Special Session Summary Inferences About Pricing and Promotion

Carl F. Mela, University of Notre Dame
Joel E. Urbany, University of Notre Dame
[ to cite ]:
Carl F. Mela and Joel E. Urbany (1996) ,"Special Session Summary Inferences About Pricing and Promotion", in NA - Advances in Consumer Research Volume 23, eds. Kim P. Corfman and John G. Lynch Jr., Provo, UT : Association for Consumer Research, Pages: 78-79.

Advances in Consumer Research Volume 23, 1996      Pages 78-79



Carl F. Mela, University of Notre Dame

Joel E. Urbany, University of Notre Dame


This session was organized with the objective of exploring consumer beliefs about persuasion attempts which come in the form of price changes, price promotions, and displays. The concept of schemer schema (or more generally, persuasion knowledge) has emerged in the literature as a potentially important moderator of marketer influence attempts. Little attention has been given to the notion that consumer beliefs or inferences about marketer promotion behavior may determine how they respond. The four papers summarized below addressed several dimensions of such beliefs.





Carl F. Mela, University of Notre Dame

Joel E. Urbany, University of Notre Dame

In twelve in-depth interviews of consumers, Mela and Urbany find that only a small proportion had extensive knowledge of prices and promotion behavior across several categories, but that nearly all interviewed were knowledgeable about prices and promotions in one or two categories. Further, these expectations were multi-dimensional, suggesting the possibility that in any given product category, enough consumers will be knowledgeable about price promotions that they have perceptions of brand promotion behavior over time.

Additionally, Mela and Urbany examined whether their respondents offered explanations for seller promotion behavior, finding significant heterogeneity within the sample. Those respondents who did offer explanations varied between inferences about the brands or products (object perception: e.g., "The brand which promotes more is not selling well.") and inferences about motives of the seller (nonobject perception: e.g., "The retailer needs to generate traffic."). The authors conclude that enough consumers appear to attend to brand promotions over time and think about possible explanations of promotion behavior that longer term patterns of price promotions may indeed influence consumer brand beliefs, an issue which continues to be controversial in the literature.



J. Jeffrey Inman, University of Wisconsin-Madison

K. Patrick Meline, University of Wisconsin-Madison

Product displays are an important tool at the point-of-purchase which can serve to remind customers, stimulate impulse purchases, and enhance store atmosphere. However, recent research on persuasion knowledge suggests that customers may hold beliefs about marketer tactics which can adversely impact display performance. A basic assumption of this model is that consumers must be cued to the fact that they are being persuaded before persuasion knowledge is utilized. Inman and Meline examine consumer beliefs about marketer tactics involving point-of-purchase materials.

Their preliminary studies revealed significant variance in consumers' conception of what constituted a "display" and several dimensions describing consumer beliefs about displays (e.g., display as information, display as high/low quality, display as decoration). The authors are currently fielding a survey which measures the beliefs identified in the exploratory research. These data will be linked to store-level panel data and information about the store environment at the point of purchase to allow an assessment of the relative impact of beliefs on purchase behavior.



Aradhna Krishna, Columbia University

Bari Harlam, University of Rhode Island

Page Moreau, Columbia University

Krishna et al. noted that while scanner data provide marketers with some insight into consumers' reactions to promotions, the conclusions drawn are based solely on actual purchase data. Little information regarding consumers' perceptions of both the retailers' and the manufacturers' intentions can be gleaned from these data sources. Their study provides unique insight into consumers' beliefs about promotion behavior, as well as "second-order" perceptions: one party's perception of another's schema (e.g., what retailers think that consumers think). In their ongoing study, Krishna et al. ask parallel questions of three groups: consumers, retailers, and manufacturers. Preliminary results show substantial differences between retailer/manufacturer estimates of consumer beliefs and what consumers actually report. For example, consumers disagreed that "a product on end-aisle display has a good price cut," while both retail and manufacturer respondents expected that consumers would overwhelmingly agree. Similarly, the sellers predicted that consumers would tend to believe the retailer was primarily responsible for determining which products go on sale in the store, while consumers actually believed it was both manufacturer and retailer. These preliminary results suggest that retailers and manufacturers could increase promotional effectiveness by improving their understanding of consumer beliefs about such tactics.



Margaret C. Campbell, UCLA

Campbell's work focuses on factors which influence consumer judgments of fairness in evaluating seller price changes. She reviewed the dual entitlement theory of Kahneman, Knetsch, and Thaler as well as other perspectives, all of which suggest that the fairness of another's actions is judged by considering her/his intentions. This is particularly relevant in a pricing context, as consumer beliefs about a firm's motives in raising its price may substantially influence consumer response to that price. Results from several experiments were reviewed, suggesting that apparent seller intentions play an important role in perceived fairness. The research supports the idea that consumers think about why marketers take particular actions and that the perceived reasons influence response to those actions.



Peter R. Dickson, University of Wisconsin-Madison

Mark Heckman, Marsh Supermarkets (in abstentia)

Peter and Mark's comments encouraged taking a broader view of the issues under study. For example, Mark (who relayed his comments through Peter) indicated that increases in store size have consumers adjusting their in-store traffic patterns such that they may skip certain aisles, but attend increasingly to end-of-aisle displays. Such basic trends in consumer shopping behavior may have important implications for the issues discussed by the session participants. In addition, the study of price fairness might be fruitfully expanded to consider not just apparent seller intent in a particular instance, but also more generally consumer evaluation of such behavior with an understanding of the market mechanism whereby excess profits earned attract other firms who enter and drive prices down. Further, Peter discussed a model of market prices which is in constant disequilibrium, where both buyer and seller beliefs about each others' behavior change over time in response the ebb and flow of the market price distribution. Understanding consumer inferences about seller promotion behavior may be facilitated by recognizing the longer term dynamics of those perceptions.