NASHVILLE, Tenn. — While sale prices may attract many consumers to products, for others, they may denote lower quality, a new study suggests.
The study, conducted by Vanderbilt University marketing professor Steve Posavac and others, and set for publication in the Journal of Consumer Research, found that consumers use a series of theories when considering the relationship between value and price.
"In the case of price, most people simultaneously believe that low prices mean good value and that low prices mean low quality," Posavac said. "But these two beliefs are not equally present in consumers' minds all the time."
In one experiment, consumers were shown an advertisement for a bottle of wine with either a high or low price. When subtly reminded of the wine's quality, they gave a more favorable opinion of the expensive wine than the cheap one, but they rated the cheap wine more favorably when subtly reminded of value. The researchers found that because consumers use "naive theories" when analyzing a product, a company's subtle marketing tactics toward price or quality may attract one consumer while alienating another.
"Consumers rarely have complete information and use various strategies to fill the gaps in their knowledge as they consider and choose products," Posavac and coauthors Helene Deval, Susan Mantel and Frank Kardes write in the study. "One of these strategies involves using naive theories: informal, common sense explanations that consumers use to make sense of their environment."
Posavac used J.C. Penney as an example of how sales promotions can succeed when consumers perceive that they are getting a good deal, but can backfire if they perceive that the lower prices they pay indicate lower quality.
"A company may implement an everyday low-pricing strategy that manages to reduce brand value and alienate consumers if many of them believe that low prices equal low quality," Posavac said. "Over the years, J.C. Penney customers had become so used to sales that they no longer believed they were getting a good deal."