 Oct 2012 15:41
Resource URI: http://kar.kent.ac.uk/id/eprint/31042 (The current URI for this page, for reference purposes)
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