Some Brand Loyalty and Pricing Issues in Consumer Research

Ved Prakash, Baltimore, Maryland
[ to cite ]:
Ved Prakash (1993) ,"Some Brand Loyalty and Pricing Issues in Consumer Research", in NA - Advances in Consumer Research Volume 20, eds. Leigh McAlister and Michael L. Rothschild, Provo, UT : Association for Consumer Research, Pages: 591-593.

Advances in Consumer Research Volume 20, 1993      Pages 591-593

SOME BRAND LOYALTY AND PRICING ISSUES IN CONSUMER RESEARCH

Ved Prakash, Baltimore, Maryland

INTRODUCTION

The purpose of this paper is to discuss the issues raised by the three papers accepted by the Association for Consumer Research for presentation at the session 9:4 on "Brand Loyalty and Pricing Issues". The title of this session deals with two separate topics of brand loyalty and pricing. The two papers on pricing deal with two diverse issues, one dealing with the underestimation of 9-ending prices and the other dealing with the effects of prior beliefs on feature-based price estimates. This makes the task of developing a coherent discussion of the issues involved that much more difficult. However, the specific papers under discussion are as follows:

1) Barbara Olsen, "Brand Loyalty and Lineage: Exploring New Dimensions for Research".

2) Robert M. Schindler and Thomas Kibarian, "Testing for Perceptual Underestimation of 9-Ending Prices".

3) Tridib Mazumdar and Cheoul Ryon Kim, "Effects of Prior Belief on Feature-Based Price Estimates".

These three papers are discussed in the order of their presentation at the session.

OLSEN'S PAPER AND BRAND LOYALTY ISSUES

The purpose of Olsen's paper seems to be a study of brand loyalty through the process of intergenerational transference. The main feature of this paper is the methodology of ethnographic investigation, i.e., life history interviews with families including grandparents, parents and children. The main rationale provided for this methodology is that consumer socialization occurs primarily within family settings where brand names begin to achieve social significance. The author does a good job of drawing conceptual foundations from the consumer behavior literature (Bahn 1986; Belk, Wallendorf and Sherry 1989; McCracken 1990; Moschis 1985; Moschis, Moore and Smith 1984). These studies suggest the influence of family, environmental and religious forces on the process of family socialization and learning. This in turn influences knowledge about brands in early childhood that are subsequently repeated in adulthood. The author opines that brands learned in the family become either "bridges" in the intergenerational process (as products are carried forward from one generation to the next), or these brands become "fences" signifying rebellion against a social relationship.

The study was undertaken with the help of a class project where some 50 students provided usable ethnographies of product usage within their own families. The students interviewed their own parents and grandparents. The author presents a verbatim account of responses provided by families from various ethnic and nationality backgrounds in the United States. Some results from this qualitative ethnographic approach are quantified. For instance, toothpaste was cited in ten families and transferred from sixteen generations, i.e., ten times between mother-daughter, five times between mother-son, and once between grandmother-grandson. Some other products that emerged as "bridges" to indicate the existence of intergenerational transfer of brand loyalty were mayonnaise, bath soap, ketchup and automobiles. The main reason given for brand loyalty was the level of product satisfaction over a period of time. Some examples of advertisements emphasizing the intergenerational process provided by the author were: Vicks Vaporub, Roman Meal bread and Brooks Brothers men's clothiers.

While Olsen's paper has made a useful contribution in drawing our attention to the ethnographic approach in understanding brand loyalty, it has raised more issues than it has answered. I would like to make the following suggestions in an attempt at a better understanding of brand loyalty. First, it is very important to get a better grasp of brand loyalty from conceptual (definitional) and operational (measurement) points of view which have been completely ignored in Olsen's paper. Jacoby and Chestnut (1978) did a thorough job of exploring the various meanings of the construct of brand loyalty. Equally difficult is the measurement of brand loyalty from operational point of view. There is a lack of consensus in the literature on what precisely constitutes a brand loyal consumer. As cited in Jacoby and Chestnut (1978) some consumer researchers think that a consumer who purchases a specific brand 50% of the times or more within a certain given time span is brand loyal, some others think that this incidence of purchase should be 75% or more. The sequence of purchases of a given brand is also a pertinent consideration in determining brand loyalty. In the absence of a clearly laid out criteria of brand loyalty, ethnographic approach is not likely to shed any reliable information. Incidentally, Olsen has not provided any estimates of reliability and validity of ethnographic approach as applied to the data in this case.

Further, it would have been better for Olsen to provide a more detailed discussion of the ethnographic approach found in the literature. It would have been better to quantify the results provided on pages 12-13 of the paper. This is a fundamental problem encountered in the application of qualitative techniques to consumer research, i.e., in the absence of quantitative results the conclusions do not seem convincing.

The next issue concerns the intergenerational transfer of values. It is very important to study this model in the overall context of transmission of cultural values. In Olsen's paper there is no conceptual framework of the intergenerational transfer of values and its linkage with transfer of brands. It may be possible to establish this linkage with the help of such values as terminal and instrumental values suggested by Rokeach (1973). The model of family communication and effects on consumer socialization suggested by Moschis, Moore and Smith (1984) could also be a good framework for testing the transfer of brand loyalty from one generation to the next.

Some other issues raised by Olsen's paper are: a) whether brand loyalty is due to the level of satisfaction attained with product attributes or whether it is due to classical conditioning learning process of transference. There seems to be an inherent contradiction in these two explanations which future researchers may investigate; b) any satisfactory study of intergenerational transfer of brands would have to be a longitudinal one where a fixed group of consumers would have to be studied over several years during the various stages of the family life cycle somewhat on the lines of recent films on social class by Michael Apted titled, 7 and up, 14 and up, 21 and up, 28 and up and 35 and up (the latest film). This is going to be an enormously difficult task for consumer researchers to undertake.

PRICING ISSUES

Schindler and Kibarian's Paper

Schindler has previously published several papers on the subject of price endings (Schindler 1984, Schindler 1989, Schlindler 1991, Schindler and Warren 1988, Schindler and Wiman 1989). In Schindler (1991), he looked at the psychological meanings of various price endings and the causes of these meanings. In the present paper, Schindler and Kibarian propose to test whether 9-ending prices tend to be underestimated as compared to zero-ending prices. This is termed as the "underestimation hypothesis". This hypothesis was first tested in Study 1 with the help of an experimental design. This study was done with the help of 141 subjects who were exposed to several advertisements (ads) indicating prices with various endings, and then requiring the subjects to recall those prices. The products involved in the ads were: a dress, sports coat and patio furniture. The results of the study did not support the underestimation hypothesis.

Subsequently, these authors undertook a field study in Study 2. This involved recall of prices in 12 categories of grocery products (coffee, milk, eggs, flour, canned tuna, margarine, sugar, jelly, apple juice, trash bags, toilet paper, and dish detergent). Shoppers were sampled at eight different locations of a supermarket chain on seventeen separate occasions. A total of 1511 prices were obtained. The vast majority of respondents provided prices data on three or fewer items. Respondents were asked to recall prices displayed in the store. Once again, the results of the study showed that the 9-ending prices were not substantially underestimated as compared to non 9-ending prices. Schindler and Kibarian speculated that perhaps substantial underestimation would only occur in circumstances where a consumer expends limited amount of time on price. The authors recommend further improvisation of the hypothesis underlying psychological pricing and studying the plausible mechanism behind underestimation.

This study by Schindler and Kibarian seems to have been well conducted in most respects: literature review, testing, analysis of the results and recommendations for further research. I can only offer some speculative explanations about the lack of support for the underestimation hypothesis. It is possible that results were due to the artifact of testing. Subjects were asked to recall prices. Perhaps the technique of verbal protocols might have yielded different results. Dickson and Sawyer (1990) suggested that supermarket shoppers tend to spend only a short time in making the selection and consequently do not carefully check the prices of the items selected. In their study, more than half the subjects could not correctly name the prices of items just placed in the cart and more than half the consumers were unaware that prices had been reduced. Therefore Dickson and Sawyer recommended that reduced prices be prominently displayed in the store so that consumers become aware of these prices at the point of purchase. Consequently, in the Schindler and Kibarian study the technique of recall of prices might have been problematic in obtaining results in the predicted direction. A second explanation for the lack of support for the underestimation hypothesis might have been the low level of price sensitivity of the consumers especially with respect to the grocery products. Thirdly, it is possible that from the conceptual point of view consumers pay more attention to the leftmost prices (or to the dollar amounts) rather than to the rightmost prices (or the cent amounts). Therefore, even if the rightmost digits are 9-ending consumers do not perceive that to be substantially lower than zero-ending prices. Consequently, expectation of rightmost 9-ending prices being underestimated is an unrealistic one and underestimates the intelligence of the consumers. Perhaps, future research can be done on the comparison of 9-ending prices in the dollar amounts (or leftmost prices), with the 9-ending prices on the rightmost (or cents prices).

Two more related issues also need to be looked into by future researchers. If there is no empirical evidence for underestimation of rightmost 9-ending prices by consumers, why do marketers continue to practice them as a part of psychological pricing? Perhaps a survey of business executives on this matter may be useful. Secondly, it may be fruitful to do a comparative study of several psychological pricing tactics used by marketers (Nagle 1987).

Mazumdar and Kim's Paper

I found the subject matter of this paper to be rather challenging. This paper deals with some very interesting issues raised in Lichtenstein, Bloch and Black (1988), Rao and Monroe (1988), Rao and Sieben (1992), and Zeithaml (1988). The basic issue is the perceived price-quality relationship and its effect on price estimation by consumers. The allied pertinent issue is how the consumer response is influenced by moderating variables such as consumer beliefs, knowledge and familiarity. Zeithaml (1988) has introduced an interesting dichotomy of product attributes or cues. Intrinsic attributes relate to product features, but extrinsic attributes deal with price and brand name of the product. Rao and Monroe (1988) have suggested that consumers with low familiarity are guided by extrinsic cues of the product, moderately familiar consumers are guided by intrinsic cues and highly familiar consumers know when to be guided by extrinsic cues in addition to being basically guided by intrinsic cues. Rao and Sieben (1992) have shown that acceptable price range was found to be the lowest for the low-knowledge subjects; moderately knowledgeable subjects made least use of the information on prices and extrinsic cues; this study basically reinforced the findings of the earlier Rao and Monroe (1988) study.

Mazumdar and Kim's is a limited experimental exploratory study. It tests two main hypotheses: 1) consumers who have positive association between price and quality based on features of the product will have higher estimate of the price; 2) consumers who have difficulty assessing the usefulness of the product features will have lower estimates of the price. (It seems that the construct of feature based attributes is similar to the concept of 'intrinsic attributes' suggested by Zeithaml (1988)). The two hypotheses were tested in the framework of a regression model where price estimate was the dependent variable and prior feature based beliefs, difficulty of assessing the usefulness of the feature, and the interaction of beliefs and difficulty of assessing usefulness of features, were the independent variables. The overall fit of the model seemed to be good with an adjusted R2 of 0.73. Hypothesis 1 was supported, suggesting the significant role of the prior beliefs of the price-quality relationship. Hypothesis 2 (the inverse relationship between difficulty of assessing usefulness of features and price estimates), was marginally supported. The interaction effect was not significant.

While Mazumdar and Kim have made useful contribution on the role of prior beliefs, I feel that the hypotheses are too simplistic. The literature review could have been more in depth, thus providing more solid foundation for the hypotheses. I think it is very important to bring in the intervening variables of knowledge, familiarity, reference price, acceptability range and other antecedents of the consumers in studying their perceptions of price. The distinction between intrinsic and extrinsic cues as suggested by Zeithaml (1988), Rao and Monroe (1988), Rao and Sieben (1992) is an important one while studying the role of antecedent (or moderating) variables. The conceptual model presented by Rao and Sieben (1992, P. 261, Figure 1) could be a useful framework for future research.

Some other areas of pricing research that deserve future research are the role of choice difficulty or uncertainty in making decisions about the prices (Urbany, Dickson and Wilkie 1989) and the role of regret experienced after the purchase. Also, I have been fascinated by the psychological explanations provided by theories such as prospect theory developed by Kahneman and Tversky (1979, 1984). More research needs to be published on this theory's application to pricing perceptions. Finally, the role of reference prices in the context of the theories of assimilation and contrast deserves further exploration (Urbany, Bearden and Weilbaker 1988).

CONCLUSION

The three papers discussed above have made useful contributions to consumer research in the areas of brand loyalty and pricing strategy. Some very interesting issues have been raised by these authors. I have attempted to discuss some of the issues in these areas and pointed out directions for future research.

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