Consumer Evaluation of Reference Price Advertisements: Effects of “other” Brand’s Prices and Semantic Cues

While consumer behavior and policy researchers have contributed to legislation and legal decisions for reference price advertising, there is hardly any research on how "other" external price information may impact the effects of reference prices and associated semantic cues. These issues are studied with two 3 x 2 x 2 experiments. Results of the first study indicate that consumer evaluations are influenced by "other" external price information within a plausible reference price range. In addition, presence of "other" external price information resulted in more positive perceptions of the offer when respondents were exposed to an abstract semantic cue. However, the results of the second study show that "other" external price information had no effect when the respondents were exposed to implausible or highly implausible prices, but the reference price level affected consumers’ perceptions of value, attitude toward the deal, and search intentions. The possible public policy and managerial implications are discussed.