A Price Expectations Model of Customer Brand Choice

Kalwani, Manohar U.; Yim, Chi Kin; Rinne, Heikki; Sugita, Yoshi

doi:10.2307/3172584

Cited by 216 publications

(101 citation statements)

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“…First, in identifying the sales promotion usage pattern in Korea, the present work can provide researchers a practical hint in deciding on their follow-up research topic concerning the sales promotion and its related area. Various research argue the short-term and long-term advantages of sales promotion, as well as its short-term and long-term disadvantages, and they all identify the advantages and disadvantages of various types of sales promotion in different contexts (Alba et al 1994(Alba et al , 1999Blattberg and Neslin 1990;Blattberg and Wisniewski 1989;Blattberg et al 1981;DelVecchio et al 2007;Diamond and Campbell 1989;Dodsen et al 1978;Doob et al 1969;Guadagni and Little 1983;Kalwani et al 1990;Kalwani and Yim 1992;Kuehn and Rohloff 1967;Lattin and Bucklin 1989;Liefeld and Heslop 1985;Mayhew and Winer 1992;Moriarty 1985;Neslin and Shoemaker 1983;Neslin et al 1985;Prentice 1975;Sawyer and Dickson 1984;Scott 1976;Strang 1976;Woodside and Waddle 1975). The present research indicated that managers have and will conduct two main sales promotion types, namely, price cut and bonus pack, regardless of the various kinds of sales promotion that can be implemented.…”

Section: Resultsmentioning

confidence: 99%

“…Several researchers, however, argue that sales promotions can decrease sales and market share in the long term by affecting the internal reference price and repurchase intention of consumers in a negative way (Alba et al 1994(Alba et al , 1999DelVecchio et al 2007;Diamond and Campbell 1989;Dodsen et al 1978;Kalwani et al 1990;Kalwani and Yim 1992;Lattin and Bucklin 1989;Mayhew and Winer 1992;Scott 1976). Sales promotion results in negative effects because it reduces the consumer's cognitive value of the product and decreases brand equity by lowering the reference price of the products; thus, the sales decline in the long run even though sales promotion increases the short-term sales (Diamond and Campbell 1989;Liefeld and Heslop 1985;Prentice 1975;Sawyer and Dickson 1984;Strang 1976).…”

Section: Literature Reviewmentioning

confidence: 99%

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Usage pattern of sales promotion in the Korean market

Kwon¹,

Ko²,

Jung³

2017

Pressacademia

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Purpose -An increasing number of retailers and manufacturers are relying on sales promotions to boost sales, extend market share, and clear excess inventory. Previous research on sales promotions primarily focus on the effect of this approach on two main perspectives: firm level, which includes sales, market share, and firm performance; and customer level, which involves perceived quality of product/service, change in reference price, and purchase/repurchase intention. To help subsequent and new research on these issues, this research note focuses on finding patterns of sales promotions conducted in various sectors of industry in the Korean market. Methodology -A survey on the sales promotion usage pattern of a company was conducted with 74 decision makers in various companies followed by a small group interview. Findings-Results indicated that price off and bonus pack sales promotions were the main types of sales promotions conducted and considered in most sectors of industry in Korea. Decision makers were also found to have knowledge on the long-term disadvantage of sales promotions. Despite this advantage, two main reasons were pointed out for the continuing conduct of sales promotions: reaction to the sales promotions of competitors and expectation of other members of the organizations. Conclusion-This research on the usage pattern of sales promotions in Korea can contribute to the choice of the next sales promotion research topic in Korea and in other nations.

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Section: Resultsmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Usage pattern of sales promotion in the Korean market

Kwon¹,

Ko²,

Jung³

2017

Pressacademia

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“…Kalyanaram and Little (1994) use an exponentially smoothed measure of past shelf prices encountered by a consumer and estimate the smoothing parameter to be 0.82, implying that the most recent price has the maximum influence on reference price. Kalwani et al (1990) summarize the impact of the previous five prices and find the most recent price to be weighted most heavily. Rajendran and Tellis (1994) use the weighted mean of the previous three prices with the most recent price weighted most heavily as a brandspecific temporal reference price.…”

Section: Analysis Of the Misspecified Modelmentioning

confidence: 99%

“…A positive coefficient for the associated parameter is interpreted as evidence for the sticker shock effect. These models have also been extended to incorporate more sophisticated responses to reference prices, including asymmetries in response to gains and losses (e.g., Kalwani et al 1990) and zones of indifference around reference prices (Kalyanaram and Little 1994).…”

Section: Introductionmentioning

confidence: 99%

The Impact of Heterogeneity in Purchase Timing and Price Responsiveness on Estimates of Sticker Shock Effects

Chang¹,

Siddarth

Weinberg

1999

Marketing Science

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The notion that individuals have an internal reference price against which they compare observed prices is well supported by several psychological theories. Empirically, several papers in the marketing literature, employing scanner panel data, have modeled the impact of reference prices on brand choice via the sticker shock formulation, in which consumers evaluate choice alternatives using differences between shelf prices and reference prices. Most of the studies reported thus far have not accounted for heterogeneity in price response among consumers and have typically imputed reference prices from the shelf prices of brands that a consumer is supposed to have "observed" on previous purchases in the category. Since category marketing activity can differentially affect the purchase timing of households, we argue that this measure of reference price may follow certain systematic patterns across consumers and, when combined with unaccounted for price response heterogeneity, may result in a spurious sticker shock effect. Specifically, we show that estimates of sticker shock are biased upward if households that are price-sensitive in the brand choice decision are also more responsive to category promotion activity in their purchase timing decision.We discuss some general conditions under which the bias occurs and conduct a simulation experiment to confirm our specific hypotheses. Our simulation results show that changes in purchase timing are a critical determinant of the bias in the sticker shock effect. We also show that unaccounted for price response heterogeneity can in itself result in a biased sticker shock parameter; however, this requires very large differences in price sensitivities across consumers, far greater than what is normally observed.We develop a hierarchical Bayes version of the nested logit model, which models heterogeneity via individual-level parameters in a continuous random effects framework. We estimate the model on scanner panel data from the yogurt and ketchup categories. We find, in both categories, that the 95% probability interval of the posterior distribution of the mean sticker shock coefficient contains the value zero. Therefore, at least for the data used in this study, there is no evidence for the sticker shock effect at the aggregate level. In contrast, the corresponding coefficient from a standard model (which ignores this heterogeneity) is highly significant and supports the existence of a (possibly spurious) sticker shock effect. Consistent with our explanation of the underlying cause of the bias, households that are more price-sensitive in the choice decision are also found to be more responsive to category promotion activity in their decision to purchase in the category.The results highlight the measurement problems associated with imputing reference prices from past prices. Since the frequency, duration, and price level of a retailer's promotional program depend on its size and prevalence, accurate estimates of the sticker shock effect are essential for formulating op...

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“…(Lichtenstein and Bearden, 1989; see also reviews by Compeau and Grewal, 1998;Krishna et al, 2002;Urbany, Bearden, and Weilbaker, 1988). Consumers' internal reference prices also can be influenced by past prices, brand promotion frequency and the type of store (Kalwani et al, 1990). Therefore, price promotions are likely to affect consumer reference prices or price expectations.…”

Section: Dynamic Effects Of Price Promotionsmentioning

confidence: 99%

Emerging trends in retail pricing practice: implications for research

Lévy

Grewal

Kopalle

et al. 2004

Journal of Retailing

138

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This article represents the first of several editorials to appear in the Journal of Retailing designed to examine the nexus between retail practice and research, with the goal of stimulating further research. This essay on emerging trends in pricing discusses recent advances in retail pricing optimization. We begin with a review of how retailers typically make pricing decisions using time-honored heuristics and attempt to infer the optimal decisions. However, current methods are sub-optimal because they do not consider the effects of advertising, competition, substitute products, or complementary products on sales. Most fail to take into account how price elasticity changes over time, particularly for fashion merchandise, or how market segments react differentially to price changes. In addition, many retailers find it difficult to know how to price merchandise when their suppliers offer temporary 'deals'. They are also generally unaware of how their pricing strategy influences their overall image. As these issues demonstrate, optimal pricing is not a static problem. Retailers must be able to react quickly to changes in the environment or sales patterns. This paper also provides examples of the more sophisticated pricing techniques that are currently being tested in practice. Finally, we conclude with a discussion of the critical components that must be incorporated into retail pricing.

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A Price Expectations Model of Customer Brand Choice

Cited by 216 publications

References 0 publications

Usage pattern of sales promotion in the Korean market

Usage pattern of sales promotion in the Korean market

The Impact of Heterogeneity in Purchase Timing and Price Responsiveness on Estimates of Sticker Shock Effects

Emerging trends in retail pricing practice: implications for research

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