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Journal of Consumer Research, Inc.

The Role of Price in Multi-Attribute Product Evaluations Author(s): Gary M. Erickson and Johny K. Johansson Source: Journal of Consumer Research, Vol. 12, No. 2 (Sep., 1985), pp. 195-199 Published by: The University of Chicago Press Stable URL: http://www.jstor.org/stable/254352 . Accessed: 12/05/2013 05:39
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Consequently.g. The classical economic model postulates that a consumer maximizes utility by allocating a limited budget over alternative goods and services (e. price is not a significant determinant of overall attitude. a role substantiated in several behavioral studies (e. this "negative" price influence can be hypothesized to surface in individuals' behavioral intentions. Finally. 195 T analysis is used to determine underlying structure among various attribute beliefs and to see with which components price (belief) is related.. Valuable discussion about the modeling of price effects in a utility-formation framework is provided by Rao and Gautschi 1982 and by Srinivasan 1982." But the role of price can extend even further if we are dealing with subjective beliefs about price levels because these beliefs are likely intertwined with other attribute beliefs. has been concerned with the multifaceted nature of price. JOHANSSON* The potentially multifaceted role of price in product evaluations is investigated with an empirical analysis of surveyed beliefs. it limits how much is available for spending on other goods and services. The purpose of the present study is to investigate empirically the various roles price can play in the multi-attribute product evaluation process.176. perceptions of the products on various attributes might well "bias" the perceptions of prices away from the actual prices. Seattle. Price becomes the sacrifice one makes to obtain the stream of benefits generated by the bundle of attributes that constitutes the product. thereby contributing to the attribution definition process. just as price beliefs influence perceptions of quality attributes in the pricequality relationship. Principal component *Gary M. moderating the effect on a positive overall product evaluation. and intentions regarding automobile brands. and ? JOURNAL OF CONSUMER RESEARCH* Vol. PRICE AS A CONSTRAINT One basic way of viewing price is as a constraint on what product alternatives can be considered feasible. It is found that price beliefs both influence and are influenced by beliefs about a brand's quality. A second step is applying two-stage least squares to determine the direction of influence between price beliefs and beliefs about other attributes. the importance of price as a constraint on behavioral intention is assessed. In the multiattribute setting. and intentions regarding various automobile brands. However. Johansson is Professor. WA 98195..55. as well as assessing the role of price as an independent product attribute in the overall evaluation process. University of Washington. the price consumers pay for a product results in a reduction of their wealth. 12 May 2013 05:39:31 AM All use subject to JSTOR Terms and Conditions . It is also found that price becomes a negative factor when behavioral intentions are involved. attitudes. One would expect automobiles to be one product category where such a constraint is operative (Ratchford 1975). Olson 1974. p.48 on Sun. But price may also convey information to the consumer about product quality. All prices are rarely known precisely until relatively late in the evaluation process. This gives price the character of a product "attribute.) This is done by analyzing survey responses in the form of beliefs. 390). attitudes.g. he role price plays in a consumer's evaluation of product alternatives is very possibly not a unidimensional one. either analytical or empirical. PRICE AS A QUALITY SIGNAL Several studies have been concerned with consumer perception of price as an indicator of quality. In this context it is important to consider whether the consumer views the product purchase as having a major impact on his/her budget and thereby considers price as an important constraint on the purchase decision. Lilien and Kotler 1983. lending support to an economic interpretation of price. ERICKSON JOHNY K. (Not much in the way of research. 12 * September 1985 This content downloaded from 195. Wheatley and Chiu 1977). Erickson is Assistant Professor and Johny K.The Product Role of Price in Multi-Attribute Evaluations GARY M. This role represents the "price as a constraint" view common in economics (Lancaster 1971). both in the Department of Marketing and International Business DJ-10. To begin with.

BMW320i. gas mileage. The "+" anticipates that price and quality beliefs possibly influence each other in a positive manner. However. A two-way relationship linking attribute beliefs and attitude is needed to recognize halo effects (established empirically by Beckwith and Lehmann 1975. The inclusion of attitude requires the recognition of how attitude influences and is influenced by other factors. and the probability of their purchasing various automobile makes. actual price. this can and should be investigated empirically. The previous discussion has suggested possible price links with intention and quality perception. passenger comfort. durability. Finally. safety. handling. based on Fishbein's extended model (Fishbein and Ajzen 1975). For instance. Ford Mustang. and familiarity are assumed to have appropriate effects and to act as identifiers in the simultaneous system. Holbrook 1983. These perceived prices are in many cases based on imperfect market information that is very possibly incorrectparticularly in the early stages of the evaluation process. The complete model is shown in the Figure. Indeed. styling. in the typical multi-attribute evaluation process. 13 attributes were chosen. the extent to which price is used as a quality signal depends on the availability of alternative information. since the main effects appear to be more clearly associated with quality belief and intention. and color selection. Datsun 200 SX. also based on the pilot studies: price. Note that actual attribute values. Further.55. students at the University of Washington that asked for their beliefs about.176. The dashed lines indicate the theorized relationships involving price.. Where information on quality-related attributes is readily available. perceived prices are used. Perceived high-quality cars can be expected to cost more and vice versa. Johansson. Honda Accord. As a consequence. one would accordingly expect price to lose its significance. driving comfort. Toyota Celica. This possible two-way influence needs to be explored more systematically. for example. workmanship. an additional influence on attitude is notedincreased familiarity with the alternative (Moreland DATA The data used to investigate the various roles of price were obtained through a survey of 96 M. These various roles of price are to be examined empirically. However.A. the final list of automobiles involved ten models: Volkswagen Rabbit. perceived variables between dealers or across options and differing negotiation skills are prone to make anticipated prices different from final prices. Solid lines indicate relationships established in previous research. reliability. acceleration. a one-way influence of attitude on intention is assumed. Based on frequency of mention in the pilot studies. Chevrolet Citation. Apparently. No direct association with attitude has been suggested. The final questionnaire used semantic differential This content downloaded from 195. In addition. their overall affective rating of. MODEL OF POSSIBLE PRICE EFFECTS I . and the "-" that price likely plays a budget constraint role in intention.48 on Sun. and Plymouth Reliant. and Zajonc 1979). Two pilot studies were conducted on subsamples to elicit automobile models and appropriate attributes.. whether price is used as a quality signal appears to depend on the availability of other signals. the causal relationship between price and perceived quality can proceed in one direction only-from price to quality perception. and Chao 1984). 12 May 2013 05:39:31 AM All use subject to JSTOR Terms and Conditions .196 THE JOURNAL OF CONSUMER FIGURE RESEARCH many of these have shown price to operate in this manner (see Monroe 1973 for a review). Huber and McCann (1982) noted effects that were consistent with a hypothesis of reciprocal inferential beliefs involving price and taste quality. to avoid dissonance.I I I I I PERCEPTIONS OF PRICE Studies in the area of price-quality relationships have generally involved direct control of and complete information on prices. an argument can be made for a weak direct relationship at best between price and attitude. Mazda 626.B. MODEL A complete model of price effects on product evaluation needs to incorporate attitude as well as beliefs and intention. horsepower. Szybillo and Jacoby (1974) showed that cues for physical differences and store image render price an insignificant indicator of product quality. Of course. We need to be concerned with possible inferential impacts between price and quality perceptions. Erickson. the "0" that the direct relationship between attitude and price is likely to be weak. Audi 4000. In the case of automobiles.

29 b results reveal how price relates to overall attitude as well. actual values of attributes should influence beliefs. The two-stage least squares results. the ratings were standardized within individuals to control for idiosyncratic scale use-a common practice in research on multi-attribute models (c. actual values on three attributes were available: horsepower. That is. The third significant factor.016 10. Regression methods were then used to sort out the various price effects.55.93a 2.) The results.92b -. and color selectionwere not available in published sources.116 -. allow the disentanglement of the price-quality relationship.527 -. and driving comfort." An especially interesting result was that price loaded highly only on the "quality" factor.211 -1. shown in Table 1. The coefficient estimates for these two equations indicate that price positively influences quality per- This content downloaded from 195. First.176. bp < 0. pp. True values were controlled for in the analysis. This was done in two steps.10.020 . The nature of the individual attributes loading highly on each factor allowed a labeling of the factors as "quality. QUALITY.05. This analysis yielded three components with eigenvalues exceeding one.846 -. 460-462 for the reasoning behind the use of ordinary least squares in this situation.77 5. acceleration.58 -1. One would expect that a consumer's underlying attribute structure would contain a smaller number of dimensions. driving comfort. and to aid in the identification of the role of price in consumer attribute structures.116 .449 . The . see Theil 1971. allow the assessment of the effect of price on intention. mileage. using the weights from the principal component analysis. 12 May 2013 05:39:31 AM All use subject to JSTOR Terms and Conditions . styling. (Values were also available for handling and passenger comfort. PRICE-QUALITY RECIPROCITY The price-quality relationship can be unraveled by concentrating on two of the equations in Table 1those for which price belief and quality belief are the dependent variables. only a dependent measure.33b 13.81 b .059 .002 -2. workmanship.29b 14." and "selection. indicating an intertwining of price beliefs with judgments about quality." was eliminated from the analysis because of the difficulty in securing a list of actual values on this dimension to act as an identifier in the simultaneous system.63b -2. the probability of purchasing each (should they be in the market for one).441 .48 on Sun.11 -12.81 b -1. Values were generally available for price.377 .) These objective values were used to detect the influence on perceptions of publicly available information about physical characteristics and price.02b -. True attribute values were included in the analysis. Bass and Wilkie 1973). The respondents were then asked to indicate their overall rating of each model. "selection.42 b 4.002 -. (This regression can be done separately due to the recursive nature of the intent relationshipintent is not itself an explanatory variable." "economy.56b 8. as available. The final step in the estimation was an ordinary least squares regression of the behavioral intent relationship.f. and their familiarity with the model.037 . as available.06 ESTIMATION Prior to analysis. t value . and attitude were estimated using two-stage least squares. Not surprisingly. quality and other attribute beliefs. List price was included as a possible determinant of price belief.083 . with price excluded in the derivation of the scores. the simultaneous relationships among price beliefs. Actual values for the remaining attributes-safety.672 . Factor scores. substantial correlation exists among the attribute beliefs. actual values for some of the attributes were compiled from Consumer Reports and Car & Driver.798 9..451 . durability.82 3.145 -. For the quality (belief) variable. were used for the attribute beliefs. shown in Table 2. the influence of actual values could be limited by search and out-of-pocket costs required to obtain such information. and reliability. and were not used. acceleration. Equation/Variable Endogenous variable: Attitude Price belief Quality belief Economy belief Familiarity Intercept Endogenous variable: Price belief Attitude Quality belief Actual price Intercept Endogenous variable: Quality belief Attitude Price belief Actual horsepower Actual acceleration Actual driving comfort Intercept Endogenous variable: Economy belief Attitude Actual gas mileage Actual reliability Intercept "a < 0. a principal component analysis was conducted. but only for a minority of the models. For this reason. However.ROLE OF PRICE 197 TABLE 1 PRICE. horsepower.26b . In addition.60b 11.23b -8.AND ATTITUDEINTERACTIONS Coefficient estimate scales to elicit each respondent's beliefs about levels of the 13 attributes for each of the 10 models.

Perceived price has a positive effect on quality belief. controlling for attitude. t value . the results do indicate a different role for price in explaining intention This content downloaded from 195. since this role would be unlikely to influence overall affect. determining intention-attitude the results in Table 2 with those in Table Combining 1 shows that: (1) price affects intention positively through its positive effect on quality perception. the direct and incremental effect of price on attitude appears to be weak. intention is also a function of subjective norms (social norms multiplied by the motivation to comply). not merely the particular evaluations of the respondents. As anticipated by Monroe (1984). High quality cars are likewise perceivedto be higher priced than they actually are. SUMMARY AND CONCLUSIONS Interpretation of the results of the present study should be qualified in light of the limited nature of the product. and through this. The next task is to see if price also has a role in the determination of overall attitude. an important implication of the empirical results shown in Tables 1 and 2 is that price ultimately has both a positive and a negative effect on intention.190 . This does not mean. The first is as a positive influence on quality perceptions (which. it would relate more directly to the decision to purchase-to behavioral intention. Higherpriced cars are perceived to possess (unwarranted)high quality. The empirical investigation in this paper has revealed the importance of considering all of the consumer response constructs-beliefs. price perceptionsprovide only a weak independent role in determiningoverall attitudes. that price has no effect on attitude. attitude.81* . with a strong negative influence on the probability of purchase for higher-priced cars. through the positive effect of quality perception on attitude. and (2) price has a negative and direct effect on intention. as a positive influence on attitude and intention. 12 May 2013 05:39:31 AM All use subject to JSTOR Terms and Conditions . 3. 2. in which attitude and price belief are the dependent measures.198 TABLE 2 PRICE AND BEHAVIORALINTENTION Coefficient estimate THE JOURNAL OF CONSUMER RESEARCH Equation/Variable Dependent variable: Probability of purchase Attitude Price belief Intercept Adjusted R-square: .85 ceptions (the traditional price-quality relationship). This raises PRICE AND ATTITUDE We see by the first two equations in Table 1. Nevertheless. the approach used was perhaps not so limiting after all. we found that price has. than that found for attitude. basically. and through the positive effect of attitude on intention. Note that actual attribute levels are controlled for. Here the price effect surfaces significantly. in turn. the next section discusses the empirical relationship of price to a behavioral intention measure-probability of purchase-while controlling for the forward influence of attitude on intention. two roles. As a consequence of the price-quality relationship. However. Three interesting conclusions can be drawn from the empirical results: 1. reinforce beliefs about price). On the other hand.05. However. so that price can serve well as a proxy for quality perception and is positively related to attitude through this relationship.14* 6.55. The negative effect is direct while the positive effect is indirect. To test this hypothesis. The other major role of price is as a negative direct influence on intention. In the case of price. Note in Table 2 that there are two independent variables and price belief. however. but since this study's questionnaire did not provide indicators for those constructs. quality perceptions influence price beliefs. and survey method used. and intention-and the influences on these constructs. the regression model is less than perfect. The empirical results in the present study supportthe propositionthat the majoreffectof price on attitudes is through its influence on quality perceptions.010 25.48 on Sun. Rather. In addition. According to Fishbein's extended model (Fishbein and Ajzen 1975).407 NOTE: = P < 0.700 -. The price-quality relationshipappears to be operating in a reciprocalmanner. PRICE AND BEHAVIORAL INTENT Table 2 contains the estimation of the effect of price on probability of purchase. The budget constraint role of price is supported. Price perceptions appear to have an independent and negative effect on the probabilityof purchasing a given car-a budget constraintrole. A reinforcing relationship between price and quality perceptions-rather than a unidirectional price-to-quality linkage-is thus strongly supported by these data. biasing price perception upwards.176. The direct effect of price on attitude is weak. controlling for the attitude effect. since the intent of the study was to investigate the evaluation process of consumers. perceivedprice is a good proxy variablefor perceived quality. Note that actual price is controlled for. that neither variable has a significant effect on the other. This finding does not eliminate the budget constraint role of price. sample.

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