How Do Low-Price Guarantees Deter Consumer Price Search? - the Effects of Branded Variants and Search Cost

Hillbun (Dixon) Ho, University of Arizona, USA
Low-price guarantees (LPGs) are a storewide pricing policy widely used by retailers for projecting a price-competitive image. Retailers believe that LPGs act as signals of low store prices. Research on LPGs has found that these price signals might discourage consumers from price searching. Given the increasing popularity of LPGs, it is important to find out what factors would attenuate or magnify the degree of consumer price search under the influences of LPGs. In this paper, I propose that consumers’ price search in response to LPGs are affected by two factors: search cost and branded variants. Drawing on signaling theory and information processing research, I provide theoretical explanations and develop hypotheses with respect to consumers’ reactions to LPGs when (1) individuals’ search cost differs and when (2) branded variants are present or absent in the retail market. Data collected from a computer-simulation experiment are used to test the hypotheses. The empirical results provide evidence in supportive of the hypotheses.
[ to cite ]:
Hillbun (Dixon) Ho (2007) ,"How Do Low-Price Guarantees Deter Consumer Price Search? - the Effects of Branded Variants and Search Cost", in NA - Advances in Consumer Research Volume 34, eds. Gavan Fitzsimons and Vicki Morwitz, Duluth, MN : Association for Consumer Research, Pages: 494.