Price, Product Information, and Purchase Intention: An Empirical Study

Tung-Zong Chang
Fengchia University, Taiwan

Albert R. Wildt
University of Missouri

Price, nonprice product information, and purchase intention, together with the intervening variables of perceived price, perceived quality, and perceived value, are empirically examined. The results indicate that perceived price is positively influenced by objective price and negatively influenced by reference price. They support the positive price-perceived quality relationship found in previous studies and, further, show that the influence of price on perceived quality is lessened in the presence of substantial direct product information. Finally, the results demonstrate that a trade-off between perceived price and perceived quality leads to perceived value, and perceived value is a primary factor influencing purchase intention.

Product features and price are major decision variables used by marketers to influence the product evaluations and purchase behaviors of potential customers. To effectively make decisions regarding these variables, marketers seek knowledge about how consumers use product attribute and price information in the evaluations of products. For example, marketers are concerned with questions such as these: Do consumers use physical product attributes as the primary indicator of product quality? Do consumers use price as a quality indicator? Does this vary depending on the circumstances? If price is used as an indicator of quality, in terms of purchase intention, is this offset by the negative imJournal of the Academy of Marketing Science. Volume 22, No. 1, pages 16-27. Copyright 9 1994 by Academy of Marketing Science.

pact of price on consumers' perceptions of product value? What are the relative roles of price and quality evaluations in the determination of the value of a product to a consumer? What are the roles of customers' evaluations of quality and value in the formation of purchase intentions? As an illustration, consider the manager of a new personal computer (PC) company who is deciding what information to include in a communication package to induce consumer patronage. Many product features can be included in the communication message. A consultant suggests a strategy of building a strong value perception using a comparative advertising campaign emphasizing a strong price advantage while arguing that the product is basically as good as the market leader. Will this be effective? Will the low price result in a strong value perception, or will it detract from the perceived quality of the product and thereby negatively impact value? As another example, the marketing manager of a minor household appliance manufacturer must decide on the focus of an upcoming advertising campaign. Based on a previous consumer study, the firm's advertising agency points out that consumers rated the firm's products low in quality. It suggests a series of TV commercials emphasizing product quality and a price consistent with the quality image. The agency maintains that this will improve product quality perceptions. However, the manager is not so sure about this strategy. Before making a decision, the manager wants to know how price and product attribute information combine to influence quality perceptions and how this translates into purchase intentions. There are likely no simple answers to questions such as these. However, the literature suggests that the link between product attributes and price and the intention to purchase is influenced by a number of intervening con-

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FIGURE 1 Extended Relationship between Price, Product Attribute Information, and Purchase Intention

Product Attribute Information

Perceived ~'N +

Objective Price

-I+

Perceived Value

~ J

Purchase Intention

Perceived Price Reference Price

structs (Olson and Jacoby 1972; Zeitham11988), including perceived price, perceived quality, and perceived value. An understanding of these variables and their interrelationships can provide useful managerial insight. Prior research indicates that perceived price (i.e., the consumer's perception of price) is formed based on the actual (objective) price and the consumer's reference price (Winer 1986; Erickson and Johansson 1985). Prior studies also indicate that perceived quality is influenced by price and intrinsic product attribute cues (Monroe and Krishnan 1985; Olson and Jacoby 1972). 1 Perceived quality and perceived price are thought to be instrumental in the formarion of value perceptions, with perceived quality positively related to perceived value and perceived price negatively related to perceived value (Sawyer and Dickson 1984; Zeithaml 1988). Further, perceived value is thought to be a key variable influencing choice. High perceived value is expected to lead to willingness to buy (Dodds and Monroe 1985; Monroe and Chapman 1987) and purchase (Zeithaml 1988). Figure 1, an adaptation of composite models proposed by Dodds and Monroe (1985) and Zeithaml (1988), describes the relationships between these constructs as suggested by the current research literature. The variables/constructs and relationships just described appear reasonable and intuitive. And although

some of the interrelationships among these variables have been examined in prior studies, others have been the subject of little investigation. Further, no published research investigates this collection of variables and constructs using a single data source. Various studies have examined the use of price information relative to product choice (e.g., Dickson and Sawyer 1986; Huber, Holbrook, and Kahn 1986). However, such studies often neglect the intervening roles of quality and value perceptions (Zeithaml 1988). Other studies have examined the price-perceived quality relationship but largely ignored the constructs of ultimate concern: purchase intention and purchase (Olson 1977; Monroe and Krishnan 1985). Still other studies have investigated perceived price (Lichtenstein and Bearden 1989; Urbany, Bearden, and Weilbaker 1988); however, its role in the determination of value and purchase intention has received little empirical attention. This article examines the links between price and product attribute cues, perceived quality and value, and purchase intention, as well as the effects of internal reference price and perceived price on these links. The reported study, best considered exploratory due to the lack of welldeveloped conceptual and measurement frameworks for some of the investigated constructs and links, is conducted with the intent of increasing understanding of a complex

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WINTER1994 literature addresses the price-perceived quality relationship, and, although there is some variance in findings, a positive relationship between price and perceived quality has been identified in numerous studies (Rao and Monroe 1988; Zeithaml 1988). Notwithstanding research evidence on the positive relationship between price and perceived quality, various researchers (e.g., Dodds and Monroe 1985; Zeithaml 1988) suggest that this relationship is mediated by perceived price. As Jacoby and Olson (1977) indicate, consumers encode the actual price and form a price perception. This price perception, or perceived price, then influences the formation of quality perceptions. Investigation of the influence of nonprice product attribute information, especially intrinsic attribute information, on perceived quality has been less systematic. It is expected that, in general, the greater the number of information cues the more influence these cues have on quality perceptions (assuming they are consistent in terms of content). Further, product attributes differ in importance, and it may be expected that information on more important attributes has higher information value and thus greater influence on quality perceptions. Consistent with this discussion, the relationship between intrinsic product attribute information, perceived price, and perceived quality is described in Panel 2 of Figure 2, and the following hypothesis is proposed.
H2: Perceived quality is positively influenced by intrinsic product attribute information and perceived price.

set of constructs. It is hoped that the findings suggest (1) managerial implications of how various factors influence the formation of quality and value perceptions and (2) under what conditions price and perceived quality combine to yield favorable purchase intentions.

BACKGROUND AND HYPOTHESES

Product attribute information and price are largely under the marketer's control. It is generally assumed that, given these as well as other inputs, consumers form various intermediate perceptions that ultimately influence purchase. In the remainder of this section these intervening constructs are discussed and hypotheses are offered.

Perceived Price
Perceived price can be defined as the consumer's perceptual representation or subjective perception of the objective price of the product (Jacoby and Olson 1977). Although objective price is a factor often cited for its association with quality, value, and purchase intention, perceived price has been identified as a relevant intermediate variable in the price-quality-value relationship (Monroe and Chapman 1987; Zeithaml 1988). Winer (1986) suggests that when making purchase decisions, consumers often compare objective price with internal reference price, which is the overall price level or range the consumer perceives for the product category. Assimilation/contrast theory (Sherif 1963) and adaptationlevel theory (Helson 1964) have been used to describe how objective price and reference price interact to influence product evaluations (Lichtenstein and Bearden 1989; Urbany, Bearden, and Weilbaker 1988). Zeithaml (1988) uses the means-end chain to specify the general directions of the effects of objective price and reference price on perceived price. As depicted in Panel 1 of Figure 2, it is hypothesized that perceived price is formed by a perceptual representation of the objective price in relation to the reference price. Ahigher reference price will induce consumers to perceive the objective price as lower and vice versa. Consistent with the preceding discussion, the following hypothesis is offered. HI: Perceived price is positively influenced by objective price and negatively influenced by internal reference price.

One aspect of the relationship of price and nonprice cues with perceived quality that has received little attention is the relative influence of price in the determination of perceived quality. Past research suggests that the influence of price on quality perceptions may vary inversely with the value of other available information (Chang and Wildt 1989). If this information value is perceived as low, consumers may rely more on price to make quality judgments. On the other hand, if this information value is perceived as adequate or high, quality perceptions may be influenced largely by the available nonprice information, and consumers may rely less on price to make quality judgments. This leads to the following hypothesis. H2a:The availability of intrinsic product attribute information lessens the magnitude of the influence of perceived price on perceived quality.

Perceived Quality
Product attribute information is an elemental or disaggregate form of information, whereas perceived quality can be considered a summarization of this information (Olson and Jacoby 1972; Myers and Shocker 1981; Zeithaml 1988). It is generally agreed that both intrinsic and extrinsic product attribute information, including price, influences quality perceptions. A large body of

Perceived Value
Perceived value has been proposed (Dodds and Monroe 1985; Zeithaml 1988) as an intervening construct in the relationship of price and nonprice information with purchase intention. Also, it has been suggested (Holbrook and Corfman 1985) that situational or contextual factors may affect the formation of value perceptions and that per-

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19

FIGURE 2 Hypothesized Relationships

. Perceived

Price

~ived

Pdc~

Perceived Quality

:e ved ~ ~ c e i v

~,,~ribute Informa~,J
.

e d +
+

Quality~

Perceived Value

@ved u ity--

~eived

Valu~

4.

Purchase Intention

@ved Value~
ceived value is subject to the influence of one's frame of reference (Zeithaml 1988). Additionally, some researchers (Dodds and Monroe 1985; Sawyer and Dickson 1984) treat perceived value as a trade-off between the "give" and "get" components of a product. Part of the "give" component, also referred to as perceived sacrifice by Zeithaml (1988), corresponds to the

~~Purchase Intention~

price paid as perceived by the consumer and is expected to have a negative impact on perceived value. The "get" component corresponds to the quality of the product as perceived by the consumer and is expected to have a positive impact on perceived value. Consistent with the above discussion, Panel 3 of Figure 2 graphically describes the relationships between per-

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WINTER 1994 magazines, and flyers. For each product, 20 attributes were selected through pretest. The selected attributes varied in perceived importance in quality inference and are commonly used in product descriptions. They were ordered from most important to least important on the basis of the pretest. Using these 20 attributes, six information contexts, which varied in the number and importance of intrinsic attributes, were formed as follows: Context 1: Context 2: Context 3: Context 4: Context 5: Context 6: No attributes 5 least important attributes 10 less important attributes 5 most important attributes 10 more important attributes All 20 attributes.

ceived quality, perceived price, and perceived value. These relationships are reflected in the following hypothesis. H3: Perceived value is positively influenced by perceived quality and negatively influenced by perceived price.

Purchase Intention
Value perceptions may be formed independently of participation in a transaction, whereas purchase intentions are formed under the assumption of a pending transaction and, consequently, often are considered an important indicator of actual purchase. Therefore, perceived value and purchase intention are measures of separate constructs, although they are expected to be positively related in most instances, and the former is expected to be a key variable affecting the latter, as noted in Panel 4 of Figure 2. In general, if a product is judged low in value due to either low quality or high price, purchase intention is expected to be low; if a product is judged high in value, this judgment is expected to lead to high purchase intention. Based on the above discussion, the following hypothesis is proposed. I-I4: Purchase intention is positively influenced by perceived value.

METHOD Overview
A laboratory experiment employing a 2 (Objective Price) 6 (Intrinsic Product Information) x 2 (Product) design was constructed. Product is a within-subjects factor, whereas price and product information are betweensubjects factors.

Product. Four criteria were used in selecting products. First, they were selected to be relevant to subjects to gain cooperation and provide a realistic setting. Second, they were selected so that they could be evaluated on a number of attributes so that manipulation of the amount of product information was possible. The third criterion was that they be infrequently purchased, which is expected to lead to stronger price-perceived quality relationships (Gardner 1970; Monroe and Krishnan 1985). The final criterion was that they differ in technical complexity. Zeithaml (1988) suggests that consumers rely more on price in making quality judgments for technically complex products because they are more difficult to evaluate. Also, the difference in technical complexity allows cross-product comparisons and may increase the generalizability of the findings. Based on the above criteria, two-bedroom apartments were employed as the less complex product and PCs were employed as the more complex product. Measures
Objective (actual) price and information context were experimentally manipulated, and measures of other variables were obtained through a self-report questionnaire. Price was assigned one of two values, high or low, and was specified in monetary units (dollars). Internal reference price was measured in monetary units as the most likely price (rent). Perceived price was measured on a single 9-point scale assessing the degree to which subjects judged price to be high or low. Product attribute information was assigned one of six levels corresponding to the six information contexts. Perceived quality was measured using multiple measures--two overall quality measures and a measure of comfort for apartments and of dependability for PCs. Perceived value and purchase intention were each measured using single-item, 9-point scales.

Independent Variables Objective price. Objective price levels were specified to create large differences in price so as to facilitate measuring its impact on consumers' perceptions of quality but at the same time to be considered realistic by subjects. For each product, two levels of objective price were selected. The high prices were selected to be close to the upper ends of the price ranges in local markets, and the low prices close to the lower ends. Intrinsic product attribute information. The product information manipulation was restricted to intrinsic product attributes and designed to produce variation in the level (information content) of product information. This allows examination of the influence of nonprice information on perceptions of quality and the effect of this information (quantity and importance) on the role of price in product quality evaluations. Actual product quality was not directly manipulated. Intrinsic product attributes were identified through a variety of sources, including newspapers,

Subjects and Procedures

Subjects were upper-division business students from two Midwest state universities. They were randomly assigned to 1 of 12 (2 Price x 6 Product Information) experimental conditions. As a cover story, they were told that

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21

TABLE 1 Analysis Summary for Perceived Price and Perceived Quality

Variables Model Criterion Predictor Beta a Apartments p Value PCs

R2 0.39 0.31

Beta

p Value

R2 0.38 0.42

1.1 1.2

Perceived price Perceived quality

Objective price Reference price Context Objective price Reference price Context x Price Context x Reference price Context Objective price Reference price Perceived price Context Price Context x Reference price Context x Perceived price

0.62 -. 19 cvb 0.54 4).01 ivc iv cv 0.59 4).04 4). 13 iv iv iv

0.00 0.00 0.15 0.00 0.53 0.00 0.92 0.72 0.00 0.14 0.00 0.00 0.96 0.17

0.65 -0.29 cv 0.85 -0.21 iv iv cv 0.84 -0.22 0.05 iv iv iv

0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.00 0.00 0.00 0.42 0.00 0.00 0.00

1.3

Perceived quality

0.36

0.45

a. Standardized regression coefficient. b. Contextis a six-level categorical variable. There is no single standardized coefficient. c. Interaction involving a categorical variable. Not represented by a single coefficient. the "Information Services Department" was helping a student housing service unit and a PC purchasing service unit modify their information booklets, and participation in the study would help these units provide better student housing and PC purchasing services in the future. Subjects in all conditions read introductory material consisting of the cover story, a brief statement indicating the nature of the specific product form (i.e., a basic product description), and the price range reflecting the local market. Subjects then read additional material that contained appropriate price and product information corresponding to the assigned experimental condition and answered questions relating to perceptions of quality, price, and value; other appropriate variables; and manipulation checks. The procedure was repeated for the second product. The order of presentation of products was alternated by subject. After providing responses for both products, subjects answered questions relating to all product attributes and respondent characteristics. significant (0.01 level) and in the anticipated direction for both products. In addition, subjects reported perceptions of the overall importance of the product attribute cues for the context to which they were assigned. The differences in the mean perceived overall importance of information cues between Contexts 2 and 3 (the two 5-cue contexts) and between Contexts 4 and 5 (the two 10-cue contexts) were in the expected direction and statistically significant (0.025 level) for both products.

TEST OF HYPOTHESES
The hypotheses were examined using the general linear model (regression analysis or analysis of covariance, as appropriate). This methodology is widely understood and deemed appropriate given the scope of the research. The two products were examined separately in parallel analyses.

DATA
From the 425 subjects participating in the study, 409 and 414 valid responses were obtained for apartments and PCs, respectively. Based on subject responses to questions at the conclusion of the experimental sessions, no subjects indicated that they detected the true purpose of the study. As a check for product attribute importance, subjects rated the importance ofail product attributes at the conclusion of the data collection session. All pairwise differences in average attribute importance for the four information cue sets were in the anticipated directions and statistically significant (0.01 level) for both products. The difference between average attribute importance for the 10 more important and the 10 less important attributes was also

Hypothesis 1: Perceived Price

Hypothesis 1 states that perceived price is positively influenced by objective price and negatively influenced by internal reference price. This hypothesis is examined using a linear regression model. The results (Table 1, Model 1.1) of doing so indicate a statistically significant positive relationship between price and perceived price, and a significant negative relationship between reference price and perceived price for both products. For these data, the overall explanatory power of the predictor variables is similar for the two products, and, as evidenced by the magnitudes of the standardized coefficients, the relative influence of objective price is considerably greater than that of internal reference price. Hypothesis I is supported.

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WINTER1994 (0.01 level) for PCs, but for apartments this was true only for objective price and its interaction with context. The third model (Table 1, Model 1.3) indicates that perceived price does not account for significant variation in perceived quality over that accounted for by the other predictor variables (for PCs), or its influence is not in the expected direction (for apartments). Further, the impact of the initial three predictor variables is not materially less, in terms of variance accounted for or magnitude of standardized coefficients, in the third model than in the second. This suggests that objective price and reference price affect perceived quality directly, and the mediating role of perceived price is not supported. Given the above results, Model 1.2 (Table 1) is the preferred model. To better interpret these results, an ad hoc analysis consisting of six regression models (one for each information context) of perceived quality on objective price and reference price was conducted. The results, reported in Table 2, show that the impact of price diminishes, as hypothesized, with higher information levels. For apartments, the effect of price is statistically significant (0.05 level) for the three contexts with lower information content (Contexts 1, 2, and 3), and the magnitudes of the standardized coefficients generally decrease as information level increases. Similar results were obtained for PCs except that the relationships were generally stronger (larger standardized coefficients and statistical significance in five of the six models) and an anomaly occurs for Context 6, which includes 20 information cues. The effect of reference price was generally stronger for PCs than for apartments. It was not statistically significant (0.05 level) for apartments but was statistically significant in three instances for PCs. All significant coefficients possessed the expected sign. The collective statistical evidence supports the hypothesis that objective price, reference price, information context, and the interactions of objective price and reference price with context influence perceived quality. However, the mediating role of perceived price is not supported, and there is only weak support for the role of reference price.

Hypothesis 2: Perceived Quality

Hypothesis 2 states that perceived quality is positively influenced by intrinsic product attribute information and perceived price. Additionally (Hypothesis 2a), these variables interact such that the influence of perceived price on quality perceptions diminishes with increased information value. Considering Panels 1 and 2 of Figure 2, the hypothesized relationship between price, attribute information, and perceived quality involves both moderator and mediator variables (Baron and Kenny 1986). Attribute information is a moderator variable because it affects the "strength of the relation between an independent or predictor variable and a dependent or criterion variable" (Baron and Kenny, 1986, p. 1174). Perceived price is a mediator variable because objective price and reference price influence perceived quality through perceived price. If a moderating relationship exists, its presence can be detected by a significant interaction effect for the moderator and predictor variables. And, according to Baron and Kenny (1986), To test for mediation, one should estimate the three following regression equations: first, regressing the mediator on the independent variable; second, regressing the dependent variable on the independent variable; and third, regressing the dependent variable on both the independent variable and on the mediator. . . . These three regression equations provide the tests of the linkage of the mediational model. To establish mediation, the following conditions must hold: first, the independent variable must affect the mediator in the first equation; second, the independent variable must be shown to affect the dependent variable in the second equation; and third, the mediator must affect the dependent variable in the third equation. If these conditions all hold in the predicted direction, then the effect of the independent variable on the dependent variable must be less in the third equation than in the second. Perfect mediation holds if the independent variable has no effect when the mediator is controlled. (p. 1177) Consistent with the Baron and Kenny model, three linear models were considered: (1) perceived price on objective price and reference price; (2) perceived quality on information context, objective price, reference price, and the interactions of information context with objective price and reference price; and (3) perceived quality on information context, objective price, reference price, perceived price, and the interactions of information context with objective price, reference price, and perceived price. 2 Results for the first regression (Table 1, Model 1.1) indicate that variations in objective price and reference price account for significant variation in perceived price. The second model (Table 1, Model 1.2) indicates that variations in context, objective price, and reference price account for significant variation in perceived quality. Further, all estimated coefficients for this model (1.2) possessed the expected signs and were statistically significant

Hypothesis 3: Perceived Value

Hypothesis 3 states that perceived value is positively influenced by perceived quality and negatively influenced by perceived price. Further, consideration of Panels 1 and 2 of Figure 2, in conjunction with Panel 3, implies that perceived quality and perceived price mediate the relationships between objective price, reference price, and product attribute information with perceived value. Using a similar rationale as for Hypothesis 2, the hypothesized relationship between objective price, attribute information, perceived quality, and perceived value was investigated by means of four equations. Results for the first two models (Table 1, Models 1.1 and 1.2) indicate that variations in the levels of context, objective price, and reference price account for significant variation in perceived price and perceived quality. The third model (Table 3, Model 3.1) indicates that variations in the three predictor variables, as

Chang, Wildt/ PURCHASEINTENTION 23

TABLE 2 Supplemental Analysis for Hypothesis 2 (Criterion Variable is Perceived Quality)

Apartments Context Bem-P a Bem-RP b PCs

R2 0.40 0.03 0.12 0.02 0.12 0.02

Be~-P

Bem-RP

R2 0.53 0.16 0.28 0.02 0.42 0.36

No cues (basecondition) 5 most importantcues 5 least importantcues 10 moreimportantcues 10 Less importantcues All 20 cues

0.64 (0.00)r 0.16 (0.25) 0.34 ((3.01) -0.10 (0.42) 0.34 (0.00) 0.10 (0.42)

-0.02 (0.85) -0.07 (0.62) 0.01 (0.91) -0.10 (0.41) -0.11 (0.33) 0.07 (0.59)

0.77 (0.00) 0.31 (0.03) 0,54 (0.00) 0.16 (0.25) 0.54 (0.00) 0.59 (0.00)

-0.22 (0.05) 0.15 (0.28) -0.07 (0.52) ~0.11 (0.45) -0.47 (0.00) -0.32 (0.01)

a. Standardizedregressioncoefficientfor price. b. Standardizedregressioncoefficientfor referenceprice. c. Numbersin parenthesesindicatep values. a group, significantly (0.01 level) account for variation in perceived value. However, statistically significant (0.05 level) coefficients were obtained only for objective price, reference price, and the objective price-context interaction for apartments, and only for objective price, and the objective price- and reference price-context interactions for PCs. The fourth model (Table 3, Model 3.2) indicates that perceived quality and perceived price were significantly (0.01 level) associated, in the expected directions, with perceived value for both products, and that variations in the levels of perceived quality and perceived price account for significant variation in perceived value, over and above that attributable to the original three predictor variables. However, an examination of the individual estimated coefficients for objective price, reference price, and context reveals mixed results. To further investigate this relationship, a fifth model, indicating the effect of perceived value on perceived quality and perceived price, was estimated (Table 3, Model 3.3). A comparison of the fourth and fifth models (Table 3, Models 3.2 and 3.3) indicates that context, objective price, reference price, and the context interactions do not significantly (0.10 level) increase explanatory power (i.e., contribution to explained variance). In other words, Model 3.2 offers no improvement over Model 3.3. Therefore, Model 3.3 is the preferred model--the results support perceived quality and perceived price as mediators of the relationship between context, objective price, and reference price with perceived value. Hypothesis 3 is supported. tion (see Panels 3 and 4 of Figure 2). As with Hypothesis 2, to investigate the price-quality-value-intention relationship, three regression analyses were conducted. The results (Table 3, Model 3.3 and Table 4, Models 4.1 and 4.2) support the hypothesis that perceived value mediates the relationship of perceived price and perceived quality with purchase intention--variations in perceived quality and perceived price account for significant variation in both perceived value and purchase intention (Models 3.3 and 4.1); and variation in perceived value accounts for significant variation in purchase intention when perceived quality and perceived price are controlled (Model 4.2). However, the results also indicate that perceived quality and perceived price act directly on purchase intent i o n s - t h e coefficients of all three variables are statistically significant (0.025 level) and have the expected signs (Model 4.2). To further investigate the relationship o f perceived value and purchase intention, linear regression models, with purchase intention as the criterion variable and perceived value as the predictor variable, were estimated. The results are reported in Table 4 (Model 4.3). Considering the results for all estimated models, perceived value mediates the relationship of perceived quality and perceived price with purchase intention. In addition, perceived quality and perceived price have direct, although weak, influences on purchase intention. Hypothesis 4 is supported.

SUMMARY AND DISCUSSION Summary

Hypothesis 4: Purchase Intention

Hypothesis 4 states that purchase intention is influenced positively by perceived value. In this hypothesized relationship, perceived value mediates the relationship of perceived quality and perceived price with purchase intenThis study undertook the ambitious task of empirically examining the influence of objective price and product information on purchase intention through several inter-

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TABLE 3 Analysis Summary for Perceived Value

Variables Model Criterion Predictor Beta a Apartments p Value PCs

R2 0.29

Beta

p Value

R2 0.13

3.1

Perceived value

Context Objective price Reference price Context Price .. Context x Referenceprice Context Objective price Reference price Context x Price Context x Referenceprice Perceived quality Perceived price Perceived quality Perceived price

cvb -0.23 0.24 ive iv cv -0.17 0.09 iv iv 0.32 -0.52 0.29 -0.65

0.65 0.00 0.00 0.05 0.99 0.76 0.00 0.00 0.52 0.87 0.00 0.00 0.00 0.00

cv -0.06 -0.21 iv iv cv -0.08 -0.24 iv iv 0.35 4).45 0.34 -0.45

0.20 0.01 0.35 0.01 0.01 0.21 0.85 0.63 0.03 0.07 0.00 0.00 0.00 0.00

3.2

Perceived value

0.57

0.31

3.3

Perceived value

0.53

0.24

a. Standardizedregression coefficient. b. Contextis a six-level categorical variable. There is no single standardizedcoefficient. c. Interactioninvolving a categoricalvariable. Not represented by a single coefficient,

TABLE 4 Analysis Summary for Purchase Intention

Variables Model Criterion Predictor Beta a Apartments p Value R2 Beta PCs p Value

R2 0.14 0.24

4.1 4.2

Purchase intention Purchase intention

Perceived quality Perceived price Perceived quality Perceived price Perceived value Perceived value

0.38 -0.43 0.24 4).12 0.47 0.63

0.00 0.00 0.00 0.02 0.00 0.00

0.33 0.44

0.32 -0.28 0.20 -4).11 0.37 0.46

0.00 0.00 0.00 0.02 0.00 0.00

4.3

Purchase intention

0.39

0.21

a. Standardizedregression coefficient. vening variables. The results are generally consistent with recently proposed conceptual models (Dodds and Monroe 1985; Zeithaml 1988). First, the results indicate that perceived price is positively associated with objective price and negatively associated with reference price. Second, the findings support the positive price-perceived quality relationship found in previous studies; further, they show that the influence of objective price on perceived quality is lessened in the presence of substantial direct intrinsic product attribute information. Third, the study demonstrates that a trade-off between perceived price and perceived quality leads to perceived value, and perceived value induces purchase intention. However, the study does not support the theoretical role of perceived price in the objective price-perceived quality relationship suggested in the literature (cf. Zeithaml 1988). The results support perceived price as the perceptual representation of objective price in relation to reference price, as suggested by Monroe and Chapman (1987) and Zeithaml (1988). Of the two price variables, objective price exhibits the greater influence (as represented by the magnitudes of the standardized coefficients) on perceived price, and its influence is positive, as expected. The influence of reference price is less than that of objective price, and negative, as expected. The results generally support intrinsic attribute information cues, objective price, and internal reference price as factors that combine to influence perceived quality. The role o f perceived price as an intermediate variable in this relationship, as suggested by Monroe and Chapman (1987) and Zeithaml (1988), is n o t supported. Findings indicate that objective price has a positive influence on perceived quality under conditions of low to moderate levels of intrinsic attribute information but little influence under higher levels of information--that is, the influence of objective price on perceived quality diminishes as the importance and number of intrinsic information cues increase. This result, that the price effect on perceived quality is moderated by the importance and quantity of product information, supports the notion that the effect of price on

Chang, Wildt/ PURCHASEINTENTION 25 perceived quality is not universal and is influenced by various situational variables (Jacoby and Olson 1977; Monroe and Krishnan 1985). Finally, purchase intention is shown to be positively influenced by perceived value, which mediates the influence of perceived price and perceived quality, as suggested by various conceptual models (Dodds and Monroe 1985; Zeithaml 1988). However, the empirical results also indicate that perceived price and perceived quality have direct effects on purchase intention, in addition to the indirect effects through perceived value. These unexpected direct effects of perceived quality and perceived price may merit special attention. They suggest that the formation of purchase intention is more complex than might have been expected and that factors in addition to perceived value may deserve investigation. luted to reference price. This implies that before deciding on appropriate price levels for target customers, marketers should know consumers' internal price standards. For example, car buyers often experience sticker shock. Such a phenomenon may be due to the lack of market knowledge on the part of marketing managers, who do not know potential customers' internal reference prices, or on the part of consumers, who shop for new cars every three or more years and use previous price paid as an internal standard. To reduce such shock, marketing managers can first determine consumers' internal reference prices and proceed accordingly. Alternatively, manufacturers can inform consumers of recent market prices to adjust consumers' internal price standards upward. This might be accomplished by including comparative (higher) prices of competitors in advertisements. Second, price exerts a positive effect on perceived quality, but this effect is moderated by the importance and amount of intrinsic information. Thus the price-quality inference is lessened in the presence of substantial intrinsic attribute information. This suggests that, depending on the intention, marketers may design information packages that encourage the use of price information or those that emphasize the use of intrinsic attribute information. For leading brands, to encourage consumers to use price as a quality cue, advertising may de-emphasize intrinsic attribute information. For lesser known brands, direct comparison with leading brands on important intrinsic information may guide consumers to use intrinsic information in product evaluations. Third, both perceived quality and perceived price contribute to the formation of value perceptions and purchase intentions. Marketing managers should be aware that consumer patronage may not be determined by objective price or quality alone. Decisions are made regarding the approximate objective price/quality mix, and consumers are likely to form value perceptions based on this mix. Furthermore, the unexpected direct links from perceived price and perceived quality to purchase intention suggest that, for some consumers, price or quality perception alone may be a sufficient determinant of purchase. The findings are consistent with the three consumer choice strategies--best value, price (quality) seeking, and price aversion found by Tellis and Gaeth (1990). Finally, two products differing in technical complexity were examined, and results indicate product differences in the investigated relationships. First, objective price has a stronger effect on perceived quality for PCs than for apartments. This result supports Zeithaml's (1988) proposition that consumers rely more on objective price for technically complex products. Second, the relationships of perceived price and perceived quality with perceived value and purchase intention are weaker for PCs than for apartments. Third, the relative contribution of price and quality perceptions to consumer perceptions of value varies by product. Perceived price has a stronger influence on perceived value for apartments than for PCs. This finding suggests that managers may want to adjust their relative emphasis on price or quality depending on existing consumer perceptions and product type.

Limitations
As with most empirical research, this study is subject to certain limitations. First, the present study is limited in its scope of application due to the use of student subjects. However, this is common in experimental research and is consistent with current practice. Second, evaluating a product based on a brief statement and a list of attributes in a questionnaire does not reflect typical evaluation situations. However, to reduce the degree of artificiality, considerable effort was taken to make the task realistic and relevant. Student subjects were exposed to information similar to that actually available to them on campus, and the cover story was found successful in that no students detected the real purpose of the study. Third, the degree and differences in subject involvement in the task and subject expertise might influence results. However, consumers with different levels of interest and expertise are common in actual situations, and the chosen products are relevant to the student subjects. Fourth, conceptually the study is limited in scope due to the omission of other possibly relevant variables that could have been introduced into the model. However, this study does consider more constructs and linkages than most previous research in this area. Fifth, potential limitations exist relative to the measurement of the constructs considered. For example, reference price is operationalized as likely price. Alternative operationalizations are possible (Winer 1986) and may alter the results. Similarly, Zeithaml (1988) notes that consumers hold multiple meanings of value. Also, the single-item measures used for some of the variables may not capture the richness of the underlying constructs, but this reflects absence of acceptable, readily available, and commonly used multiple-item scales. Finally, this study is subject to common problems associated with experiments, such as demand characteristics and forced evaluations.

Managerial Implications
The results have a variety of managerial implications, some of which are mentioned here. First, perceived price is positively related to objective price and negatively re-

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JOURNAL OF THE ACADEMY OF MARKETING SCIENCE

WINTER 1994

Taken collectively, study findings indicate a complex relationship between the management decision variables of price and product attributes and the constructs of perceived value and purchase intention. The direct influence of price and product attribute information on purchase intention is relatively low. (In this study, variations in objective price and intrinsic attribute information explain less than 15 percent of the variations in purchase intention for apartments and less than 5 percent for PCs.) However, the chain of relationships that exists between objective price and information cues and purchase intention is moderately strong, and differences do exist between the products studied.

Future Research
Results from this study and prior studies investigating similar constructs strongly suggest the need for improved understanding, definitions, and measurements of the investigated constructs. Although the price-perceived quality relationship has a strong and long research tradition and the various other constructs considered in this study have been examined in prior studies, agreed-upon construct definitions and measurement scales do not exist for all constructs. To facilitate research and knowledge advancement, attention should be devoted to the development of valid and reliable measures of these constructs. If this is done, not only will the quality of research in the area be improved, but the comparability of results over studies will be facilitated. To illustrate the potential problem, consider the construct of perceived price. Results indicated that perceived price did not serve as a mediator of price cues in their relationship with perceived quality but did serve as a mediator in the relationship with perceived value. This suggests that either the construct is not well understood or the measurement method is not tapping the underlying construct. Better conceptualizations of other constructs also are needed to explore more fully how product attribute information influences purchase intention. It may be useful to examine the multiple meanings of various constructs and how these meanings are related. For example, perceived quality and perceived value may hold multiple meanings. Monroe and Chapman (1987) suggest that value may be decomposed into acquisition value and transaction value, whereas Parasuraman, Zeithaml, and Berry (1985) found consistent dimensions of perceived quality for services. Assuming that product quality perceptions have multiple dimensions, an examination of what dimensions affect transaction value and what do not may be beneficial. As various quality dimensions may affect the two value dimensions differently, such effort may shed some light on how to effectively communicate to consumers to enhance a product's perceived value. Future research should investigate alternative models of the relationship between product information and purchase intention. A small number of conceptual models have been proposed, but extensive empirical investigation of these models is lacking. Further, the low explanatory

power of price and product attributes relative to purchase intention suggests that these variables may have less influence on intention and purchase than many think. If this is the case, the identification of other relevant factors and the specification of alternative model formulations that consider these factors have the potential to improve understanding of customer behavior and also the practice of marketing. The findings of this study relative to interproduct differences suggest a final interesting area for research. In the current study, PCs exhibited a stronger price-perceived quality relationship but a weaker relationship of perceived price and perceived quality with perceived value and purchase intention than did apartments. Although the product dimensions that account for the differing results are unknown, a product difference is strongly suggested. Verification of product differences and the identification of product dimensions associated with these differences may be a useful undertaking.

NOTES
1. Intrinsic attributes are integral to the physical product and have a direct effect on product performance. Examples are an automatic rewinder, an automatic flash, and a 35mm to 105mm lens on cameras. Extrinsic attributes are external to the physical product and do not have a direct effect on product performance. Examples are brand name and price. 2. Perceived quality was measured as a composite of three items, as noted earlier. For the data collected in this study, the minimum interitem correlations for these items are 0.73 and 0.65, and the average correlations are 0.76 and 0.71 for apartments and PCs, respectively. These values appear reasonable and comparable to those obtained in similar studies (NunnaUy 1978; Petroshius and Monroe 1987; Rao and Monroe 1988).

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ABOUT THE AUTHORS

Ttmg-Zong C h a n g is Associate Professor of marketing at Fengchia University, Taichung, Taiwan. He received his Ph.D. from the University of Missouri. His primary research interests are in the areas of consumer behavior and international marketing. A l b e r t R. W i l d t is the Bailey K. Howard World Book Professor of marketing at the University of Missouri. He received his Ph.D. from Purdue University. He has published articles in various business, marketing, and social science journals.