Issues in Conceptualizing and Measuring Consumer Response to Price

ABSTRACT - This paper reviews concepts and measures of consumer response to price in the context of an information processing schema (Jacoby and Olson 1977). Following the review, issues relating to the concepts and measures are discussed. Finally, suggestions for improving measures of consumer response to price are offered.


Valarie A. Zeithaml (1984) ,"Issues in Conceptualizing and Measuring Consumer Response to Price", in NA - Advances in Consumer Research Volume 11, eds. Thomas C. Kinnear, Provo, UT : Association for Consumer Research, Pages: 612-616.

Advances in Consumer Research Volume 11, 1984      Pages 612-616


Valarie A. Zeithaml, Texa A&M University


This paper reviews concepts and measures of consumer response to price in the context of an information processing schema (Jacoby and Olson 1977). Following the review, issues relating to the concepts and measures are discussed. Finally, suggestions for improving measures of consumer response to price are offered.


Calling for improvement in the measurement of marketing constructs, Churchill stated:

"A critical element in the evolution of a fundamental body of knowledge in marketing, as well as for improved marketing practice, is the development of better measures of the variables with which marketers work" (1979, p 64).

His paradigm for developing better measures specified eight steps researchers should follow in developing high quality measures: (l) specify domain of construct; (2) generate sample of items; (3) collect data; (4) purify measure; (5) collect data; (6) assess reliability; (7) assess validity; and (8) develop norms.

The first step in Churchill's paradigm involves specifying the domain of the construct. This step requires that researchers define exactly what concepts mean--"delineating what is included in the definition and what is excluded" (p. 67). Also imperative to specifying domains is a thorough literature review of previous concepts and measures so that researchers can build on previous work and compare and accumulate findings.

To what extent does the literature on consumer response to price contain clearly defined concepts? What is the domain of the construct called "price consciousness"? To what extent have researchers built a conceptual base for measuring this construct? To what extent have measures been operationalized from the conceptual base? Finally, to what extent have measures been consistent across studies? These and other questions involved in specifying the domain of the price consciousness construct have not been investigated systematically.

The major purpose of this paper was to attempt to specify the domain of the construct called "price consciousness" as a first step in applying Churchill's paradigm to measurement of consumer response to price. To that end, this paper: (l) reviews concepts and measures of consumer response to price that relate to price consciousness; (2) evaluates these concepts and measures; and (3) offers suggestions on applying the remaining steps in the Churchill paradigm to improve measurement of price consciousness


One of the earliest hypothetical constructs to represent consumer response to price was termed "price consciousness." It was first defined as, "the extent to which housewives are conscious of the price of an article at the time of its purchase" (Gabor and Granger 1961, p. 172). This early study and subsequent conceptual work implied that price consciousness involved price knowledge or price recall (Shapiro 1968, Monroe 1973, Olson and Jacoby 1977). Other researchers used the term "price sensitivity" synonymously with price consciousness (Gabor and Granger 1964, Murphy 1978). Still other researchers used the term price consciousness to indicate the relative importance of price vis a vis other shopping orientations (Wells and LoSciuto 1965, Trier et al. 1960) or the extent to which consumers depend on price to indicate quality (Etgar and Malhotra 1981). The term continues to appear in the literature to describe aspects of consumer response but definitions are not consistent. Recently, Monroe and Petroshius (1981) defined the concept as follows:

"A buyer is characterized as price conscious to the degree he/she is unwilling to pay a higher price for a product, and if the price is greater than what is acceptable to pay, the buyer may refrain from buying. Moreover, the price conscious shopper will not be willing to pay for distinguishing features of a product if the price difference for these features is too large" (p. 44).

This definition of price consciousness implies a number of (possibly different) dimensions of consumer response. First, concern for price as a criterion in decision making is implied. Second, consumer awareness and knowledge of prices must exist, for the buyer must know prices in order to decide what a "higher price" is. Internal limits or bounds of acceptability are also suggested by the "willing/unwilling" terms. Finally, the ability to discern differences in prices, i.e., some form of sensitivity to prices, is suggested.

Are all of these dimensions intended by researchers to be aspects of price consciousness? Before answering this question, a review of concepts and measures relating to price consciousness will be presented.


Concepts and measures of consumer response to price will be presented in the context of an attitudinal, information processing schema (Olson and Jacoby 1977). The schema (shown in Figure 1) reflects a behavioral science orientation to the study of price at the level of the individual consumer. It is based on the premise that:

"External stimuli do not exert direct effects upon behavior but only indirect effects. Stimuli must first be perceived and interpreted before they can affect decision processes and overt behavior" (Olson and Jacoby 1977, p. 73).

The schema covers a wide range of consumer responses and classified them into stages which will facilitate discussion of concepts and measures. Because most measures of consumer response to price have dealt with organismic variables (variables in the center box), the following discussion will be limited to that portion of the schema.

As represented in the schema, the consumer receives price input in a form isomorphic to the external stimulus, but may alter the information in the process of encoding it. As an example, an external price stimulus may be $20, yet the individual may assign it a meaning of "expensive" when encoding it. The resulting interpretation of the external price stimulus by the organism is called the psychological price (P-price). Subsequent processing steps include storage (i.e., representation of price in consumer memory), attitude toward P-price, and integration of P-price with other information. For a complete description of the mode see Olson and Jacoby (1977).



A review of the literature reveals that researchers have measured consumer response to price in many ways. In most cases, the measures did not derive from a conceptual base but were developed to suit the needs of the particular research. Table 1 lists the measures which relate to price consciousness by stages in the Olson and Jacoby conceptual schema.

Encoding of O-price

Measures relating to the encoding of O-price have been limited. Two five-point encoding scales, called "degree of sensory encoding" and "degree of semantic encoding," were developed to capture the extent to which subjects intended to encode prices (Zeithaml 1981, 1982a, Zeithaml and Fuerst 1983).


P-price, the interpretation of the external price in the organism, has been represented in two ways. The first concept, termed "price image" relates to the perceptions of price levels of retail stores (Brown 1969; Nystrom, Tamsons and Thams 1975). The second representation involves perceptions of savings which result from different methods of presenting price cues in advertisements (Berkowitz and Walton 1980, Della Bitta and .Monroe 1981, Blair and Landon 1979, Walton and Berkowitz 1979, Keiser and Krum 1976).

The notion that consumers may form price images of retail stores rather than memorize specific product prices has been suggested in early work on consumer pricing (Oxenfeldt 1968, Brown 1969, Parsons and Price 1972). Two measures of this concept of price image have been reported.

Brown (1969) measured price image by asking respondents to rank stores by their relative price levels and then converting the information to an interval scale using Thurstone's law of comparative judgments. In the same study, he measured "price perception validity" by comparing the price image of retail stores to price reality, i.e., comparing P-price to O-price. Nystrom, Tamsons and Tams (1975) operationalized price image by asking customers to rank how expensive a store was on a nine-point scale ranging from very high to very low.



Several recent research studies suggest that a relevant way to measure P-price is in the form of perceptions of savings. These studies measure savings perceived by consumers when they are presented with price stimuli in advertising (e.g., reference prices and comparison prices). Operationalizations of the concept of perceived savings differ. Keiser and Krum (1976) called their measure "perception of the advertised price" and asked subjects to indicate on a three-point scale (ranging from agree to disagree) the extent to which they believed the advertised price was less than the price normally charged. Blair and Landon (1981) measured "degree of savings" on a four-point scale ranging from no savings to large savings. They also calculated perceived savings in dollars and cents by asking subjects to state their beliefs regarding the store's regular price on an item and the lowest price around town for that item. Berkowitz and Walton (1980, Walton and Berkowitz 1979) measured perceived savings on a seven-point bipolar scale anchored by the terms "extremely large savings" and "no savings at all." Finally, Della Bitta and Monroe (1981) used what appears to be the same measure of perceived savings as Berkowitz and Walton: a seven-point, equal-interval scale anchored by descriptive phrases.

Storage of P-price

Variables measured in this stage of the schema have been called by different names (e.g., price knowledge, price accuracy, price awareness) but all represent the price information stored in consumer memory. Measures of storage of P-price have most frequently been quantified in terms of recall of the exact prices of products and have used grocery items as the focal products Progressive Grocer 1964, Gabor and Granger 1961, Brown 1971. Zeithaml 1982a).

One of the earliest studies (Progressive Grocer 1964) asked several thousand consumers to recall the exact prices of 69 frequently advertised and price-competitive items. Two measures were calculated: the percentage of customers naming the exact price and the percentage of customers naming a price within a range of five percent above or below the exact price. In another early study, Gabor and Granger (1961) used three measures of what they termed "price consciousness": the percentage of respondents who could remember some price for the product irrespective of its accuracy; the percentage of subjects who could name prices accurately; and the percentage of incorrectly named prices that fell within a range of five percent above or below the correct price.

More recent research has incorporated one but not all of these measures. For example, a more recent study by Progressive Grocer used the same measures as the 1964 study (Progressive Grocer 1977). Wilkinson, Mason and Paksoy (1979) used the percentage of respondents remembering the exact price of items to represent what they termed "price accuracy," while Goldman (1977) operationalized "price knowledge" as the percentage of respondents citing prices falling within a range of five percent above or below the exact price. Stephens and Moore (1975), using a variation of the older measure, scored consumer price estimates as correct if they fell within observer-determined ranges.

Allen, Harrell and Hutt (1976) used a measure similar to past studies to assess what they termed "price awareness" (frequency of shoppers naming the exact price) but also developed a second measure of the variable to quantify the consumer's magnitude of error. "Percentage error" was calculated using the following formula:

| actual item price - price given by shopper |

|                         actual price                        |

Zeithaml (1981, 1982a, 1983) used the same measure of percentage error out called it "exact price recall error." She developed another measure, called "price comparison error," which quantified respondent errors in ranking categories of products by their prices. Errors in ranks were tabulated by counting the absolute difference in rank units between the correct rank and the subject's recalled rank.

In a study investigating the accuracy of reported reference prices for professional services, Zeithaml and Graham (1983) measured three variables: (1) "recalled reference price," the subject's best estimate of the price of a professional service; (2) "error in reference price," the amount of money by which a respondent's reference price departed from the actual price of the service; and (3) "percent of error in reference prices," calculated by subtracting the recalled reference price from the actual price then dividing by the actual price.

Attitude toward P-price

Measures of attitude toward P-price have included variables designed to assess consumers' evaluative reactions toward O-price. Several variables emerge from a review of the literature: "price acceptability," "value for the money," "perceived worth," price evaluation," and "confidence in price knowledge."

Price acceptability measures have involved consumers' evaluations of whether stated retail prices are true or fair prices. As measured by Fry and McDougall (1974), "price acceptance" was the frequency with which respondents answered, "yes," "no," and "uncertain" to three questions: (1) "Do you think this is the price the store has been selling this product for during the last few days?"; (2) "Do you think this regular price of $___ is what people would have to pay at other stores around town for this product at the present time?"; and (3) "Do you think the sale price of $___ is the lowest price at which you could buy this product in town?" Berkowitz and Walton (1980) took a different approach, asking respondents to rate prices on a seven-point scale ranging from "extremely unfair price" to "extremely fair price." Della Bitta and Monroe (1981) measured a similar concept, "perceived acceptability of the offer," on a seven-point,equal-interval scale anchored by similar descriptive phrases.

Variables called "value for the money" and "perceived value for the money" were measured in a similar fashion. Most research assessed the concept using a single seven-point scale anchored with descriptive phrases such as "not a good value for the money" and "extremely good value for the money" (Barnes 1975, Della Bitta and Monroe 1981, Berkowitz and Walton 1980, Walton and Berkowitz 1979).

A number of other concepts relate to the value of the offer. "Relative expensiveness" of price was measured on a vertical seven-point scale by Monroe, Della Bitta and Downey (1977). "Perceptions of offer value" was assessed by Della Bitta, Monroe and McGinnis (1981) using three seven-point, equal-interval scales. "Evaluation of advertised sale price" consisted of a three-point scale (labelled "low," "about right," "high") to capture respondent evaluation of price (Keiser and Krum 1976). "Price evaluation" was a nine-interval scale ranging from very expensive to very cheap that was developed to measure subject perceptions of the price of a shirt (Nystrom, Tamsons, and Thams (1977). Finally, "perceived worth" was a seven-point scale ranging from "excellent buy for the money" to "bad for the money" (Berkowitz and Walton 1980, Walton and Berkowitz 1979).

Two additional variables not directly related to those listed above have been operationalized and measured. First, "difficulty in evaluating prices" (Nystrom, Tamsons and Thams 1977) was a nine-interval scale ranging from easy to difficult. Second, "confidence in price knowledge" (Zeithaml 1982a, Zeithaml and Fuerst 1983), assessed consumers' confidence in their ability to remember prices on a series of seven-point certainty scales ranging from very uncertain to very certain.

Integration of P-price with Other Information

Integration of P-price with other information has taken two forms. First, a number of studies has investigated price emphasis vis a vis other shopping orientations. Second, numerous studies have investigated the use of price as an indicator of quality. Because this second set of studies has been extensively reviewed elsewhere (Olson 1977) and because it does not relate directly to price consciousness, it will not be discussed here.

Studies examining price emphasis relative to other shopping orientations reveal that price is not important to all consumers in all purchases. The manner in which this orientation has been measured varies greatly. An early study (Trier, Smith and Shaffer 1960) found that cost of food was rated the most important of seven identified factors underlying food buying decisions of housewives. Stone (1954) isolated four types of shoppers based on their orientation to retail stores; one of them, the "economic shopper," constituted 33 percent of the sample and accounted for more respondents than any other group. In a study using direct observation, Wells and LoSciuto (1965) measured "concern for price" and found that it was exhibited by 13 percent of shoppers purchasing cereal, 17 percent of shoppers purchasing candy, and 25 percent of shoppers purchasing detergent.

Williams, Painter and Nicholas (1978) classified consumers into four groups - "involved," "apathetic," "convenience," and "price" - using store image measures and a clustering algorithm. Guiltinan and Monroe (1978) identified two price-related shopping strategies called "in-store economy" and "economy planners." In a related measure, Zeithaml (1982c) assessed the "extent of economizing" of supermarket shoppers on four seven-point scales reflecting a price orientation.



In general, concepts representing consumer response to price lack uniformity in the literature. While some consistency is evident across studies for one or two concepts (e.g., perceived savings, perceived worth), most representations of consumer response to price vary from study to study. The variation may be partly explained by different objectives of the research studies (e.g., some have been designed to address public policy concerns while others focus on managerial issues).

When viewed in the context of the information processing schema, common elements of the different concepts become evident. For example, the meanings of price knowledge (Progressive Grocer 1965, Goldman 1977), price awareness (Allen Harrell and Hutt 1976), and price consciousness (Gabor and Granger 1961) are similar despite their different labels. Unfortunately, the use of different terms makes it difficult to compare and accumulate findings because a researcher must make assumptions about their similarity. Possibly because different terms have been used, few researchers have described previous concepts and discussed how those concepts relate to the ones they chose to operationalize (notable exceptions include Della Bitta and Monroe 1981, and Della Bitta. Monroe and McGinnis 1981 who based their measures on previous work).

Many concepts are defined only by their operationalizations or measures, and are not developed in a definitional or theoretical manner. How these concepts (which are really measures) fit into an overall model of price response is often unspecified (exceptions include Della Bitta, Monroe, and McGinnis 1981, Berkowitz and Walton 1980, Zeithaml 1982a, and Zeithaml and Fuerst 1983 which all discuss their measure in the context of the Olson and Jacoby schema). None of the studies reviewed relates its concepts to the construct of price consciousness (except for Gabor and Granger 1961, which uses the term in a limited sense).


Many measures of consumer response to price are unnecessarily different from other measures which assess the same concept For example, the number of interval-scale values used in measures of perceived savings (P-price) is three, four, and seven in three different studies. In defense of this variation, these three studies were conducted concurrently and probably without knowledge of the others, so consistency could not be expected. However, future research with this variable should acknowledge the three previous measures, select the best of those available or "present a detailed statement of the reasons and evidence as to why (a) new measure is better" (Churchill 1979).

More substantial measurement difficulties exist. Only a few studies have measured encoding of O-price and none have used methodologies recommended by Olson and Jacoby (1977) which allow consumers to respond in nonreactive ways. Therefore, little is known about the manner in which consumers encode O-price. Encoding may be in a sensory form (e.g., 79 cents), a semantic form (e g., expensive, least expensive in the product category, too cheap, etc.). or may not be accomplished at all (e.g., with brand loyal consumers). Lacking accurate data, researchers must make assumptions about encoding to measure recall.

Varying researcher assumptions about encoding (which are most often not articulated or defended in studies) lead to inconsistency in measures of storage: some researchers measure exact price, some measure relative price, etc. The appropriate measures of recall are difficult to develop prior to understanding consumer encoding of prices. In the meantime, researchers measuring price knowledge may be well advised to include multiple measures of knowledge reflecting different methods of storage.


One conclusion to be drawn from this review is that the domain of price consciousness is not clearly specified in the literature. Is price consciousness the overall hypothetical construct describing all aspects of consumer response to price (other than the relationship of price with quality)? Or is price consciousness merely a single response (i.e., a concept or a measure)? If it is a concept or a measure, which of the following does it represent: price awareness? price sensitivity? price importance? Work in defining these concepts would be desirable.

Based on the review of the literature, the following definitions of the construct and its dimensions are ProPosed.

PRICE CONSCIOUSNESS consists of a set of consumer response to price which excludes responses relating to quality perceptions but includes other consumer perceptions, knowledge, attitudes and orientations. Dimensions of price consciousness include price image, price perception, price knowledge, price acceptability, perceived value for the money, and price importance as well as others that have not yet been articulated

PRICE IMAGE involves the consumer's perceptions of the price level or relative price level of a retail store.

PRICE PERCEPTION involves the translation of O-price into cognitions that are meaningful and relevant to the consumer. These may include perceptions of prices of individual products, perceptions of prices in advertising, or perceptions of savings from different ways or presenting price.

PRICE KNOWLEDGE involves the information a consumer stores in memory about prices. It is usually measured by asking t consumers to recall prices. Comparison of recalled prices with actual price (O-price) is called PRICE RECALL ACCURACY.

PRICE ACCEPTABILITY is the consumer's evaluation of a price, usually on criteria such as truthfulness of fairness.

PERCEIVED VALUE FOR THE MONEY is the consumer's evaluation of the product's value based on its price.

PRICE IMPORTANCE is the salience of price as an attribute in consumer decision making.

This formulation is one of many possible formulations but one that appears to be consistent with the literature. The execution of subsequent steps in the Churchill paradigm (1979) would provide an opportunity-to evaluate and refine the formulation.


According to Churchill (1979), the step following domain specification involves generation of sample items. Using all possible sources (published research, interviews, focus groups, insight), the researcher develops a set of items reflecting each dimension of a construct. ResearcherS interested in studying price consciousness or its dimensions should apply this step by developing and editing a list of sample items relevant to the concepts.

After data collection, the measure must be purified using calculations of internal consistency (e.g., coefficient alpha) and factor analysis. In this step, the researcher can decide whether specified dimensions are identifiable (e.g., whether price importance is different enough from price knowledge to be separated conceptually).

Subsequent steps include collection of more data followed by reliability and validity assessment. Several of the consumer pricing studies reviewed included measurement of internal consistency reliability (e.g., Della Bitta, Monroe and McGinnis 1981, Zeithaml 1982a) on some dimensions of response. However, assessment of convergent and discriminate validity of measures, which have not yet been reported, would provide evidence of construct validity.

The final stage in Churchill's paradigm, development of norms, would provide standards on which to compare consumers' responses to price.


In the past ten years, studies of consumer response to price have appeared with greater frequency in the literature. With a goal of more clearly articulating the domain of one marketing construct in that literatureCprice consciousness--a review of concepts and measures was undertaken. Results of that review indicate that conceptual and measurement refinements are possible and necessary. Churchill's paradigm for developing better measures of marketing measures is suggested as a procedure for accomplishing these refinements.


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Valarie A. Zeithaml, Texa A&M University


NA - Advances in Consumer Research Volume 11 | 1984

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