Investigating the Dual Role of Price on Consumers’ Purchase Intentions of Hedonic versus Utilitarian Products: An Abstract
The role of price in consumers’ product evaluations has attracted considerable research attention in the consumer behavior literature (e.g., Bornemann and Homburg 2011). Research has identified two opposing effects of price: information and sacrifice (Rao and Sattler 2003). One the one hand, consumers rely on price to infer quality information of products and services. In this case, a higher price indicates higher quality and thus positively affects purchase probability (Rao and Monroe 1988). On the other hand, price is a measure of sacrifice. The sacrifice effect of price, which stems from classic economic theory, represents the consumer’s evaluation of the amount of money he or she must sacrifice to satisfy his or her consumption needs (Völckner 2008). From a management perspective, it is critical to understand the dual role of price in consumers’ evaluations of product alternatives in order to derive effective pricing strategies.
Despite an abundance of research, current academic literature remains inconsistent regarding the effects of prices. In addition, only a few studies (Chapman 1993; Chapman and Wahlers 1999) consider the simultaneous effects of signaling and sacrifice on behavioral outcomes such as purchase intentions. The purpose of this study is to investigate the effects of price changes on purchase intensions, in particular, if price increases can lead to higher revenue as opposed to a decrease based on economic theory.
We conduct a field experiment to investigate the informational and sacrifice effects of price for two products: wine (hedonistic) versus laptop cases (utilitarian). Our results indicate that price effects vary depending on the product category. Specifically, the influence of price increases for hedonic products is opposite to utilitarian products. The signaling effect for wine (hedonic product) is strongly positive, whereas the sacrifice effect is stronger for laptop cases (utilitarian product).
The results suggest several key implications for managers. Our study shows that signaling and sacrifice effects of price changes differ between hedonic and utilitarian products. If managers understand the price response drivers and the underlying consumer characteristics, they can develop targeted communication campaigns and influence, at least to a certain extent, consumers’ willingness to buy (Völckner 2008).
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