Spending propensity and price perceptions

ABSTRACT

This article presents a systematic investigation of how Spending Propensity moderates consumers’ perceptions of prices. Results from three studies are presented. Studies 1 and 2 reveal that, in the absence of any external cues, consumers who are predisposed to spending freely evaluate a posted price more favorably than those who are not. Such consumers also report anticipating less pain associated with spending than those who are not inclined to spend. Additionally, Study 2 informs that simple price communication tactics, without any real reduction in price, may be effective at mitigating the pain felt among those who are less inclined to spend. Furthermore, such tactics are capable of reducing, and even reversing, the gap between those who are not predisposed to spending and those who are. Finally, Study 3 explores how spending propensity moderates consumers’ perceptions of a discount.

KEYWORDS:

• Reference price
• spending propensity
• price perception
• consumer behavior
• retail price advertising

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. An anonymous reviewer expressed some concern over the validity of using student subjects. However, considering that the product of interest in the studies reported in this article was a backpack (a product that is routinely purchased by students), it was determined that the use of students, in this case, did not adversely impact validity.

2. In addition to comparing the absolute widths of the regions computed as Width of Range = Upper limit – Lower Limit, a comparison was also made on relative width computed as Range/IRP. No significant difference between HPS and LPS groups was found.

3. VIF values not exceeding 10 are often taken to mean that the effects of linear relationships among the independent variables are not severe (Neter, Wasserman, and Kutner 1985, p. 392).

4. It is interesting to note that, overall, LPS consumers appear to behave in accordance with the predictions of Prospect Theory (Kahneman and Tversky 1979) in that they are more sensitive to losses than to gains (standardized coefficients = −0.49 and 0.25 for losses and gains, respectively). However, among HPS consumers, the emphasis placed on Gains and Losses are almost identical (standardized coefficients = −.27 for losses and 0.25 for gains). Perhaps, there is a negative association between Spending Propensity and risk averseness – a topic that is outside the immediate scope of this research, but one that may be an interesting avenue for future research.

Additional information

Notes on contributors

Rajesh Chandrashekaran

Dr. Rajesh Chandrashekaran is Professor of Marketing at the Silberman College of Business, Fairleigh Dickinson University, NJ, USA.  His primary area of research is related to psychological perspectives on pricing.  More specifically, he researches how consumers perceive retail prices against a host of internal reference prices, and how several retail price advertising tactics including the use of 9-endings, color, and suggested comparison prices may be used to intervene in the price judgment process.