Consumer Price-Quality Beliefs: Schema Variables Predicting Individual Differences
ABSTRACT - Consumers develop beliefs about the correlation between price and quality from their own consumption experiences. For a given product category, some consumers believe that price and quality are highly correlated whereas other consumers believe that price and quality are not highly correlated. Twenty-two schema variables affecting price-quality beliefs were identified through a review of the literature and a qualitative, exploratory study. Ten of the schema variables were examined in an empirical study and found to be significant predictors of price-quality beliefs for coffee (R2=.47), paper towels (R2=.39), and perfume (R2=.29).
Citation:
Karen H. Smith and N. Chinna Natesan (1999) ,"Consumer Price-Quality Beliefs: Schema Variables Predicting Individual Differences", in NA - Advances in Consumer Research Volume 26, eds. Eric J. Arnould and Linda M. Scott, Provo, UT : Association for Consumer Research, Pages: 562-568.
Consumers develop beliefs about the correlation between price and quality from their own consumption experiences. For a given product category, some consumers believe that price and quality are highly correlated whereas other consumers believe that price and quality are not highly correlated. Twenty-two schema variables affecting price-quality beliefs were identified through a review of the literature and a qualitative, exploratory study. Ten of the schema variables were examined in an empirical study and found to be significant predictors of price-quality beliefs for coffee (R2=.47), paper towels (R2=.39), and perfume (R2=.29). INTRODUCTION Numerous studies have attempted to determine if and when consumers will use price as a surrogate indicator of quality (price reliance). It seems likely that before such a price-quality inference can be made, the consumer would have to believe that there was, indeed, a correlation between the prices of brands in a product category and their quality (price-quality belief). For example, a consumer who believes there is a very strong correlation between price and quality for perfume would be more likely to infer that a $100 per ounce brand of perfume is of high quality than a consumer who believes there is no corrlation between price and quality for perfume. Research has shown that some consumers believe there is a strong price-quality correlation for most product categories, some believe there is a weak correlation for most product categories, and others believe the correlation depends on the type of product (Lichtenstein and Burton 1989). Furthermore, price-quality beliefs have been shown to affect judgments of perceived quality (Peterson and Wilson 1985), value and purchase intentions (Dodds, Monroe, and Grewal 1991), information search (John, Scott, and Bettman 1986) and other stages of the consumer decision process (Bettman, John, and Scott 1986). Why do price-quality beliefs differ? Peterson and Wilson (1985) suggested that the variation in price-quality beliefs results from the differing consumption experiences of consumers. By abstracting information over many consumption experiences, consumers develop knowledge about the relationship between price and quality for different product categories. Such knowledge structures have been referred to as price-reliance schemata (Peterson and Wilson 1985) because they contain knowledge and beliefs about the conditions under which using price as an indicator of quality has been a successful consumption strategy. A schema is a knowledge structure, stored in memory, that contains knowledge and beliefs about some stimulus domain (Crocker 1984). A schema has variables, or attributes, that define the stimulus domain. For instance, a schema for bird contains attributes such as having a beak, being able to fly, and laying eggs. The attributes are referred to as variables because individual instances of the schema will vary on each attribute. For example, an ostrich does have a beak and lay eggs, but it does not fly. Similarly, a consumers price-reliance schema contains variables that distinguish the product categories for which there is a strong price-quality correlation from those with a weak correlation. The stronger the price-quality belief, the more likely the consumer will exhibit price reliance. If price-quality beliefs vary, then what are the schema variables affecting such beliefs? Greater insight into the variables affecting price-quality beliefs is important for two reasons. From a theoretical standpoint, the variables may explain a substantial portion of the variance in consumers price-quality beliefs. From a methodological standpoint, studies of perceived quality and value should incorporate the variables and investigate their effects on consumer judgments of product quality and value. The purpose of the reported research was to identify the schema variables affecting price-quality beliefs and to operationalize and test the predictive ability of the variables in an empirical study. To accomplish this purpose, this research did three things. First, the price-quality literature was examined to determine what variables have been proposed and/or empirically tested. Second, exploratory interviews were conducted to identify additional variables affecting price-quality beliefs and to set forth specific hypotheses regarding the relationships between the variables and price-quality beliefs. Third, the hypothesized relationships between ten of the schema variables identified and price-quality beliefs were statistically tested in an empirical study. LITERATURE REVIEW Studies in the price-quality research stream have proposed and/or empirically tested many variables hypothesized to affect the use of price as an indicator of quality. Prior studies suggest that use of price as an indicator of quality is more likely when perceived quality varies across brands in a product category (Leavitt 1954; Lambert 1972; Zeithaml 1988) and when perceived price varies across brands in a product category (Leavitt 1954; Raju 1977; Dodds and Monroe 1985; Zeithaml 1988). Lichtenstein and Burton (1989) found that price-quality beliefs are generally stronger for durable goods than for nondurable goods. Greter risk or consequence of product failure tends to enhance price reliance (Peterson and Wilson 1985). Leavitt (1954) suggested that price reliance is more likely for product categories that are expensive and purchased infrequently. Price reliance is more likely when quality is difficult to judge because of ambiguous information (Lambert 1972; Pechmann and Ratneshwar 1992). A consumer who lacks the ability to judge quality is more likely to rely on price as an indicator of quality than consumers with greater ability (Lambert 1972; Rao and Monroe 1988; Zeithaml 1988). Use of price to judge quality is more likely when brand choice is important to the consumers self-image (Lambert 1972) and when the consumers level of involvement is high (Gotlieb 1990). In addition, Raju (1977) found the price-perceived quality relationship to be dependent on whether a brand is within the consumers acceptable price range. That is, consumers have upper and lower threshold prices where: (1) the quality of a brand is suspect if it is priced below the lower threshold price and (2) a brand is not considered worth the price if it is priced above the upper threshold. Dodds and Monroe (1985) found similar results in that the positive effect of price on perceived quality was greater between the low-priced and medium-priced brands than it was between the medium-priced and high-priced brands. Studies have also examined the effect of the presence of other cues, such as brand name, on price reliance, but with mixed results. Some studies found that the presence of brand name enhances price as a signal of quality (e.g., Dodds and Monroe 1985), whereas others found the opposite (e.g., Dodds, Monroe, and Grewal 1991). SCHEMA VARIABLES AFFECTING PRICE-QUALITY BELIEFS IDENTIFIED IN EXPLORATORY STUDY EXPLORATORY STUDY To further examine the nature of price-quality beliefs and to identify as many variables affecting price-quality beliefs as possible, a qualitative exploratory study was conducted. Twenty-six undergraduate business students (nine males and seventeen females between the ages of twenty-one and twenty-nine) were interviewed individually, and the dialogue taped and transcribed. Each interview was between thirty minutes and one hour in length. Subjects were asked about their price-quality beliefs for twenty-eight product categories (fourteen durable good categories and fourteen nondurable good categories drawn from previous price-quality studies). Subjects price-quality beliefs were classified by the researchers as either (1) belief in a moderate to strong price-quality correlation or (2) belief in a weak or no correlation. Subjects were also asked to explain the reasons for their beliefs. Subjects responses were grouped by similarity and used to identify schema variables affecting price-quality beliefs and to provide insights into the nature of the relationship between each variable and price-quality beliefs. Price-reliance schema variables Twenty-two schema variables were identified. The variables are listed in Table 1. Thirteen of the variables have been examined either theoretically or empirically in previous research, but the other nine variables have not been previously studied. For example, some subjects price-quality beliefs were influenced by their perceptions that quality depends on ones own personal preference (e.g., "perfume quality depends on what you like"). Other variables mentioned by subjects that have not been previously studied are whether quality is perceived to be important, whether higher-priced brands are perceived as more durable (e.g., longer-lasting perfume fragrance), whether seller mark-up is perceived as excessive (e.g., designer clothing, luxury cars), whether excessive advertising costs drive up the price of some brands (e.g., breakfast cereals), and whether the consumer is brand loyal. The most frequently mentioned variable was quality variaton. Subjects described two types of quality variation: variation in ingredients (materials, components, or workmanship) and variation in sensory attributes (how brands look, smell, taste, sound, or feel). Perceptions with respect to brand name were described by subjects in two ways: (1) whether brand name is a good indicator of quality and (2) whether well-known brands cost more. These perceptions represent two distinct schema variables that appear to interact with one another. For example, subjects who believed that well-known brand names cost more but did NOT believe that brand name is a good indicator of quality tended to have weak beliefs for that product category. However, subjects who believed that well-known brand names cost more and also believed that brand name is a good indicator of quality tended to have strong beliefs for that product category. The two schema variables related to brand name could help explain the conflicting findings related to the effect of brand name on price reliance. Brand name may weaken the price effect (cf. Dodds, Monroe, and Grewal 1991) when brand name is perceived as a good indicator of quality (Bounty paper towels), but brand name is not perceived as being strongly related to price (well-known brands do not necessarily cost more than lesser-known brands). Alternatively, brand name may reinforce the price effect (cf. Dodds and Monroe 1985) when brand name is perceived as a good indicator of quality and brand name is perceived as being strongly related to price (Bounty costs more than lesser-known brands such as store brands). EMPIRICAL STUDY The eleven most frequently mentioned schema variables (at least six subjects mentioning the variable as shown in Table 1) and level of involvement were chosen for empirical testing. However, after pre-test, items for the threshold and price-level variables were dropped due to ambiguous interpretation by subjects. The following hypotheses were set forth for the ten variables tested in the empirical study: For a given product category, price-quality beliefs will be stronger: H1. the greater the perceived variation in ingredients across brands; H2. the greater the perceived variation in sensory attributes across brands; H3. the greater the perceived importance of quality; H4. the greater the perceived price variation across brands; H5. the greater the perceived importance of brand image as an aspect of quality; H6. the greater the perceived dependence of quality on personal preference; H7. the stronger the perceived relationship between brand name and quality; H8. the stronger the perceived relationship between brand name and price; H9. the greater the level of product involvement; and H10. the less the perceived ability to judge quality. Methodology Ninety-six undergraduate business students served as subjects and received course credit for participation in the study. Data were collected via questionnaire. The first part of the questionnaire measured subjects perceptions in terms of schema variables, and the second part measured price-quality beliefs. Perceptions and beliefs were measured for three product categories. Analyses were conducted separately for each product category and for all product categories combined (referred to as "combined products"). Product familiarity and demographic variables were also measured. Three product categories (coffee, paper towels, and womens perfume) were chosen because (1) they demonstrated the greatest variation in price-quality beliefs across subjects in the exploratory study (64% of subjects believed the price-quality correlation was strong versus 36% believed the correlation was weak for coffee, 62% strong versus 38% weak for perfume, and 38% strong versus 62% weak for paper towels), (2) they are product categories that are generally familiar to student subjects, (3) they are product categories with which some students will have more experience than other students, and (4) they represent a wide variety of product characteristics. Coffee and paper towels are inexpensive, frequently purchased products, whereas perfume can be expensive and is usually purchased infrequently. Paper towels are generally purchased at grocery or discount stores. While coffee and perfume may be bought at grocery or discount stores, they can also be bought at specialty or department stores. Coffee and perfume generally depend more on the senses (taste, smell) and personal preference than paper towels, but the feel or look of paper towels may be important to some consumers. Measures The schema variables and price-quality beliefs were measured on seven-point scales: "
The variation in ingredients or manufacturing processes across all brands of coffee is ..." ("very low" to Avery high")
"
The variation in sensory attributes (taste, smell, feel, or looks) across brands of coffee is ..." ("very low" to Avery high")"
The variation in price across all brands of coffee is ..." ("very low" to Avery high")"
The degree to which brands of coffee have distinctive images is ..." ("very low" to Avery high")"
For coffee, the degree to which perceptions of quality depend on personal preferences is ..." ("very low" to Avery high")"
For coffee, the degree to which brand name is a good indicator of the level of quality of a brand is ..." ("very low" to Avery high")"
For coffee, the degree to which brand name influences the price of brands is ..." ("very low" to Avery high")"
Your own ability to judge the quality of brands of coffee is ..." ("very low" to"very high")"
How important is product quality to you for coffee?" to ("not at all important@Avery important" )Three-item involvement scale, alpha=.85:
Coffee is ..."("important to you" to "unimportant to you" )"
"
Coffee is ..."("uninteresting to you" to "interesting to you")"
Coffee is ..."("think about it very often" to "never think about it")Two-item price-quality belief scale; alpha of .90; means (SD) of 4.37 (1.23) for coffee, 4.29 (1.42) for paper towels, 5.16 (1.24) for perfume:
For coffee, the degree to which price is a good indicator of quality is ..." (" very low" to Avery high")"
"
The relationship, or correlation, between price and quality for coffee is ..." ("very weak" to Avery strong")Though few studies have found product familiarity or demographics to influence price-quality beliefs, these variables were measured as a control in the event that such differences might influence study results. Product familiarity was measured with three items (frequency of purchase, frequency of use, and self-reported knowledgeability). The demographic variables measured were age, gender, marital status, and whether subjects maintain their own households (that is, do not live with parents or in a dormitory).
Analysis
Because order effects were possible (cf. Rexeisen 1982), three orders for schema variables and three orders for product category were used. No effects of variable order were found. However, analysis of variance tests did indicate that price-quality beliefs about perfume were influenced by product category order (p=.01). Mean price-quality beliefs about perfume were stronger when perfume was presented after one or both of the other two product categories (2/3 of subjects) than when perfume was presented first (1/3 of subjects). Because mean price-quality beliefs were weaker for coffee and paper towels than for perfume across all orders, it is possible that anchoring effects from the other two product categories strengthened subjects price-quality beliefs about perfume. The number of subjects was approximately equal for each of the three orders, so order effects were averaged out in the statistica analyses.
Some subjects failed to complete their questionnaires or wrote comments on their questionnaires, indicating they lacked a schema for certain product categories (e.g., "I dont drink coffee"). Responses of the aschematics (six subjects lacked a schema for coffee, four for paper towels, and two for perfume) were omitted from the analysis following the suggestion of Markus (1977).
While familiarity was found to have a significant, positive relationship with price-quality beliefs (p<.001), this effect falls to nonsignificance when beliefs are regressed against familiarity and the schema variables. These results suggest that the relationship between product familiarity and price-quality beliefs is mediated by the schema variables (cf. Baron and Kenny 1986)." No significant effects of the demographic variables on price-quality beliefs were found, which is consistent with prior studies (e.g., Rao 1971).
Testing of Hypotheses
To test the hypotheses, bivariate regressions between price-quality beliefs and each schema variable (Table 2) as well as multiple regressions incorporating all ten schema variables (Table 3) were performed for each product category and for combined products.
Bivariate regressions. Nine of the ten schema variables were expected to relate positively to price-quality beliefs; only ability to judge quality had a negative relationship posited. Results of the regressions and the hypothesized direction (positive or negative) of the relationship with price-quality beliefs are shown in Table 2. Because of the exploratory nature of this research, tests with p-values of .05 or less are reported as significant; tests with p-values between .05 and .10 are reported as approaching significance.
For combined products, all ten schema variables were significantly (at the .05 level or better), and positively, related to price-quality beliefs. Although expected to have a negative relationship with price-quality beliefs, ability to judge quality was also found to be positively related to beliefs. Therefore, based on the bivariate regressions for combined products, H1 through H9 were supported, but H10 was not supported.
For coffee, price-quality beliefs were significantly related to variation in ingredients, quality importance, price variation, brand image, brand name-quality, and brand name-price. The relationship between beliefs and variation in sensory attributes approached significance (b=.18, p<.10). Personal preference, level of involvement, and ability to judge quality were not found to be significantly related to price-quality beliefs.
For paper towels, nine of the ten schema variables were positively, and significantly (p<.05) related to beliefs. Quality importance was not significantly related to beliefs.
For perfume, only four schema variables were significantly (p<.05) related to price-quality beliefs (quality importance, price variation, brand name-quality, and level of involvement). The coefficient for brand name-price approached significance (b=.18, p<.10).
For each product category and for combined products, price-quality beliefs were stronger for subjects with higher (rather than lower) ability to judge quality. Rao and Monroe (1988) found that novice subjects were more price reliant than medium-knowledge subjects, but that high-knowledge subjects were also more price reliant when price information was diagnostic. Thus, their study found a U-shaped, rather than linear, relationship for ability to judge quality. Since the three product categories are generally familiar to students, perhaps the positive elationship found in the present study mirrors the positive relationship between the medium and high-knowledge subjects found by Rao and Monroe (1988).
As Table 2 shows, the three product categories differed in which schema variables were significantly related to price-quality beliefs. Only three variables (price variation, brand name-quality, and brand name-price) had significant (p<.10) relationships with beliefs for all three product categories. Across all three product categories, subjects with stronger price-quality beliefs tended to perceive greater price variation among brands, perceive brand name to be a good indicator of quality, and perceive well-known brands to cost more.
Multiple regressions. Regression coefficients and adjusted R-squares for the multiple regression analyses are shown in Table 3. The ten schema variables explained a substantial portion of the variation in price-quality beliefs (adjusted R2 of .37 for combined product categories, .47 for coffee, .39 for paper towels, and .29 for perfume). For combined products, regression coefficients for only three of the schema variables (price variation, brand name-quality, and brand name-price) were significant at the .05 level (b=.15, .36, and .15, respectively, p<.01). This suggests that perceptions in terms of these variables may be the most important in influencing price-quality beliefs. The same three variables also had significant coefficients for coffee (b=.24, .23, and .36, respectively, p<.01). For paper towels, only the coefficient for the brand name-quality variable was significant (b=.36, p<.001). For perfume, regression coefficients for brand name-quality (b=.49, p<.001) and importance of quality (b=.21, p<.05) were significant.
Only the brand name-quality variable was significantly and positively correlated with price-quality beliefs for all three product categories. This positive correlation suggests that a strong correspondence between brand name and quality does not necessarily weaken price-quality beliefs. In fact, a strong brand name-quality relationship may even reinforce price-quality beliefs, especially when consumers believe that high-quality brands cost more (brand name-price variable). For combined products, the price variation and brand name-price variables were also positive and significant. These data suggest that the most important predictors of price-quality beliefs for the product categories studied are brand name-quality, brand name-price, price variation, and, to a lesser extent, importance of quality.
It is not surprising that the predictive ability of each variable was dependent on the product category. For example, quality importance had a strong correlation with price-quality beliefs for perfume but not for coffee or paper towels. The price variation and brand name-price variables were positive and significant for coffee but not for the other two product categories.
In summary, based on the multiple regression analyses, H4, H7, and H8 were supported for combined products and for coffee; only H7 was supported for paper towels; and H3 and H7 were supported for perfume.
TESTS OF HYPOTHESES: BIVARIATE REGRESSIONS BETWEEN PRICE-QUALITY BELIEFS AND EACH SCHEMA VARIABLE
PREDICTIVE ABILITY: MULTIPLE REGRESSIONS BETWEEN PRICE-QUALITY BELIEFS AND ALL TEN SCHEMA VARIABLES
DISCUSSION AND RESEARCH DIRECTIONS
While most studies in the price-quality literature have generally found a significant, positive effect of price on perceived quality (e.g., Chang and Wildt 1994), some studies have found no significant relationship between price and quality (e.g., Gardner 1971). It is likely that price-quality beliefs affect whether a consumer will use price to judge quality in empirical studies, as well as i the marketplace. If beliefs are weak, a consumer is less likely to judge a higher-priced brand as being higher in quality. Thus, it is important to understand differences in consumers beliefs about the price-quality correlation and the variables that affect those beliefs.
Thus, from a theoretical perspective, the reported research is important in explaining the variation in price-quality beliefs across consumers. The schema variables were found to be strong predictors of price-quality beliefs, explaining between 29 and 47 percent of the variance in price-quality beliefs for three product categories with a wide variety of product characteristics. From an information processing perspective, the results suggests that the schema variables may be important to brand and product category managers who are concerned with the effects of pricing and promotion on product positioning and consumer choice. In addition, the schema variables affect how consumers interpret and use product information, an issue of concern in public policy-making.
From a methodological perspective, the schema variables should be incorporated into models of perceived quality and value. For example, in Zeithamls (1988) model of perceived quality, it is possible that the brand-price variable can affect the translation of objective price into perceived price, and, therefore, affect perceived quality and value. Hence, the schema variables provide a fruitful direction for future research regarding the price-perceived quality relationship.
In addition, the effect of brand name on price reliance was found to consist of two elements (schema variables): whether brand name is perceived as a good indicator of quality and whether well-known brands are perceived to cost more. Further research should examine the interaction effects of differing perceptions in terms of these two variables and the resulting effect on use of the price cue.
The reported research has two primary limitations. First, in the exploratory study, the researchers identified the schema variables from subjects responses, without validation from additional judges blind to the hypotheses. Second, only ten of the twenty-two schema variables were empirically tested. Future research should attempt to replicate the findings of this research and to operationalize the remaining twelve schema variables, which should further increase the proportion of explained variance in price-quality beliefs. In addition, future research should develop measures for determining what variables are most predictive of price-quality beliefs across individual consumers and across product categories. For example, the brand image variable may affect price-quality beliefs about paper towels for some consumers (e.g., Bounty has a strong image as "the quicker picker upper"), but not for other consumers. Across product categories, the quality importance variable may be a poor predictor of beliefs about paper towels, but an excellent predictor of beliefs about perfume.
Finally, well-formed beliefs, such as price-quality beliefs, are often very resistant to change. Directing persuasive messages toward the underlying schema variables may be more effective in changing consumer beliefs than messages directed to more abstract price-quality beliefs (Crocker 1984). Future research should target persuasive messages at one or more of the schema variables to observe whether such an approach might be effective in changing consumer price-quality beliefs about the product category. For example, attempts to convince consumers that a high-priced brand of coffee is of higher quality than lower-priced brands may be unsuccessful if most consumers perceive that all brands of coffee have similar quality.
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Authors
Karen H. Smith, Southwest Texas State University
N. Chinna Natesan, Southwest Texas State University
Volume
NA - Advances in Consumer Research Volume 26 | 1999
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