Special Session Summary Ado You Remember How Much It Costs?@ Perspectives on Encoding and Memory For Price Information

Citation:

Madhubalan Viswanathan (1998) ,"Special Session Summary Ado You Remember How Much It Costs?@ Perspectives on Encoding and Memory For Price Information", in AP - Asia Pacific Advances in Consumer Research Volume 3, eds. Kineta Hung and Kent B. Monroe, Provo, UT : Association for Consumer Research, Pages: 30-31.

Asia Pacific Advances in Consumer Research Volume 3, 1998      Pages 30-31

SPECIAL SESSION SUMMARY

"DO YOU REMEMBER HOW MUCH IT COSTS?" PERSPECTIVES ON ENCODING AND MEMORY FOR PRICE INFORMATION

Madhubalan Viswanathan, University of Illinois at Urbana-Champaign, U.S.A.

The objective of this session was to examine how consumers encode and remember price information. Specifically, the primary objective of the session was to bring out the importance of this hitherto neglected area of research to consumer research and practice. Though some research has focused on price encoding and memory (Mazumdar and Monroe, 1990), it remains an under-researched area. Further, research of this nature would also have implications for several areas of pricing research as well as several other areas of consumer research such as nutritional information and more generally, product information. While past consumer research has examined a host of issues such as ways in which price information is used to make global judgments of product quality and value, the actual encoding of price remains an under-researched area. However, such research on price encoding and memory has important implications in understanding how price information is used in global judgments and in understanding the relationship of price with perceived quality and value.

The session included work in the area of price encoding and memory that provided a sense of the breadth of issues and implications involved in this area of research. Specifically, the session aimed to (i) provide a background of past research and what we know to date, (ii) provide a view of current and potential research in the area, (iii) discuss specific substantive and methodological issues that are central to such research, and (iv) discuss the implications of research on encoding and memory for other areas of pricing research such as on perceived quality and value. Therefore, the session included four papers on (i) our knowledge of the area to date and future research avenues and implications for other areas of pricing research, (ii) substantive issues in the study of price encoding and memory, and (iii) methodological issues in the study of price encoding and memory, respectively.

ABSTRACT - S OF PAPERS

 

RESEARCH ON PRICE AWARENESS: DO BUYERS REMEMBER THE PRICES THEY PAY?

Kent B. Monroe, University of Illinois at Urbana-Champaign

Contemporary thinking abou the role that price plays in influencing buyer behavior has evolved from the neoclassical model to a cognitive or information processing model. Within the realm of contemporary behavioral pricing research, researchers have offered descriptive models of how the price stimulus may actually be perceived, encoded or processed, stored in memory, and retrieved at a later time. Thus, it has been recognized that buyers may be influenced not only by the price of a product at the time of choice, but also by price information stored in memories of buyers, and by what they have learned about prices and price relationships from previous experiences. Therefore, to increase our understanding of how price may influence buyer behavior, we need to learn more about how buyers acquire price information, perceive it, process it, store it in their memories, and retrieve it. To provide the setting for a more detailed examination of the issues related to developing this understanding of how buyers know or remember price information, this paper first will overview briefly the early development in this cognitive approach to behavioral pricing research.

The term price awareness has been used to refer to the ability of buyers to remember prices. Until recently, very little research evidence was available on the extent of buyers’ price awareness. Economic explanations of price awareness generally have not been successful. The difficulty with these explanations is they do not consider how and why shoppers do pay attention to price, nor how price information is stored in memory. Recently, several researchers have explored buyers’ information processing to develop causal explanations of buyers’ use of and memory for price information (Zeithaml 1981; Powell 1985; Helgeson and Beatty 1987; Mazumdar and Monroe 1990, 1992). Their findings indicate that shoppers who attempt to process price information either because of their concern about prices, their involvement with the product, or the amount of attention they give to the selection are more likely to remember the prices paid. However, many buyers do not make explicit attempts to remember prices of items purchased. Thus, the role of price information in influencing buyers’ purchase decisions is considerably more complex than generally assumed in traditional thinking. The second part of this paper reviews this prior research stream raising important substantive and methodological issues that other papers in this session address.

 

REMEMBERING VS. KNOWING: IMPLICATIONS FOR PROCESSING PRICE INFORMATION

Angela Lee, Northwestern University

Many shoppers do not recall the price of the product that they have just purchased, or they give an incorrect response when attempting to recall the price from memory (e.g., Dickson and Sawyer 1990; Wakefield and Inman 1993). Yet consumers may have processed the price information when walking down the aisle and made a buy/not buy decision, even though they could not recollect the information when asked; that is, a consumer may make a decision based on what she knows, rather than what she remembers. Research findings in implicit memory distinguishes between recognition of past encounters based on conscious recollection of the encounter versus recognition based on a sense of familiarity as they appear to be sensitive to different experimental manipulations. It is proposed that this distinction between conscious recollection (i.e., remembering) and familiarity (i.e., knowing) may be useful in the study of how consumers process price information. The framework of implicit memory is introduced as a tool to investigate consumers decision making with regard to price information in the absence of conscious remembering.

 

A NUMBER PROCESSING APPROACH TO PRICE ENCODING AND MEMORY

Madhubalan Viswanathan, University of Illinois at Urbana-Champaign

Research in psychology and marketing has examined encoding and memory for numerical information. However, encoding nd memory issues in the pricing area have not been influenced in any significant way by this research. A review of empirical findings about the processing of numbers and numerical product information as well as conceptual frameworks are used as a basis to examine encoding and memory for price information. Specific hypotheses are derived for the encoding and memory for price information as a function of various factors such as format of price information, processing goals, and consumer expertise.

 

DIVIDE AND PROSPER: EFFECTS OF PARTITIONED PRICES ON CONSUMERS’ PRICE RECALL AND DEMAND

Vicki G. Morwitz, New York University

Eric A. Greenleaf, New York University

Eric J. Johnson, University of Pennsylvania

Many firms divide a product’s price into two mandatory parts, such as the base price of a mail order shirt and the surcharge for shipping and handling, rather than charging a combined all inclusive price. We call this strategy partitioned pricing. While firms presumably use partitioned pricing to increase demand and profits, there is little clear empirical support that these prices increase demand, nor any theoretical explanation for why this should occur. This paper tests hypotheses of how consumers process partitioned prices, and how partitioned pricing affects consumers’ price recall and demand. The results suggest that partitioned prices decrease consumers’ recalled prices and increase their demand. The manner in which the surcharge is presented, and consumers’ affect for the brand name, also influence how they react to partitioned prices.

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