Profiling the reference price consumer

Researchers in marketing have devoted considerable attention to understanding how price impacts the purchase decision. Some individuals, termed memory-based reference price (MBR) consumers, take into account price expectations developed from past purchase behavior when making a current choice. Other...

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Bibliographic Details
Published in:Journal of retailing 2006, Vol.82 (1), p.1-11
Main Authors: Moon, Sangkil, Russell, Gary J., Duvvuri, Sri Devi
Format: Article
Language:English
Subjects:
Choice model
Consumer behavior
Consumers
Prices
Pricing strategy
Reference price
Retailing industry
Structural heterogeneity model
Studies
Toiletry products
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Summary:Researchers in marketing have devoted considerable attention to understanding how price impacts the purchase decision. Some individuals, termed memory-based reference price (MBR) consumers, take into account price expectations developed from past purchase behavior when making a current choice. Other individuals, termed stimulus-based reference price (SBR) consumers, make choices by constructing a reference point from the currently observed distribution of prices. Using a latent class model of structural heterogeneity applied to purchase histories from the toilet tissue category, we classify households in terms of the pricing mechanism used in buying decisions. We find strong evidence that memory-based (internal) reference price consumers are more price sensitive than other consumers. Moreover, we find that variables associated with the accessibility of price information are predictive of consumer use of memory-based reference prices. Managerial implications of these results are discussed.
ISSN:0022-4359
1873-3271
DOI:10.1016/j.jretai.2005.11.006