Consumer evaluation of reference price advertisements: Effects of other brands' prices and semantic cues

Although 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 influence the effects of reference prices and associated semantic cues. The authors study these issues 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 results in more positive perceptions of the offer when respondents are exposed to an abstract semantic cue. The results of the second study show that other external price information has no effect when the respondents are exposed to implausible or highly implausible prices, but the reference price level affects consumers' perceptions of value, attitude toward the deal, and search intentions. The authors discuss the possible public policy and managerial implications.