Recent
managerial evidence and academic research has suggested that consumer decisions
are influenced not only by the prices of individual items but also by a
retailer's price image, which reflects a consumer's impression of the overall
price level of a retailer. Despite the increasing importance of price image in
marketing theory and practice, existing research has not provided a clear
picture of how price images are formed and how they influence consumer
behavior. This article addresses this discrepancy by offering a comprehensive
framework delineating the key drivers of price image formation and their
consequences for consumer behavior. Contrary to conventional wisdom that
assumes price image is mainly a function of a retailer's average price level,
this research identifies several price-related and nonprime factors that
contribute to price image formation. The authors further identify conditions in
which these factors can overcome the impact of the average level of prices,
resulting in a low price image despite the retailer's relatively high prices,
as well as conditions in which people perceive a retailer to have a high price
image despite its relatively low average price level.
According to Hamilton and
Chernev, it is not enough for retailers to simply optimize prices. Low prices
are just the beginning. Instead, they should use all the tools at their
disposal—from the mix of prices available on the store shelf, to the way they
change prices over time, to the physical characteristics of the store itself—to
communicate a desired price image.
The study also indicates
that although ‘show rooming’—the practice of examining merchandise in a retail
store and then shopping online to find the desired item at a lower price—has
become the nemesis of many brick-and-mortar retailers, not all traditional
retailers are equally affected by show rooming.
Shoppers at stores
like Wal-Mart, Costco and Aldi are less likely to pull out their smartphones to
check the competition for lower prices. These retailers benefit from their low
price image, even in cases where they do not have the lowest price on a
particular item.
Works
Cited
Journal of Marketing. Nov2013,
Vol. 77 Issue 6, p1-20. 20p. 1 Diagram, 4 Charts.
I am guilty of "show rooming" when purchasing electronics. For example, when I purchased my TV, I wanted to see what it would look like in person, but I did not want to pay the price that the TV was priced at. If only electronics stores matched online prices this would not be an issue, but I understand they would be cutting into their profit margin.
ReplyDeleteConsumers see Wal-Mart as low price store and it is indeed; they see Target as higher price store since it offers upscale products and better customer service. Target uses these two traits to differentiate itself from Wal-Mart.
ReplyDeleteMost consumers know what stores to go to for low prices. They also know which stores are the most expensive. I still like to compare prices even with stores like Wal-mart. Wal-mart is cheaper than Walgreens . Walgreens is anywhere from $1-5 more
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