Purchase Intentions and The Display of Pricing
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Date
2022-05
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Publisher
The Ohio State University
Abstract
Consumers are exposed to an overwhelming number of options and prices for each purchase they make. An increasingly prevalent practice is giving consumers a price range instead of a specific price point, leaving the price unknown until later in the process. This study explores how the display of price (price point vs. price range) can impact price perceptions and purchase intentions. We propose that range pricing can hurt brands when the price consumers end up getting is on the higher end. This is because the lower end of the range serves as a natural and optimistic reference point, and thus, prices deviating from it feel less fair and reasonable, resulting in lower purchase intention.
Five randomized experiments provide converging evidence that supports these predictions. Study 1 tested our core prediction and found that, while range pricing can increase consumers purchase intent when the eventual price falls on the low end of the range (vs. same price present by itself), if the price falls on the high end of the range, the strategy backfires by decreasing purchase intent. Study 2 replicated these findings even when participants were given a high, but not the highest end of the range, indicating that the range pricing backfires even when the high price is not at the top end of the range (e.g., range of 31.49 dollars - 47.95 dollars , ultimate price of 44.95 dollars). Study 3 demonstrates a boundary condition such that the detrimental effect of range pricing is mitigated when the lower and the higher ends of a range share the same left-digit (e.g., 20 dollars - 29.99 dollars). Further, we find that prices under range pricing are perceived to be less fair and reasonable, which predicted consumers purchase intention. Study 4 replicates the core findings of Study 3 (thresholds can mitigate the range pricing backfire) with a different sample, product category, and prices. Study 5 tests whether providing a justification (i.e., that the item was popular) for prices falling on the high end of the range mitigates the use of range pricing and finds that telling participants that their choice was a "popular item!" significantly increased perceived fairness of the price in the range pricing condition, which then increased purchase interest.
In sum, this research demonstrates that range pricing, which can provide benefits under the right circumstances, backfires when consumers get a high price. This is because consumers perceived prices on the top end of the range to be less fair and reasonable, and thus providing a justification mitigates this effect. Studies in progress examine other mitigation strategies.
Description
Denman Research Forum Award Winner
Keywords
Pricing, Fairness, Purchase Intention, Price Range, Price Point, Consumer Behavior