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A Conceptual Model of
Perceived Customer Value
in E-Commerce: A
Preliminary Investigation
Zhan Chen and Alan J. Dubinsky
Purdue University

ABSTRACT

This article presents an exploratory study of a conceptual model of

perceived customer value in a business-to-consumer e-commerce
setting. Key precursors of perceived customer value included in the
model are valence of on-line shopping experience, perceived product
quality, perceived risk, and product price. Relationships among
these variables (as well as mediating variables) and their
relationship to on-line shoppers’ value perceptions are explored. The
theoretical framework proposed in this work expands on previous
efforts on perceived customer value by including new variables
relevant to an e-commerce setting and by integrating several key
variables into one model. The preliminary findings lead to several
implications. 䉷 2003 Wiley Periodicals, Inc.

The business-to-consumer (B-to-C) on-line market has been growing

rapidly over the past several years. According to the latest statistics
from the U.S. Census Bureau, total e-commerce sales for 2001 were
estimated at $32.6 billion, an increase of 19.3% from 2000, and total
retail sales in 2001 increased 3.3% from 2000. Recent work shows that
consumers have increasingly favorable attitudes toward on-line shop-
ping (Lohse, Bellman, & Johnson, 2000). Buying on-line is thus becom-
ing more acceptable to many people. Indeed, the Internet population is Base of text
Psychology & Marketing, Vol. 20(4): 323–347 (April 2003)
Published online in Wiley InterScience (www.interscience.wiley.com)
䉷 2003 Wiley Periodicals, Inc. DOI: 10.1002/mar.10076
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beginning to mirror the general population (e.g., Ernst & Young, 2001; Base of text
Korgaonkar & Wolin, 1999; Lohse et al., 2000).
Thus, to consumers, the benefits of the Internet are tremendous. As
an alternative channel, Web shopping is convenient and time saving;
with rich, free information available, consumers can easily compare
prices and product features across suppliers. By empowering consum-
ers, the Internet has also raised consumers’ expectations of retailers.
Indeed, they seemingly expect from on-line shopping as much as, or even
more than, what they expect from other alternate channels.
Previous work on Web shopping, though, has raised e-retailers’ con-
cerns about the low purchasing rate and moderate overall satisfaction
of on-line shoppers (e.g., Jarvenpaa & Pike, 1996 – 1997; Moon & Frei,
2000). A low barrier to entry has brought more players into the retail
business, so competition in B-to-C commerce has intensified (Porter,
2001). Because consumers now have more bargaining power, lower
switching costs, and an increased number of choices available, under-
standing what leads to on-line shoppers’ purchase intentions has become
an even more important topic meriting research attention, especially
given the demise of many dot.com firms (e.g., Barsh, Crawford, & Grosso,
2000). In fact, scholars have called for research to enhance understanding
of on-line shopping behavior processes (e.g., Korgaonkar & Wolin, 1999;
Webster, 1998). The current study thus seeks to partially address this
important issue and does so vis-à-vis perceived customer value.
Perceived customer value has recently gained much attention from
marketers and researchers because of the important role it plays in
predicting purchase behavior and achieving sustainable competitive ad-
vantage (e.g., Bolton & Drew, 1991; Cronin, Brady, & Hult, 2000; Dodds,
Monroe, & Grewal, 1991; Holbrook, 1994; Parasuraman, Zeithaml, &
Berry, 1985; Zeithaml, 1988). From the standpoint of marketing strat-
egy, creating customer value in consumer marketing means meeting
target customers’ needs and increasing customer satisfaction (Porter,
1985). Customer value management has been used widely by market-
oriented firms to differentiate themselves from competitors (Day &
Fahey, 1988; Hoffman, 2000; Parasuraman, 1997; Slater, 1997; Wood-
ruff, 1997) and is considered a major priority by executives (Gale, 1994).
Previous research has demonstrated the multidimensional and con-
text-dependent nature of perceived customer value (Bolton & Drew,
1991; Holbrook, 1994; Parasuraman, 1997; Zeithaml, 1988). That is,
perceived customer value can change with the circumstances of the per-
son and/or consumption situation. Thus, the new consumption con-
text — buying on the Internet — may well lead to a change in perceived
customer value relative to alternate purchase settings, as well as the
factors influencing perceived customer value. Despite its import,
though, no systematic body of literature suggests how an e-commerce
shopping context affects perceived customer value. short
Consequently, the objectives of this article are (a) to develop a theo- standard

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retical framework elaborating the relationships among key antecedents Base of text
and mediators of perceived customer value in a B-to-C e-commerce con-
text, (b) to posit propositions regarding these relationships, and (c) to
conduct an exploratory investigation of the model. The following section
presents the model and its attendant propositions.

Conceptual Framework
Much of the cognitive and physical effort of the purchase occurs prior
to actual buying behavior (Wilkie, 1994). Therefore, e-marketers should
know how to favorably influence customers in the prepurchase stage.
Perceived customer value has been found to be a powerful predictor of
purchase intention (e.g., Dodds & Monroe, 1985; Gale, 1994; Zeithaml,
1988). Thus, identifying factors that are critical for converting browsers
into buyers, acquiring new customers, and retaining old customers
should be of the great interest to e-marketers.
The framework presented in Figure 1 identifies key factors that in-
fluence perceived customer value in a B-to-C e-commerce setting. The
core variable is perceived customer value. Several antecedents and me-
diating variables of perceived customer value are included. A set of prop-
ositions will be developed based on a review of conceptual and empirical
work. What distinguishes the model developed in this study from its
predecessors is the inclusion of variables (subsequently discussed) that
are germane solely to on-line shopping effort. In addition, the model
integrates variables from extant perceived customer value research
(e.g., Bolton & Drew, 1991; Sweeney, Soutar, & Johnson, 1999; Teas &
Agarwal, 2000; Zeithaml, 1988). In essence, this study seeks to identify
variables that are unique to an e-commerce context, as well as those

Figure 1. Conceptual framework of perceived customer value in an e-commerce con- short

text. standard

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that are invariant across shopping environments that might influence Base of text
perceived customer value of on-line shoppers. Model variables and re-
lationships among them are elaborated later.

Concept of Perceived Customer Value

Although perceived customer value has long been recognized as an im-
portant concept in marketing research, it has often been viewed as es-
sentially a trade-off between relative quality and relative price (e.g.,
Cravens, Holland, Lamb, & Moncrief, 1988; Gale, 1994; Monroe, 1990).
This simplification has been criticized as ignoring some important con-
structs (e.g., shopping experience, risk) and may be misleading in mea-
suring perceived customer value (Sinha & DeSarbo, 1998). For instance,
Zeithaml (1988, p. 14) found that, though consumers have different con-
ceptions about perceived customer value, it can be captured in one over-
all definition: “Perceived value is the consumer’s overall assessment of
the utility of a product based on perceptions of what is received and
what is given.” Essentially, value represents a trade-off of salient “get-
and give-components,” which are perceived as benefits and sacrifices,
respectively.
Woodruff (1997) expands the concept of perceived customer value and
describes it as a source of competitive advantage. According to Woodruff
(1997, p. 142), customer value is “a customer’s perceived preference for
and evaluation of those product attributes, attribute performance, and
consequences arising from use that facilitate (or block) achieving the
customer’s goal and purposes in use situations.” Researchers assert that
this broader definition of perceived customer value provides conceptual
richness (e.g., Parasuraman, 1997).
Based on a synthesis of previous definitions, perceived customer value
is defined here as a consumer’s perception of the net benefits gained in
exchange for the costs incurred in obtaining the desired benefits. As
suggested by others, evaluating perceived customer value from the per-
spective of the consumption experience is important (Anderson & Narus,
1998; MacMillian & McGrath, 1997). “All factors, both qualitative and
quantitative, subjective and objective, that make up the complete shop-
ping experience . . .” (Schechter, 1984; cited in Zeithaml, 1988) should
be considered in order to evaluate how perceived value is formed and
what value means to the customer.
This research examines prepurchase consumer value perceptions in
an on-line shopping situation; two reasons explain this research focus.
First, consumers often expend much effort on prepurchase evaluation;
the Web is touted as an ideal means with which to engage in such ac-
tivity. Second, perceived customer value influences individuals’ pur-
chase intention (as cited earlier). So, this study focuses on identifying
key precursors of perceived customer value through an examination of short
the on-line prepurchasing experience. Instead of specifying what bene- standard

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fits and sacrifices the consumer might realize, this study explores the Base of text
influencers of perceived gains and costs. Specifically, major factors that
may generate consumers’ perceived benefits or sacrifices are considered.
A distillation of germane literature (subsequently discussed) reveals
four major elements involved in the prepurchase stage that have sig-
nificant influence on a consumer’s value perception and purchase inten-
tion in a B-to-C e-commerce setting. These factors are valence of expe-
rience, perceived product quality, perceived risk, and price. Each of these
can either positively or negatively influence perceived customer value
in an on-line setting. For example, high perceived product quality can
be a benefit. However, if the quality is low, it can be a cost and decrease
a consumer’s value perception.

Valence of Experience
Valence of experience is defined in this model as a consumer’s emotional
or attitudinal state aroused by the pre-purchase on-line shopping ex-
perience. According to Lewin’s field theory, behavior is a function of both
the person and the environment (Wilkie, 1994). External forces may
affect a person’s behavior as well as internal forces. This theory has been
widely applied in the traditional retail setting by manipulating store
atmosphere and in-store stimuli, such as music, color, and assortment,
and found to positively influence consumers’ shopping experience and
decision making (e.g., Baker, Grewal, & Parasuraman, 1994; Bellizzi &
Hite, 1992; Koelemeijer & Oppewal, 1999; Yalch & Spangenberg, 1990).
Consumer perception is considered a process of sensing, selecting, and
interpreting stimuli in the external, physical world into the internal,
mental world (Wilkie, 1994). Consequently, one can infer that external
signals, such as what consumers experience when they are shopping on-
line, can influence consumers’ internal perceptions of customer value.
Prior work supports this argument (e.g., Buyukkurt, 1986; Donovan,
Rossiter, & Nesdale, 1994; Ghosh & McLafferty, 1987; Kerin, Jain, &
Howard, 1992). In the model proposed in this study, a similar positive
influence of valence of experience on perceived customer value is ex-
pected in a B-to-C e-commerce setting.
Traditional store shopping experience evolves from a consumer’s in-
teractions with a store’s physical surroundings, personnel, and cus-
tomer-related services (Kerin et al., 1992). Electronic technology makes
the on-line shopping experience different from what happens in the tra-
ditional (bricks and mortar) business format. With on-line purchasing,
the physical store environment no longer exists, as the shopping expe-
rience is converted into a human – Web-site interaction. In an e-com-
merce setting, consumers and e-retailers usually communicate through
automated interfaces with no direct contact with the products. By de-
creasing the human service provided, e-retailers can lower transaction short
costs. However, some companies misunderstand or overuse this self- standard

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service feature of e-retailing and assume that on-line customers should Base of text
help (or service) themselves on whatever product or service they need
(Moon & Frei, 2000). What often occurs is that consumers end up pro-
viding much of their own service. Self-service sites are more likely to
leave customers frustrated and annoyed than alternate sites (Moon &
Frei, 2000). Therefore, how might an e-retailer’s Web site foster a fa-
vorable purchase experience? Three key factors are identified in this
study: relevant information, ease of use of the Web site, and customer
service.

Relevant Information. The Web has become one of the most important
tools for information search (Spink, Bateman, & Jansen, 1999). E-mar-
keting allows both buyers and sellers to exchange information about
prices and product offerings. Consumers can enjoy rapid access to in-
formation about products, make price comparisons across competing of-
ferings, and find more unusual products (Vijayasarathy & Jones, 2000).
Quick access to low-cost, useful information has become one of the im-
portant benefits on-line shoppers seek (Korgaonkar & Wolin, 1999).
Consumers, however, perceive only relevant information to be useful
and valuable. Whereas retail store personnel can adapt the information
to a consumer’s needs, such flexibility is virtually absent in on-line shop-
ping. According to Jacoby (1984), consumers will suffer from informa-
tion overload if too much irrelevant (or even relevant) information or
too many options are provided. Information search will lead to time and
energy cost; therefore, the shopping experience will likely be perceived
to be unpleasant if such efforts are conceived to be excessive. Garbarino
and Edell (1997) suggest that a task that requires more cognitive effort
to evaluate can lead to more negative affect, so consumers are more
likely to choose an alternative that requires less effort in processing and
evaluating. Moon and Frei (2000) argue that although customers like
having choices, they do not want too many. In their model, a company
uses technology to shoulder many of the tasks involved in shopping,
thus relieving the burden of consumers and offering prescreened alter-
natives geared to customer need.

Ease-of-Use of the Web Site. Consumer decision-making research sug-

gests that in addition to affective reactions induced by product infor-
mation, information processing per se may influence affect (e.g., Gar-
barino & Edell, 1997; Swinyard, 1993). A task that requires more
cognitive effort to evaluate can lead to more negative affect (Garbarino
& Edell, 1997). Because information processing requires cognitive effort,
especially when the information displayed is not readily comprehensible
(Coupey, 1994), a Web-site design that does not facilitate information
processing may cause negative affect. Swinyard (1993) argues that, if
consumers who are in a good mood are exposed to especially negative short
stimuli, their mood-protection mechanism may fail. Their good mood standard

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will be replaced by a neutral or even negative mood, thus leading them Base of text
to abort their shopping. Analogous to a physical store with a poor layout
and store environment, an unfriendly on-line user interface may lead
consumers to feel confused, feel a loss of control in the interaction, and
ultimately develop negative feelings about the on-line shopping expe-
rience. This could result in their abandoning the purchase process or
moving to an alternate Web site. On the other hand, an ideal human –
Web interaction will lead to positive consequences, such as a good mood,
longer staying time, and more exploratory behavior (Novak, Hoffman,
& Yung, 2000).
Are there any criteria that can be used to measure the ease of use of
a commercial Web site? Based on the Trevino and Webster (1992) study,
Nel, Niekerk, Berthon, and Davies (1999) suggest that a successful hu-
man interaction with a Web site should satisfy four dimensions. That
is, when surfing the Web, users should have (a) a sense of control over
the interaction, (b) focused attention, (c) aroused curiosity, and (d) in-
trinsic interest in the interaction. Thus, a successful Web site should
allow consumers to have quick access to useful information, which will
simplify the ordering procedure, and thus generate convenience that
consumers value and that makes the shopping experience favorable.

Customer Service. Customers usually expect additional support ser-

vices to back up the products or services they buy and use (Clemmer,
1990). Customer service is significantly different in an e-commerce mar-
ketplace relative to its traditional store counterpart. The technology en-
ables consumers to fulfill the purchase process generally without any
direct interaction with e-commerce employees (Meater, Ostrom, Round-
tree, & Bitner, 2000). Customer service is received mainly through the
means of access afforded by the Web site (Griffith & Krampf, 1998). For
instance, whether there are e-mail addresses hot linked from the site,
whether the telephone number of a customer service agent is available,
whether this service is offered 24 hours a day, and whether the firm is
responsive can all comprise customer service. Previous research shows
that most consumers prefer some form of human interaction with e-
commerce. Aberg and Shahmehri (2000) found that Internet shoppers
have very positive attitudes about the concept of human Web assistants
whose task is to assist customers in Web shopping. Internet users may
shop on-line more frequently if they receive immediate response to their
questions.
Hence, the foregoing discussion suggests that in a B-to-C e-commerce
setting:

P1: (a) The degree of relevant information provided, (b) the ease of
use of the Web site, and (c) the degree of customer service offered
are positively related to the on-line shopper’s valence of experi- short
ence. standard

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P2: Valence of experience of the on-line shopper is positively associ- Base of text
ated with his or her perceived customer value.

Perceived Product Quality

Consistent with previous research (Jacoby & Olson, 1985; Parasuraman
et al., 1985; Zeithaml, 1988), perceived product quality is defined in this
article as the consumer’s judgment about a product’s overall excellence
or superiority. Researchers assert that perceived quality has a positive
effect on perceived customer value. This is both intuitively true (Fornell,
Johnson, Anderson, Cha, & Bryant, 1996) and demonstrated in previous
work (Bolton & Drew, 1991; Cronin et al., 2000; Dodds et al., 1991).
According to cue-utilization theory, products consist of an array of
cues that serve as surrogate indicators of quality (Cox, 1967; Olson,
1972). Cues can be classified into two categories: extrinsic and intrinsic.
Extrinsic cues are product-related attributes that are not part of the
physical product (e.g., price, brand name, packaging). Intrinsic cues rep-
resent product-related attributes that cannot be manipulated without
changing physical properties of the product (e.g., ingredients of a gro-
cery product, clothing size, design of an automobile). Research evidence
suggests that consumers use extrinsic attributes to infer product quality
(Bolton & Drew, 1991; Richardson, Dick, & Jain, 1994; Teas & Agarwal,
2000).
A consumer’s perception of quality is different from objective quality.
The latter describes the actual technical superiority or excellence of the
product that is measurable or verifiable according to some predeter-
mined standards (Monroe & Krishman, 1985), as judged from intrinsic
cues. Conversely, perceived product quality is rather a higher-level ab-
straction, a global assessment, and highly subjective owing to the spe-
cific consumption setting (Zeithaml, 1988). This is particularly true in
the on-line shopping setting, where consumers generally have no in-
trinsic product attributes to generate objective judgment about the
product quality in the pre-purchase stage (i.e., when consumers have no
previous experience with the product). E-commerce provides consumers
with only a visual display of goods and services. As such, consumers
perceive a lower level of tangibility because of the lack of demonstrable
proof about the performance of a product (Vijayasarathy & Jones, 2000).
In this situation, extrinsic attributes are expected to have a strong in-
fluence on perceived quality (Teas & Agarwal, 2000; Zeithaml, 1988).
Prior research suggests that perceived product quality serves as a
mediator in the linkage between extrinsic cues and perceived customer
value (e.g., Dodds et al., 1991; Teas & Agarwal, 2000). Based on a syn-
thesis of previous work, there conceivably are three major extrinsic cues
associated with perceived product quality in a B-to-C business environ-
ment: on-line shoppers’ valence of experience, e-retailer reputation, and short
product price. standard

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Valence of Experience and Perceived Product Quality. Moods, feel- Base of text
ings, and emotions are important aspects of consumers’ behavior (e.g.,
Derbaix & Pham, 1991; Havlena & Holbrook, 1986; Pham, 1998). The
emotional or affective aspect of decision-making theories (Pham, 1988;
Schwarz & Clore, 1988) offers evidence that valence of experience can be
used as a heuristic to infer product quality and make purchase decisions.
Consumers use a “how-do-I-feel-about-it” heuristic as a source of infor-
mation and rely on the feelings experienced as they make these evalua-
tions. Positive feelings should lead to a favorable evaluation of the epi-
sode, whereas negative feelings should induce an unfavorable evaluation
(Schwarz & Clore, 1988). In the same vein, the retail literature has sug-
gested that store environment has a positive influence on product quality.
For example, Kerin et al. (1992) found that store-related stimuli have a
significant effect on product quality perceptions. Similarly, valence of ex-
perience should influence consumers’ product quality perceptions. That
is, consumers with a favorable on-line shopping experience will perceive
a product to have better quality than those with an unfavorable experi-
ence, especially if they are unfamiliar with the product.

E-Retailer Reputation and Perceived Product Quality. Stigler

(1961) holds that reputation denotes the persistence of quality, and rep-
utation demands a higher price because it economizes the search pro-
cess. Reputation of the e-retailer is garnered from word-of-mouth com-
munication, level of advertising, and brand equity (Bolton & Drew,
1991; Teas & Agarwal, 2000; Zeithaml, 1988). Previous studies suggest
that word-of-mouth recommendation plays an important role in reduc-
ing the amount of information consumers process and is used as a de-
cision-making heuristic to infer product quality (e.g., Furse, Punj, &
Stewart, 1984; Olshavsky & Granbois, 1979). Brand name (or reputa-
tion) has been found to affect quality perceptions (Gardner, 1971). Ad-
ditionally, it serves as a surrogate for quality and a dominant choice
heuristic by providing consumers with a bundle of information about
the product (e.g., Dawar & Parker, 1994; Hoyer & Brown, 1990; Jacoby,
Szybillo, & Busato-Schach, 1977; Rao & Monroe, 1989). Brown and Da-
cin (1997) demonstrated that what consumers know about a company
can influence their beliefs about and attitudes toward new products
manufactured by the company. This could also apply to e-retailers be-
cause of the absence of intrinsic product cues on a Web site with which
to evaluate product quality. Strader and Shaw (1999) found that in e-
marketing, unless a seller’s price is significantly lower than prices of a
trusted seller, switching costs will inhibit the consumer from buying
from the unknown e-seller. Hence, it is proposed that the reputation of
the e-retailer is positively related to product quality perceptions.

Product Price and Perceived Product Quality. Price has long been short
suggested as an important extrinsic cue for product quality (e.g., Olson, standard

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1977). Consumers use price as a quality indicator as it simply reflects Base of text
a belief that supply and demand forces lead to a natural ordering of
products on a price scale. That is, a positive relationship between price
and product quality exists. Some researchers suggest, however, that this
general positive relationship does not hold if more cues are available
(Dodds et al., 1991; Zeithaml, 1988). Nonetheless, others argue that
price continues to be a quality cue in the presence of other extrinsic cues
(such as brand name or store name) (Rao & Monroe, 1989; Teas & Agar-
wal, 2000). Thus, price should be a positive indicator of perceived quality
owing to the general absence of intrinsic cues in on-line shopping.
The preceding discussion implies that in a B-to-C e-commerce set-
ting:

P3: (a) Valence of experience of the on-line shopper, (b) e-retailer rep-
utation, and (c) product price are positively related to perceived
product quality.
P4: Perceived product quality is positively associated with perceived
customer value.

Perceived Risk
Perceived risk is the consumer’s perception of the uncertainty and con-
comitant adverse consequences of buying a product or service (Dowling
& Staelin, 1994). According to Strader and Shaw (1999), in on-line shop-
ping the key risks are financial, performance, and privacy. Financial
risk is defined as the probability of monetary loss associated with buying
a product (because the product may need to be repaired, replaced, or
returned) (Horton, 1976). Financial risk is related to an e-retailer’s post-
purchase service policy conveyed through the on-line interface or public
image. Warranties and money-back guarantees can lower a consumer’s
financial-risk perception (Broydrick, 1988; Shimp & Bearden, 1982).
Performance risk refers to the loss incurred when a product fails to meet
a consumer’s expectations (Horton, 1976; Simpson & Lakner, 1993). Ow-
ing to the general absence of intrinsic attributes with which to judge
product quality, performance risk in on-line shopping tends to increase
vis-à-vis a traditional business format (Strader & Shaw, 1999; Vijay-
asarathy & Jones, 2000). Privacy risk reflects the degree to which con-
sumers suffer a loss of privacy owing to information collected about
them when they shop on-line (Jarvenpaa & Pike, 1996 – 1997). A pri-
mary concern of on-line shoppers is a Web site’s lack of financial security
and hacker attacks that can compromise consumer credit-card infor-
mation (e.g., Kemp, 2000; Korgaonkar & Wolin, 1999; Lasch, 1998;
Strader & Shaw, 1999).
Several studies suggest that perceived risk is an important variable
that needs to be examined vis-à-vis perceived customer value (e.g., short
Shimp & Bearden, 1982; Teas & Agarwal, 2000). Wood and Scheer standard

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(1996) argue that a consumer’s evaluation of a deal may be a function Base of text
of perceived benefits, costs, and risk. Broydrick (1998) maintains that
removing risk is an important means of enhancing perceived customer
value. Some empirical work offers evidence regarding the role that per-
ceived risk plays in value perceptions. For example, Sweeney, Soutar,
and Johnson (1999) found that in a retail environment, perceived risk
has a direct, negative effect on perceived value and mediates the rela-
tionship between product quality and perceived value. Based on the
evidence from previous research, factors that influence perceived risk
included in the model are e-retailer reputation, perceived quality, and
product price.

E-Retailer Reputation and Perceived Risk. As suggested in both

classical economics (Heiman & Muller, 1996) and consumer-research
literature (e.g., Bolton & Drew, 1991; Richardson et al., 1994; Teas &
Agarwal, 2000), consumers use signals or extrinsic cues (such as adver-
tising and brand name) to infer product quality and refine their choices.
For example, word-of-mouth communication is an important source of
risk-reducing information, largely because its independent nature re-
veals true characteristics of the product (Bansal & Voyer, 2000; Heiman
& Muller, 1996; Murray, 1991). Consumers are likely to perceive an e-
retailer with a good reputation as being more trustworthy and credible
than one with a poor reputation (Hendrix, 1999). Consequently, as an
extrinsic cue, an e-retailer’s good reputation should foster lower finan-
cial, performance, and privacy risk for on-line shoppers.

Perceived Product Quality and Perceived Risk. As perceived prod-

uct quality increases, uncertainty associated with product performance
will decrease. Sweeney et al. (1999) determined that in a retail environ-
ment, quality offerings can reduce perceived risk. The effect many ex-
trinsic cues (e.g., brand name) have on perceived risk is realized to a
great extent by their influence on perceived quality. In an e-commerce
context, consumers who have a positive perception of product quality
are less likely to expect disappointing product performance, thus re-
ducing their level of performance risk.

Product Price and Perceived Risk. Monetary price is positively re-

lated to perceived product quality, but is likely to lead to greater level
of financial uncertainty (Sweeney et al., 1999). Grewal, Gotlieb, and
Marmorstein (1994) maintain that the price of the product is an inher-
ent component of perceived financial risk. Consumers who pay a higher
price are more likely to suffer from financial loss than those who pay a
lower price. Also, as the price level increases, the risk of an incorrect
product assessment will rise. This is particularly true when buyers are
less familiar with the product because of the infrequency of purchase short
(Rao & Monroe, 1989). As noted earlier, on-line shopping remains a standard

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relatively new experience for many individuals. As such, a high price is Base of text
likely to generate a greater degree of perceived financial and perform-
ance risk for on-line shoppers.
Hence, the previous arguments suggest that in a B-to-C e-commerce
setting:

P5: (a) E-retailer reputation is negatively related to perceived risk.

(b) Perceived product quality is negatively associated with per-
ceived risk. (c) Product price is positively related to perceived risk.
P6: Perceived risk is negatively associated with perceived customer
value.

Product Price
Price has been found to have a positive impact on perceived product
quality but a negative effect on a product’s value for the money (e.g.,
Dodds et al., 1991; Monroe, 1990; Zeithaml, 1988). As a financial sac-
rifice, price contributes negatively to value. Economical shoppers usu-
ally see price as an important cost component and compare prices
between different alternatives (Zeithaml, 1988). Achieving price lead-
ership has been proposed as an effective way to enhance customer value
(Porter, 1985). Selling on-line can be up to 15% less costly than selling
through regular channels (Korgaonkar & Wolin, 1999). Previous re-
search shows that seeking the best price is a major motivation of on-
line shoppers (Korgaonkar & Wolin, 1999). Indeed, transaction costs
and sales tax typically are lower in e-commerce than in traditional busi-
ness settings (Strader & Shaw, 1999). Thus, to the price-sensitive seg-
ment of the market, price is an important criterion for value judgment.
Hence, in a B-to-C e-commerce setting:

P7: Product price is negatively related to perceived customer value.

Purchase Intention
The economic theory of utility assumes that consumers are economically
rational and so will try to achieve the maximum utility, or satisfaction,
possible given their resource limitations (e.g., budget, time, cognitive
capabilities) (Henderson & Quandt, 1958; Horton, 1984). When per-
ceived customer value is defined as an overall evaluation of the relative
value of a product compared to alternatives, it reflects consumers’ net
gain obtained from their consumption behavior; thus it is likely to be
used as an indicator of purchase intention. Previous studies have pro-
vided ample evidence for the positive influence that perceived value has
on purchase intention or consumers’ willingness-to-buy (e.g., Dodds et
al., 1991; Monroe, 1990; Rao & Monroe, 1989; Szybillo & Jacoby, 1974; short
standard

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Top of text
Zeithaml, 1988). In Web-based consumer markets, the same positive Base of text
effect of perceived customer value on purchase intention is anticipated.
Thus, in a B-to-C e-commerce setting:

P8: Perceived customer value is positively related to on-line purchase

intention.

METHODOLOGY

Sample
The sample consisted of 110 undergraduate students enrolled in an in-
troductory marketing course at a large state university. Students were
selected as sample respondents because they tend to have more access
to the Internet than other consumers, and thus are more likely to be on-
line shoppers. Data collection was conducted during class time. Eight
respondents had no on-line purchasing experience and had never con-
sidered shopping on-line; therefore, they were deleted from the sample.
Ninety-nine usable questionnaires were returned. Arguably, the sample
size is relatively small. However, considering the exploratory nature of
this study, a sample size approximating 100 is sufficient to yield statis-
tically valid results for multiple regression analysis, the statistical tech-
nique employed in this study (Hair, Anderson, Tatham, & Black, 1998).
The average age of the respondents was 22 years; 59% were male.
Most of the respondents were Caucasian (85%). Forty-five percent had
annual personal income (excluding the amount paid for tuition and
books) of more than $6000. Ninety-four percent answered the questions
based on their on-line shopping experience in the past 6 months. Among
them, 82% purchased on-line in the past 3 months, and 54% did so in
the past month. Because most respondents had had a recent on-line
shopping experience, responses were expected to be minimally affected
by memory loss about the experience.
Sample respondents resemble typical on-line shoppers because they
possess disposable income and have made on-line purchases. The prod-
ucts purchased most by respondents (books, CDs, computers, apparels,
and travel) also mirror the most frequently purchased product catego-
ries by on-line shoppers (e.g., Ernst & Young, 2001; Szymanski & Hise,
2000).

Measures
A review of previous studies on perceived value, retail service quality,
and on-line shopping behavior provided a basis for developing scale
items for each construct (e.g., Dodds et al., 1991; Kim, 2001; Korgaonkar short
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Top of text
& Wolin, 1999; Mathwick, Malhotra, & Rigdon, 2000; Sweeney et al., Base of text
1997, 1999; Szymanski & Hise, 2000; Teas & Agarwal, 2000). Five-point
scales were used in this study, as previous research has found that a
five-point scale is readily comprehensible to respondents and enables
them to express their views (Marton-Williams, 1986). The questionnaire
was pretested with nonsample students, and refinements were made
based on the results of the pretest.
Because one of the objectives of this study was to understand the
determinants of on-line shoppers’ purchase intention, ideal participants
should be active shoppers who are close to making or have just made a
final purchase decision. Consequently, respondents were instructed to
consider their most recent Internet shopping experience during which
they seriously considered buying a product. To avoid confusion, respon-
dents were also asked to respond to the questions based on their ex-
perience with one particular e-store when shopping for a particular
product.
Scale reliabilities were evaluated by calculating coefficient alphas.
Reliabilities of the multiple-item scales ranged from 0.75 to 0.92. Scores
of each item were summed to represent the corresponding construct.
Shown in Table 1 is relevant information pertaining to each construct,
including the number of items, a sample statement, scale sources, and
reliability coefficient.

RESULTS

A series of multiple-regression analyses was performed to determine

whether the propositions developed in this study received empirical sup-
port. Multicollinearity does not appear to be a major concern, as the
maximum variance inflation factor among the independent variables is
approximately 1.8 (Neter, Wasserman, Nachtsheim, & Kutner, 1996).
Study results, which are shown in Table 2, are now reported.

Antecedents of Valence of Experience

As anticipated, ease-of-use of the Web site (b ⫽ 0.36) and relevant in-
formation (b ⫽ 0.29) are significantly, positively related to consumers’
valence of experience (p ⬍ .01). Thus, Propositions 1(a) and 1(b) are
supported. Customer service is marginally significant (b ⫽ 0.16, p ⫽
.06); the sign of the parameter estimate is positive, suggesting a positive
impact of customer service on consumers’ valence of experience when
shopping on-line. Ease of use of the Web site has the highest regression
coefficient among the three predictors of valence of experience. As such,
among these three predictors, ease of use seemingly has the greatest
impact on consumers’ valence of experience in an on-line context. The short
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Table 1. Construct Measurement.

Top of text
Base of text
Number
of Reliability
Scale Items Sample Statement Source of Measure Coefficient
Ease-of use 5 The interface of XYZ’s Web Mathwick, Malho- 0.75
of the Web site is user (unfriendly/ tra, & Rigdon
site friendly). (2000); Szyman-
ski & Hise
(2000)
Relevant in- 4 The quality of product in- Korgaonkar & 0.79
formation formation on XYZ’s Web Wolin (1999);
site is (not valuable/valu- Szymanski and
able). Hise (2000)
Customer 4 Overall, I’d say the quality Dabholkar, 0.80
service of my interaction with Thorpe, &
XYZ’s customer support Rentz (1996);
was (poor/excellent). Brady & Cronin
(2001)
Valence of 3 When shopping on XYZ, I Szymanski & 0.83
experience have a/an (unpleasant/ Hise (2000)
pleasant) experience.
E-retailer’s 4 XYZ has a (poor/good) repu- Teas & Agarwal 0.87
reputation tation. (2000)
Perceived 3 This product is likely to be Grewal, Monroe, 0.77
product of (poor/good) quality. & Krishnan
quality (1998)
Product price 3 Compared to other products Sweeney, Soutar, 0.88
with similar features, the & Johnson
price of this product of- (1997)
fered by XYZ is (low/
high).
Perceived 4 There is a chance that Korgaonkar & 0.80
risk there will be something Wolin (1999);
wrong with this product Sweeney, Sou-
or that it will not work tar, & Johnson
properly (disagree/agree). (1999); Kim
(2001)
Perceived 3 Comparing what I pay for Dodds, Monroe, & 0.75
customer what I get, this product Grewal (1991);
value appears to be a good Mathwick, Mal-
value for the money (dis- hotra, & Rigdon
agree/agree). (2000)
Purchase in- 3 I purchased or would con- Sweeney, Soutar, 0.92
tention sider buying this product & Johnson
from XYZ (disagree/ (1999)
agree).
short
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Table 2. Multiple Regression Results.

Top of text
Base of text
Standardized
Regression
Dependent Proposed Independent Coefficients
Variables Effects Variables (SE) P Value Adjusted R2
Valence of P1(a): ⫹ Ease-of-use of the 0.36 (0.10) 0.0006 0.44
experi- Web site
ence
P1(b): ⫹ Relevant information 0.29 (0.10) 0.0050
P1(c): ⫹ Customer service 0.16 (0.08) 0.0643
Perceived P3(a): ⫹ Valence of experi- 0.19 (0.09) 0.0414 0.23
product ence
quality
P3(b): ⫹ E-retailer’s reputa- 0.41 (0.10) ⬍0.0001
tion
P3(c): ⫹ Product price 0.05 (0.09) 0.5558
Perceived P5(a): ⫺ E-retailer’s reputa- 0.03 (0.11) 0.7796 0.11
risk tion
P5(b): ⫺ Perceived product ⫺0.33 (0.11) 0.0030
quality
P5(c): ⫹ Product price 0.23 (0.10) 0.0212
Perceived P2: ⫹ Valence of experi- 0.31 (0.09) 0.0004 0.37
customer ence
value
P4: ⫹ Perceived product 0.38 (0.09) ⬍0.0001
quality
P6: ⫹ Perceived risk 0.05 (0.09) 0.6067
P7: ⫺ Product price ⫺0.39 (0.08) ⬍0.0001
Purchase P8: ⫹ Perceived customer 0.49 (0.09) ⬍0.0001 0.24
intention value

regression equation explains 44% of the variance in the valence of ex-

perience variable.

Antecedents of Perceived Product Quality

Consumers’ valence of their on-line shopping experience (b ⫽ .19) and
e-retailer reputation (b ⫽ .41) are positively related to perceived product
quality, as expected. So, Propositions 3(a) and 3(b) receive empirical
support. These findings suggest that certain external cues influence on-
line shoppers’ perceptions of product quality. The anticipated positive
relationship between price and perceived product quality, however, is
not supported (p ⬎ .05). The overall regression equation explains 24%
of the variance in perceived product quality. short
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Antecedents of Perceived Risk Base of text
On-line shoppers’ perceptions of product quality are inversely associ-
ated with their perceived risk; furthermore, purchase price is positively
related to perceived risk. Both of these findings were expected. Conse-
quently, Propositions 5(b) and 5(c) are supported. Product quality seem-
ingly is more important than price in determining consumer on-line risk
perception (b ⫽ ⫺0.33 versus B ⫽ 0.23, respectively). Unexpectedly, e-
retailer reputation is not significantly related (p ⬎ .05) to on-line shop-
pers’ risk perceptions. Therefore, Proposition 5(a) is not supported. The
overall R square for this equation is 0.11.

Antecedents of Perceived Customer Value

Valence of experience (b ⫽ 0.31) and perceived product quality (b ⫽ 0.38)
are positively related to perceived customer value; also, product price is
negatively associated (b ⫽ ⫺0.39) with perceived customer value. All
three findings were expected. Therefore, Propositions 2, 4, and 7 are
supported. The magnitude of the effects that these factors have on per-
ceived value is similar, with valence of experience slightly lower than
perceived product quality and product price. The proposed negative ef-
fect of perceived risk on perceived customer value (P6), however, is not
supported (p ⬎ .05). The overall R square for the equation is 0.37.

Perceived Customer Value and Purchase Intention

Consistent with findings from previous work, the regression result
shows a highly significant positive relationship between perceived cus-
tomer value and on-line purchase intention (p ⬍ .0001), thus providing
support for Proposition 7. With only one predictor and an R square of
0.24, the model further supports the important role of perceived cus-
tomer value in determining a consumer’s purchase intention in an on-
line setting.

DISCUSSION

Contribution of the Research

This article attempts to partially address the call for work on the con-
sumer purchase process in e-commerce vis-à-vis perceived customer
value of on-line shoppers. The model described in this article identified
key antecedents that are likely to influence perceived customer value in
B-to-C e-commerce and explored the relationships among these con-
structs. Theoretically, the article contributes to the marketing literature
in two ways. First, the model broadens the perceived customer-value short
standard

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Top of text
literature by synthesizing findings from previous studies and by inte- Base of text
grating several key variables into one theoretical framework. Perceived
risk and valence of experience are included in the model, in addition to
perceived product quality and product price, which have been consid-
ered important in previous research. Second, the model presented in
this article is specifically designed for a B-to-C e-commerce setting and
is among the first efforts to explore perceived customer value in a Web-
based business context.

Rationales for Unanticipated Findings

Arguably, the results obtained in the current work are preliminary, thus
requiring that additional empirical attention be given to the model.
Nonetheless, the large number of propositions supported by the analy-
ses may suggest that the model presented in this study might well cap-
ture major relationships among key precursors of perceived customer
value in an e-commerce context. In fact, only three propositions were
not supported: product price and perceived product quality, e-retailer
reputation and perceived risk, and perceived risk and perceived cus-
tomer value. Potential explanations for these unexpected results are
now offered.

Product Price/Perceived Product Quality. Zeithaml (1988) has sug-

gested that a general price and quality relationship does not exist. Con-
sumers use price to infer quality chiefly when their familiarity with the
product tends to be low or they lack other quality cues. The use of price
as an indicator of quality may also depend on product categories and
the price variation within a category of products. Future work empha-
sizing perceived quality in an on-line purchasing context may improve
the findings from this study by introducing moderating factors, such as
product type, and by examining the impact in an experimental design
setting.

E-Retailer Reputation/Perceived Risk. The proposition pertaining to

the inverse association between e-retailer reputation and perceived risk
was not supported. Perhaps e-retailer reputation will influence per-
ceived risk primarily when the product being purchased is expensive
(this study’s sample purchased basically less expensive products on-
line). Specifically, the cachet of the e-retailer may be more influential
when consumers are purchasing higher priced than lower priced prod-
ucts, owing to the greater potential financial loss with the former kind
of item. If this is the case, e-retailer reputation would have minimal
impact on perceived risk of low-priced products, thus contributing to the
result obtained in the current study. An alternate rationale for the find-
ing is that the reputation of the product manufacturer may vitiate the short
impact e-retailer reputation has on on-line shoppers’ perceived risk. standard

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That is, on-line shoppers may not be particularly concerned about the Base of text
e-retailer’s reputation if the manufacturer has a tradition of providing
high-quality products. As such, future work should investigate whether
the e-retailer reputation/perceived-risk relationship is moderated by
product type or manufacturer reputation.

Perceived Risk/Perceived Customer Value. The proposition regard-

ing the inverse association between perceived risk and perceived cus-
tomer value was not supported. A possible explanation for this finding
may also pertain to product type. Perceived risk plays an important role
in determining perceived customer value when the product is expensive
and infrequently purchased. For example, Sweeney et al. (1999) found
that perceived risk is an important factor in the product quality – per-
ceived customer value relationship for home appliance products. Fur-
thermore, in the present work only a small percentage of variance in
perceived risk was explained by product price and product quality
(11%). This suggests that the determinants of perceived risk in an on-
line context merit additional empirical attention.

Suggestions for Future Research

The present work was exploratory in nature, thus generating only pre-
liminary findings. Consequently, much additional research is necessary
to ascertain whether the posited model (a) receives further empirical
support, (b) requires purely some fine-tuning, or (c) demands substan-
tial modification. Such investigation will warrant rigorous testing of the
putative relationships in the model with large, nonstudent samples at-
tendant with a simultaneous test of the relationships.
Also, considering that most of the purchase effort (e.g., information
search, alternative comparison) occurs in the prepurchase stage and
that perceived customer value can be used as a powerful predictor of
purchase intention, this article primarily focused on perceived customer
value in the prepurchase stage of on-line shopping. Research in strategic
marketing suggests that customer value should be evaluated from the
consumer’s total consumption experience (MacMillan & McGrath, 1997;
Parasuraman, 1997; Woodruff, 1997). So, future undertakings can ex-
pand on this work by examining issues such as how consumers’ post-
purchase experience might influence their perceived customer value and
how perceived customer value is related to satisfaction with and loyalty
to an e-retailer.
Previous studies indicate that besides consumption situations, differ-
ences between consumers and product classes are two other sources of
heterogeneity of perceived customer value (Holbrook, 1994; Sinha &
DeSarbo, 1998; Zeithaml, 1988). Subsequent investigations could em-
phasize segment differences; also, empirically considering product cat- short
egories may help generate further understanding of perceived customer standard

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Top of text
value in e-markets. In addition, future work should investigate various Base of text
personal factors of on-line shoppers, such as their degree of skill in shop-
ping on-line (a la prior experience) and the expectations they have of
on-line shopping contexts versus traditional bricks-and-mortar shop-
ping venues.

Further Implications
The preliminary findings from this exploratory investigation lead to ten-
tative suggestions for enhancing perceived customer value in an e-re-
tailing context. Increasing perceived product quality and reducing mon-
etary price (if feasible) are approaches that could be employed by
e-retailers. Another important means of augmenting perceived cus-
tomer value includes augmenting the valence of consumers’ on-line
shopping experiences. Also, in the e-marketplace, physical products are
intangible in the pre-purchase stage. As such, extrinsic cues play an
important role when consumers infer perceived product quality and cus-
tomer value. The positive linkage between e-retailer reputation and per-
ceived product quality implies that e-marketers might be able to favor-
ably affect consumers’ perceived product quality and concomitantly
their value perceptions by enhancing value signals such as e-retailer
reputation.
Cutting price certainly can lower consumers’ cost perceptions and can
be an important means of achieving competitive advantage. However,
recent evidence notes that in an on-line context, only about 8 – 10% of
the consumers are aggressive bargain hunters, and products with the
lowest price usually do not sell well (Baker et al., 2001; Marn, 2000).
On-line consumers differ in the core benefits they seek. Therefore, firms
may use different value strategies according to their product category
and their target market. An e-retailer using a value-added strategy
should offer support for the premium prices charged. Providing superior
products, excellent service quality, a reputable company image, a user-
friendly Web site, and a favorable total shopping experience seemingly
can justify the prices and pique the target market.

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The authors gratefully acknowledge the reviewers and Rajan Nataraajan for
their valuable input during the review process.
Correspondence regarding this article should be sent to: Alan J. Dubinsky,
Consumer Sciences and Retailing Department, Purdue University, Matthews
Hall, West Lafayette, IN 47907 (dubinskya@cfs.purdue.edu).

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