The impact of category prices on store price image formation

An empirical analysis

C.J. Da Silva Lourenço, E. Gijsbrechts, R. Paap

Research output: Contribution to journalArticleScientificpeer-review

Abstract

The authors empirically explore how consumers update beliefs about a store's overall expensiveness. They estimate a learning model of store price image (SPI) formation with the impact of actual prices linked to category characteristics, on a unique dataset combining store visit and purchase information with price perceptions of the same consumers. The results identify characteristics driving categories' store-price signaling power, for different store formats. ‘Big ticket’ categories, with a narrow price range, strongly shape consumers' store price beliefs, while (volatile) prices of frequently or deeply promoted categories are less influential. At traditional supermarkets, consumers anchor and elaborate on prices of storable categories bought in large quantities, and where quality differentiation is high. For hard discounters, however, SPI is mostly shaped by frequently bought categories with narrow assortments. Interestingly, categories' SPI signaling power is not proportional to their share-of-wallet at either type of chain. Managers can use these results to identify ‘Lighthouse’ categories that signal low prices, yet make up a small portion of store spending and in which price cuts do not overly hurt revenue.
Original languageEnglish
Pages (from-to)200-216
JournalJournal of Marketing Research
Volume52
Issue number2
Early online date7 Nov 2014
DOIs
Publication statusPublished - 2015

Fingerprint

Empirical analysis
Supermarkets
Share of wallet
Managers
Price perception
Store format
Assortment
Learning model
Revenue
Quality differentiation
Purchase

Keywords

  • store price image
  • price perceptions
  • product category characteristics
  • Bayesian learning

Cite this

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title = "The impact of category prices on store price image formation: An empirical analysis",
abstract = "The authors empirically explore how consumers update beliefs about a store's overall expensiveness. They estimate a learning model of store price image (SPI) formation with the impact of actual prices linked to category characteristics, on a unique dataset combining store visit and purchase information with price perceptions of the same consumers. The results identify characteristics driving categories' store-price signaling power, for different store formats. ‘Big ticket’ categories, with a narrow price range, strongly shape consumers' store price beliefs, while (volatile) prices of frequently or deeply promoted categories are less influential. At traditional supermarkets, consumers anchor and elaborate on prices of storable categories bought in large quantities, and where quality differentiation is high. For hard discounters, however, SPI is mostly shaped by frequently bought categories with narrow assortments. Interestingly, categories' SPI signaling power is not proportional to their share-of-wallet at either type of chain. Managers can use these results to identify ‘Lighthouse’ categories that signal low prices, yet make up a small portion of store spending and in which price cuts do not overly hurt revenue.",
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The impact of category prices on store price image formation : An empirical analysis . / Da Silva Lourenço, C.J.; Gijsbrechts, E.; Paap, R.

In: Journal of Marketing Research, Vol. 52, No. 2, 2015, p. 200-216.

Research output: Contribution to journalArticleScientificpeer-review

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AB - The authors empirically explore how consumers update beliefs about a store's overall expensiveness. They estimate a learning model of store price image (SPI) formation with the impact of actual prices linked to category characteristics, on a unique dataset combining store visit and purchase information with price perceptions of the same consumers. The results identify characteristics driving categories' store-price signaling power, for different store formats. ‘Big ticket’ categories, with a narrow price range, strongly shape consumers' store price beliefs, while (volatile) prices of frequently or deeply promoted categories are less influential. At traditional supermarkets, consumers anchor and elaborate on prices of storable categories bought in large quantities, and where quality differentiation is high. For hard discounters, however, SPI is mostly shaped by frequently bought categories with narrow assortments. Interestingly, categories' SPI signaling power is not proportional to their share-of-wallet at either type of chain. Managers can use these results to identify ‘Lighthouse’ categories that signal low prices, yet make up a small portion of store spending and in which price cuts do not overly hurt revenue.

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