Price Expectations and Purchase Decisions: Evidence from an Online Store Experiment

Roy, S and Chan, T and Cheema, A (2014) Price Expectations and Purchase Decisions: Evidence from an Online Store Experiment. Customer Needs and Solutions, 1 (2). pp. 117-130. ISSN 2196-291X

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In this paper, we study the role of consumer price expectations in influencing consumer purchase decisions. Specifically, we examine the drivers of relative dominance of two price expectations—one formed prior to store visit (PRIOR) and the other about price in other stores (POST) formed after being exposed to focal store price. We collect the data from an online store shopping environment, allowing participants to make real purchase decisions. We have identified two distinct classes of shopping behaviors in our data—inside-focused (IF) and outside-looking (OL). Purchase decisions of the former are mainly driven by PRIOR while that of the latter by POST. At constant cost, we show that a promotion scheme with deep discounts (e.g., 5 % for 3 weeks or 15 % price cut in the first week) boosts sales more than the one with shallow discount (e.g., 3 % for 5 weeks). This increase comes mainly from the OL class, which is more sensitive to price changes. We further demonstrate how stores should manage consumer price expectations to maximize the sales lift during price promotions.

Item Type: Article
Subjects: Business and Management
Date Deposited: 17 Nov 2014 19:34
Last Modified: 09 Jul 2023 11:51

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