Consumer Response to Retailers’ Use of Partially Comparative Pricing

Abstract

Consumers sometimes encounter a combination of comparative and noncomparative prices in the marketplace. For example, a grocer may employ signage that provides favorable price comparisons with those of a competitor for a portion of its products, a practice that the authors refer to as “partially comparative pricing.” The authors examine the effects of partially comparative pricing on consumer response and find that it has both desirable and undesirable effects. On the one hand, such pricing enhances consumers’ beliefs about the relative prices of comparatively priced products and about the retailer's relative prices in general. On the other hand, such pricing also reduces consumers’ relative price beliefs about noncomparatively priced products and their intentions to purchase such products. The authors further show that the adverse influence of partially comparative pricing stems from consumers’ suspicions about why price comparisons exist for some, but not all, products. They also document how these effects depend on store patronage. They discuss implications of their research and provide suggestions for future empirical efforts.