Price As a Signal of Quality



Citation:

Dhruv Grewal and Kent B. Monroe (1995) ,"Price As a Signal of Quality", in E - European Advances in Consumer Research Volume 2, eds. Flemming Hansen, Provo, UT : Association for Consumer Research, Pages: 357.

European Advances in Consumer Research Volume 2, 1995      Page 357

PRICE AS A SIGNAL OF QUALITY

Dhruv Grewal, University of Miami

Kent B. Monroe, University of Illinois

Over the last few decades, product quality has become a key strategic element (Grewal 1995). Although considerable attention has focused on whether price affects consumer perceptions of quality, the circumstances moderating this relationship still remain unclear. This paper synthesizes past research to present a conceptual framework examining the role of price on consumer perceptions of quality, value and purchase intentions. Secondly, a number of methodological issues and shortcomings of past research are discussed. These shortcomings provide numerous opportunities for additional research. Finally, a number of factors moderating the price-quality relationship are discussed.

The proposed conceptual framework seeks to explain the effect of price and other information cues on buyers' price expectations, product evaluations and behavioral intentions. The contributions of this proposed framework include:

(1) discussion of the effects of information cues on buyers' internal reference prices;

(2) enhancement of our understanding of the effects of intrinsic cues on buyers' perceptions of value;

(3) discussion of the impact of contextual cues on buyers' product evaluations;

(4) conceptualization of buyers' perceptions of value as a multi-dimensional construct;

(5) inclusion of the effects of product evaluations on buyers' price search; and

(6) enhancement of our understanding of the effects of price changes on buyers' product evaluations and behavioral intentions.

The paper also discusses a number of methodological issues that need to be addressed. Specifically, issues pertaining to research design, manipulation checks, measurement and sample are articulated.

It must be noted that a number of the relationships in the framework may be moderated by other variables. For example, the effects of price on consumers' perceptions of quality may be moderated by a number of other factors (e.g., Dodds, Monroe and Grewal 1991; Rao and Monroe 1988; Grewal, Gotlieb and Marmorstein 1994). Peterson and Wilson (1985) have called for research identifying variables that moderate the price-perceived quality relationship. The conceptualization incorporates the effects of a number of moderating variables: knowledge, risk, advertised reference price, brand name, store name and the physical context. For example, the effects of price on consumer perceptions of quality take on an even greater role given the considerable amount of money retailers devote to price promotions. Do these price promotions have a positive or negative effect on brand evaluations? Results of studies pertaining to these moderating effects will be discussed.

REFERENCES

Dodds, William B. and K. B. Monroe and Dhruv Grewal (1991), "The Effects of Price, Brand, and Store Information on Buyers' Product Evaluations," Journal of Marketing Research, 28 (August), 307-19.

Grewal, Dhruv (1995), "Product Quality Expectations: Towards An Understanding of Their Antecedents and Consequences," Journal of Business and Psychology, forthcoming.

Grewal, Dhruv, Jerry Gotlieb and Howard Marmorstein (1994), "The Moderating Effects of Message Framing and Source Credibility on the Price-perceived Risk Relationship," Journal of Consumer Research, 21 (June), 145-153.

Peterson, Robert A. and William R. Wilson (1985), "Perceived Risk and Price Reliance as Price-Perceived Quality Mediators," Perceived Quality: How Consumers View Stores and Merchandise, eds. Jacob Jacoby and Jerry C. Olson, Lexington, MA: Lexington Books, 247-67.

Rao, Akshay and Kent B. Monroe (1988), "The Impact of Prior Knowledge on the Price-Perceived Quality Relationship," Journal of Consumer Research, 15 (September), 253-64.

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Authors

Dhruv Grewal, University of Miami
Kent B. Monroe, University of Illinois



Volume

E - European Advances in Consumer Research Volume 2 | 1995



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