Journal of Retailing 83 (2, 2007) 199–210

Persuasion knowledge and consumer reactions to pricing tactics

David M. Hardesty a,1 , William O. Bearden b,2 , Jay P. Carlson c,∗
a University of Kentucky, Gatton College of Business & Economics, Lexington, KY 40506, United States
b University of South Carolina, Moore School of Business, Columbia, SC 29208, United States
c School of Management, Union Graduate College of Union University, Schenectady, NY 12308, United States

Accepted 30 June 2006

Abstract

The current research investigates consumer knowledge of the pricing tactics that marketers frequently employ and the effects of that
knowledge on responses to various price offers. In the research, a series of studies were conducted to develop and validate a knowledge
measure designed to assess pricing tactic persuasion knowledge (PTPK). Consistent with the persuasion knowledge model, individuals with
higher levels of PTPK were shown to have more knowledge-related thoughts regarding pricing tactic information than those with low levels of
PTPK. Additionally, pricing tactic persuasion knowledge was shown to be more predictive of consumer choices regarding quantity surcharge
offers and purchase interest evaluations following exposure to tensile claim offers (e.g., “Save up to 50 percent Off”) than several competing
constructs.
© 2007 New York University. Published by Elsevier Inc. All rights reserved.

Keywords: Consumer knowledge; Quantity surcharge; Persuasion knowledge model

Prior research has examined marketers’ reasons for
employing different pricing tactics (e.g., Monroe 2003; Tellis
1986), as well as consumers’ responses to individual tactics,
such as comparative price claims (e.g., Blair et al. 2002),
everyday-low pricing (Darke and Chung 2005), pennies-a-
day (Gourville 1998), and price matching (Kukar-Kinney
and Walters 2003). Interestingly, the extant literature has not
investigated directly consumer knowledge of marketers’ pric-
ing tactics, nor has it attempted to assess how this knowledge
may affect consumers’ responses to such tactics.
Several theoretical perspectives that involve assumptions
regarding underlying consumer knowledge of pricing tactics
attempt to explain consumers’ reactions to marketers’ offers.
First, studies of price-fairness judgments implicitly assume
that consumers know something about price-setting strate-
gies (cf. Campbell 1999; Bolton et al. 2003). This research
∗ Corresponding author. Tel.: +1 518 388 6738; fax: +1 518 388 6754.
E-mail addresses: david.hardesty@uky.edu (D.M. Hardesty),
bbearden@moore.sc.edu (W.O. Bearden), carlsonj@union.edu
(J.P. Carlson).
1 Tel.: +1 859 257 9419; fax: +1 859 257 3577.
2 Tel.: +1 803 777 4914; fax: +1 803 777 6876.
suggests that what consumers know about how and why
marketers determine prices and price changes can affect con-
sumers’ perceptions of price fairness. As Campbell (1999, p.
198) argues, knowledge regarding selling tactics of marketers
can influence consumer responses to marketing stimuli such
as prices, price presentation, and price advertising.
Second, studies based upon attribution theory, in which
consistency and distinctiveness of pricing tactics have been
varied experimentally, support the premise that consumers
possess knowledge schemata that they use to evaluate price
promotions and that they hold these beliefs with varying lev-
els of confidence (Lichtenstein and Bearden 1986, 1989). In a
similar vein, Mela and Urbany (1996) found, based on a series
of in-depth interviews, that consumers often make inferences
about seller behavior regarding price promotions, and that
long-term patterns of price promotions can affect consumer
learning. Researchers have also investigated the varying per-
sonal tendencies of individuals to be aware of prices, and
to have pricing knowledge. For example, some consumers
exhibit price mavenism, that is, “the degree to which an indi-
vidual is a source of price information regarding products
and places to find low prices and responds to other con-

0022-4359/$ – see front matter © 2007 New York University. Published by Elsevier Inc. All rights reserved.
doi:10.1016/j.jretai.2006.06.003
200 D.M. Hardesty et al. / Journal of Retailing 83 (2, 2007) 199–210
sumers’ requests for information” (Lichtenstein et al. 1993).
Importantly, all of these theoretical perspectives suggest that
consumers develop pricing tactic persuasion knowledge as a
result of their marketplace interactions, but research has yet
to directly study such knowledge (e.g., how such knowledge
might affect consumer responses to price offers).
Using the parlance of persuasion knowledge (cf. Friestad
and Wright 1994), marketers (i.e., agents) create exchanges
in part by persuading consumers (i.e., targets) via specific
strategies for generating favorable perceptions regarding their
brands, stores, and offerings. One domain in which con-
sumers develop persuasion knowledge is in their beliefs
regarding the tactics that marketers use to set and pro-
mote prices. For example, marketers promote appeals such
as “Just $1.09 per issue for a 1-year subscription to
Sports Illustrated,” in attempts to persuade consumers that
the offerings are desirable. Similarly, marketers employ
claims like “Always low prices, always Wal-Mart,” so that
not only prices appear attractive, but also the marketers
themselves.
Consumer pricing tactic persuasion knowledge consid-
ers the marketer (e.g., the manufacturer, advertiser, retailer)
to be the agent of persuasion, the consumer to be the
target of persuasion, and the pricing tactic to reflect the
persuasion attempt. Consumers learn to recognize that pric-
ing tactics include a range of holistic message themes
(e.g., everyday-low-pricing), specific message elements (e.g.,
external reference prices), and/or abstract configurations of
message elements (e.g., image pricing) (cf. Friestad and
Wright 1994, p. 4). Pricing tactic persuasion knowledge rep-
resents a form of domain-specific knowledge gained through
experience.
Consistent with the underlying premises of the PKM, our
research focuses on consumer knowledge of pricing tactics
and the extent to which variance in this knowledge mod-
erates consumers’ reactions to influence attempts. As such,
our research addresses what Friestad and Wright (1994, p.
2) cited as an important shortcoming in the extant consumer
behavior literature: the fact that researchers have infrequently
studied persuasion knowledge as a moderator of persuasion
influence.
The main objectives, then, of the current research are
to develop and validate an index of pricing tactic persua-
sion knowledge and to investigate pricing tactic persuasion
knowledge as it moderates consumer responses to market-
place persuasion efforts. Pricing tactics include marketers’
efforts to generate favorable price perceptions regarding their
brands, stores, and offerings. As such, the measure devel-
oped here is similar to the advertising and personal selling
persuasion knowledge measures developed by Boush et al.
(1994) and Campbell and Kirmani (2000), respectively, but
adds to this prior research by investigating consumers’ per-
suasion knowledge regarding marketers’ tactics related to
pricing. Moreover, the current context-specific pricing tac-
tic persuasion knowledge measure should be more predictive
of consumer responses to marketer pricing tactics than exist-
ing general measures of persuasion knowledge confidence
(Bearden et al. 2001) or individual traits not necessarily spe-
cific to price such as need for cognition (Petty and Cacioppo
1981).
To investigate the ability of pricing tactic persuasion
knowledge to moderate consumer phenomena, we first devel-
oped a valid and reliable scale. Toward that objective, the
marketing literature was reviewed to identify the many tac-
tics that compose the domain of our subsequent objective
knowledge measure. Table 1 depicts definitions from the
extant literature for each pricing tactic. Other selling tactics
categorized under consumer sales promotion such as rebate
restrictions, buy-one-get-one-free offers, and coupons were
excluded.
Measuring pricing tactic persuasion knowledge
Consistent with prior measure development procedures,
we began by specifying the domain of pricing tactic persua-
sion knowledge and then creating an initial pool of items
based on the pricing literature and open-ended responses
from a large sample of consumers. Next, expert judges
assessed the content validity of the items in two phases.
Then, using methods consistent with test development the-
ory (Crocker and Algina 1986), the final measurement items
were selected. The operational measure of pricing tactic per-
suasion knowledge (PTPK) proposed to study the effects of
varying levels of consumer knowledge is a seventeen-item,
true–false objective index comprised of formative indica-
tors (cf. Moorman et al. 2004).1 The measure represents
a global assessment (Haynes et al. 1995) of knowledge
across different tactics that comprise the content domain
of PTPK. We also provide evidence regarding test–retest
reliability, convergent validity, and known-group validity
of the knowledge index. After providing evidence of reli-
ability and validity, we conducted Study 1 to assess the
correspondence of open-ended consumer thought data with
PTPK. Finally, Study 2 and Study 3 investigate the impact
that PTPK has on two different pricing-related marketer
tactics.
Domain specification and item development
In order to generate an initial pool of items, two sources
were used: (1) a review of the relevant academic and trade lit-
erature, and (2) an open-ended elicitation of adult consumers.
The review of the marketing literature yielded a preliminary
set of 23 pricing tactics. In addition, 441 adult consumers
of mixed age (M = 34 years) and gender (51 percent female)
1 The selection of a true–false format was based on both past literature and
the need to balance knowledge assessment with scale response demands.
The true–false measure is consistent with prior knowledge measures such
as Moorman et al. (2004) nutrition knowledge scale that included seven
true–false items.
 D.M. Hardesty et al. / Journal of Retailing 83 (2, 2007) 199–210 201

Table 1
Pricing tactic definitions
Pricing tactic Definition
(1) Captive pricinga The core product is priced low and complementary items (e.g., accessories, supplies, spare parts) are priced
with a high premium (Noble and Gruca 1999, p. 438)
(2) Customary pricing When a retailer sets prices for a good or service and seeks to maintain those prices over an extended period of
time (Dunne et al. 2002, p. 377)
(3) Customer value pricinga Pricing one version of a product at very competitive levels while also offering fewer features than are available
on other versions (Noble and Gruca 1999, p. 438)
(4) Everyday-low-pricinga The seller sets a constant, everyday price with no (or very infrequent) temporary price promotions (Monroe
2003, p. 497)
(5) Image pricinga A firm brings out an identical version of its current product with a different name (or model number) and a
higher price in an attempt to signal quality (Tellis 1986, p. 156)
(6) Invoice ERP’sa The price the dealer pays the factory for an individual product (http://www.drivingtoday.com/features/
archive/invoice pricing/)
(7) Loss leader pricinga Featuring items priced below cost or at relatively low prices to attract customers to the seller’s place of business
(Monroe 2003, p. 639)
(8) Manufacturer’s suggested retail pricesa The seller presents the price offered by comparing it with a higher price suggested (listed) by the manufacturer
(Della et al. 1981, p. 416)
(9) Multiple unit pricing When consumers are exposed to multiple-unit prices instead of single-unit prices (e.g., “On sale – 6 cans for
$3 vs. “On sale – 50 cents”) (Wansink et al. 1998, p. 73)
(10) Nine-ending pricing The practice of setting prices just below a round number (Stiving and Winer 1997, p. 57)
(11) No haggle pricinga Prices are non-negotiable (Cason et al. 2003)
(12) No interest offersa When companies charge no interest in financing a purchase in order to stimulate early purchase (Kotler and
Keller 2006, p. 453).
(13) Partitioned pricinga Dividing a product’s price into two mandatory parts rather than charging a combined, all-inclusive price (Morwitz
et al. 1998, p. 453)
(14) Penetration pricinga Using low prices as a wedge to get into mass markets early (Monroe 2003, p. 382)
(15) Pennies-a-daya The temporal reframing of the cost of a product from an aggregate one-time expense to a series of small ongoing
expenses (Gourville 1998, p. 395)
(16) Premium pricing A firm exploits consumer heterogeneity in demand for a product by offering a superior version of that product
and charging a high (profitable price) for it (Tellis 1986, p. 155)
(17) Price bundlinga The sale of two or more separate products in a package at a discount, without any integration of the products.
(Stremersch and Tellis 2002, p. 56)
(18) Price discrimination When a company sells a product or service at two or more prices that do not reflect a proportional difference in
costs (Kotler and Keller 2006, p. 453)
(19) Price matching An offer to match the lowest price available in the market (Srivastava and Lurie 2001, p. 296)
(20) Price signalinga A higher price set by a firm may signal better quality (Nagle and Holden 2002, p. 91)
(21) Price skimminga The pricing method of attempting to first reach buyers who are willing to purchase at a high price before
marketing to more price-sensitive customers (Monroe 2003, p. 642)
(22) Prices charged by competitors The seller provides the comparison price charged by a competitor along with the seller’s actual price (Berkowitz
and Walton 1980, p. 350)
(23) Prices previously charged The seller compares an advertised price with the seller’s former (higher) price (Biswas and Blair 1991, p. 1)
(24) Random discountinga Discounting price in a manner that should be undiscernible or “random” to uninformed consumers and infrequent
so that these consumers do not get lucky too often (Tellis 1986, p. 150)
(25) Seasonal pricing Price reductions for merchandise or services out of season (Kotler and Keller 2006, p. 452)
(26) Tensile price claimsa Promoting a line of merchandise at different sale prices and not specifying the exact level of reduction for any
one particular product (Biswas and Burton 1993, p. 217)
(27) Two-part pricing Involves two separate charges that consumers must pay to consume a service (Tellis 1986, p. 157).
a Item included in final seventeen-item PTPK index.

were asked to complete an open-ended elicitation task. As
part of this task, each respondent was asked to list and
describe pricing tactics that marketers use to generate favor-
able price perceptions regarding their brands, stores, and
offerings. Two judges coded the responses, and the inter-
rater reliability was 0.95. Based on these responses, three
additional tactics were added to the item pool (no haggle
pricing, seasonal pricing, and penetration pricing), expand-
ing the set to 26. To aid in creating items for each tactic,
the 441 adults were each further asked to describe why they
thought marketers employ the elicited tactics. Each respon-
dent was asked to evaluate a subset of two or three specific
tactics. Selected responses from this “why” inquiry were
edited and employed subsequently as false statements for our
true–false items. Correct statements associated with the items
were based upon descriptive definitions from the extant pric-
ing literature, which describe the various tactics (e.g., Monroe
2003; Nagle and Holden 2002; Noble and Gruca 1999; Tellis
1986). An “I don’t know” response option was included to
inhibit forced-response guessing.
As depicted in the Appendix A, we created an example
for each pricing tactic to include with the items compris-
ing the knowledge measure, so that participants could base
their responses on understandable marketplace exemplars.
202 D.M. Hardesty et al. / Journal of Retailing 83 (2, 2007) 199–210

Some examples involved general claims (e.g., “Always low Table 2

prices at store XYZ”), while others incorporated specific Item assessment results
prices. We conducted two pretests including both students PTPK scale item Indices of Point biserial
and adult consumers to determine prices to be used in the discrimination correlations
examples that included prices. These pretests yielded quite Captive pricing 0.24 0.37
similar median values for price estimates, and these val- Customer value pricing 0.36 0.42
Everyday-low-pricing 0.36 0.39
ues were used as the price specifications in several of our Image pricing 0.45 0.43
examples. Invoice ERP’s 0.47 0.44
Loss leader pricing 0.53 0.38
Content validity MSRP’s 0.27 0.32
Multiple-unit pricing 0.27 0.20a
Nine-ending pricing 0.13b 0.23a
To evaluate how well the 26 identified tactics represented No haggle pricing 0.32 0.34
the domain of inquiry, two procedures were employed. First, No interest offers 0.46 0.41
twelve marketing PhDs and five retail managers were pro- Partitioned pricing 0.59 0.50
vided with an overall conceptual definition and then asked Penetration pricing 0.36 0.42
to rate how representative each tactic was of the pricing tac- Pennies-a-day 0.35 0.40
Premium pricing −0.06b 0.02a
tics employed by marketers. We used a three-point scale. Price bundling 0.27 0.39
3: clearly representative, 2: somewhat representative, and Price discrimination 0.15b 0.19a
1: not representative at all (Zaichkowsky 1985). Individ- Price matching 0.09b 0.24a
ual tactics were retained if the judges, on average, rated Price signaling 0.35 0.32
the tactic as at least somewhat representative. Two tac- Price skimming 0.31 0.30
Prices charged by competitors 0.09b 0.21a
tics failed (two-part pricing and customary pricing); 24 Prices previously charged −0.03b 0.00a
were retained. The seventeen judges were asked to suggest Random discounting 0.64 0.47
other marketplace tactics that should be included. Based Seasonal pricing 0.12b 0.32
then on these responses, price discrimination was added, Tensile price claims 0.48 0.30
bringing the total to 25. Other tactics mentioned by the Note. Bold items are included in the seventeen-item PTPK index.
a Deleted based on point biserial correlation cutoff of 0.30.
judges were either B2B-related or overlapped with our initial
b Deleted based on index of discrimination cutoff of 0.20.
set.
In a further effort to enhance the content validity of the
remaining twenty-five items, nineteen additional experts (i.e., unbalanced items can be as reliable as multiple-choice for-
marketing faculty) were asked to evaluate the statements mats and offer the advantage of brevity (Clark and Watson
used to frame the individual items. The judges were asked 1995).2
to rate how appropriate each statement was for assessing Following tabulation of correct and incorrect responses,
pricing tactic persuasion knowledge. 3: completely appro- item indices of discrimination and point biserial correlations
priate, 2: somewhat appropriate and 1: not at all appropriate were assessed for each item (Crocker and Algina 1986) and
(cf. Netemeyer et al. 1995). All statements were rated, on are shown in Table 2. These criteria ensured that the items
average, as at least somewhat appropriate and were carried included in the knowledge index distinguished between high
forward. and low knowledge individuals (i.e., indices of discrimina-
tion) and correlated with the overall index (i.e., point biserial
Item discrimination assessment and measure purification correlations). Items failing to satisfy the cutoff criteria for
either the index of discrimination or the point biserial corre-
Student interviewers from a large Midwestern university lation were deleted.
collected data for course credit from 42 non-student adults As suggested by Crocker and Algina (1986, p. 315), the
using procedures similar to those described by Mick (1996). index of discrimination for an item should be above 0.20
These data were used to evaluate the ability of the items to be retained. As shown in Table 2, seven items failed to
(1) to distinguish between consumers with high and low satisfy this cutoff and were deleted. Next, the point bise-
knowledge and (2) to correlate with the overall scale. Respon- rial correlations for each of the remaining eighteen items
dents averaged 37 years of age; 56 percent were female. were evaluated. We retained only items whose point biserial
To detect differences in knowledge, it was critical to select
items for the final knowledge measure that captured vari- 2 The discrete nature of the items comprising the objective knowledge mea-

ability. Items with little variability have little discriminatory
power, correlate weakly to other items in the measure, and can
produce unstable correlation results (cf. Clark and Watson
1995, pp. 312–315). As such, items are undesirable if all or
mostly all respondents answer them correctly or incorrectly.
Importantly, true–false measures that do not contain highly
sure, as well as the formative nature of the items, precluded factor analysis
in efforts to address dimensionality. However, preliminary cluster analyses
and item response theory failed to support stable sub-dimensions within
the set of seventeen items used to form the proposed knowledge measure.
Moreover, reanalysis of the data that comprise our subsequent studies, using
knowledge measures based on subsets of items with similar content, also did
not support a multi-dimensional or higher order measurement approach.
 D.M. Hardesty et al. / Journal of Retailing 83 (2, 2007) 199–210
correlations were two standard errors above zero (Crocker
and Algina 1986, √ p. 324). This
√ standard error criterion is
approximated as 1/ N − 1(1/ 41 = 0.15). Thus, for an item
to be considered adequately correlated with the overall mea-
sure, item point biserial correlations had to be 0.30 or larger,
a criterion that resulted in the removal of one additional
item.
After evaluating all items using both of these indices, the
seventeen items presented in the Appendix were selected. The
item indices of discrimination ranged from 0.24 to 0.64 and
averaged 0.40. Additionally, the point biserial correlations for
the items ranged from 0.30 to 0.50 and averaged 0.39. These
indices suggest that the retained items effectively distinguish
between consumers with high or low knowledge. Also, the
retained pricing tactics were similar to the few items that were
eliminated, which suggests minimal loss of domain represen-
tation (MacKenzie 2003). For example, MSRPs (retained)
are similar to reference prices framed in terms of competi-
tor prices (deleted) and prices previously charged (deleted).
Likewise, price signaling (retained) is similar to premium
pricing (deleted).
For the resulting seventeen-item index, composite knowl-
edge scores were computed as the sum of the number of
correct responses, that is, 1: correct; 0: otherwise. Coeffi-
cient alpha and KR20 are not reported as these reliability
estimates are inappropriate when indicators are formative
(MacKenzie 2003; Moorman et al. 2004). Instead, reliability
for the proposed objective measure was assessed using the
proportional reduction in loss (PRL) measure developed by
Rust and Cooil (1994). Since the PRL reliability measure is
a direct extension of Cronbach’s alpha, it is evaluated sim-
ilarly to coefficient alpha with values above 0.70 implying
adequate reliability. For the data collected for scale purifi-
cation, the PRL reliability estimate is 0.95, supporting the
initial reliability of the PTPK measure. In addition, the rec-
ommendations of Diamantopoulos and Winklhofer (2001)
were also used to investigate the quality of the formative
PTPK measure. In this analysis, the latent variable, objec-
tive knowledge, was used as the dependent variable and each
item as independent variables. Subsequent multiple regres-
sion analysis suggested minimum multicollinearity among
the items (maximum VIF = 3.03, less than the recommended
cutoff of 10) (Neter et al. 1996, p. 387). Thus, significant
redundancy does not appear among the seventeen formative
items (Diamantopoulos and Winklhofer 2001, p. 272).3
Test–retest reliability and additional evidence
A further study was conducted to assess the test–retest
reliability of the knowledge measure. In this study, the sam-
ple was comprised of 71 non-student respondents, recruited
3 For the remainder of the data used in this paper, all VIFs were less than
the maximum of 3.03 found for the measure purification data suggesting that
there was little redundancy across the seventeen items of PTPK in any of the
data employed.
203
by undergraduate students at a Southeastern U.S. univer-
sity. Respondents averaged 39 years of age; 64 percent were
female. In the test–retest study, respondents first answered
the seventeen items (PRL reliability estimate = 0.94), then
responded to the same items a month later (PRL reliabil-
ity estimate = 0.96). A significant positive correlation of 0.72
(p < .01) between time periods one and two provided addi-
tional support for the reliability of the index. Interestingly,
test–retest estimates are seldom, if ever, reported for measures
of objective knowledge. However, evidence of test–retest reli-
ability is particularly important given the formative nature of
the knowledge items (MacKenzie 2003).
In a further effort to assess the validity of PTPK, responses
to a four-item measure of advertising persuasion knowledge,
adapted from Boush et al. (1994), were also assessed in the
initial test–retest phase. It was hypothesized that advertising
persuasion knowledge would be positively related to PTPK
because both represent aspects of general consumer per-
suasion knowledge. As expected, the advertising persuasion
knowledge measure was positively correlated with PTPK
(r = .27, p < .01), suggesting that the advertising and pricing
tactic knowledge domains are related, but distinct.
Known group differences
Responses to the knowledge items were also collected
from an additional sample of 44 tenth graders from a Mid-
western high school. Respondents averaged 16 years of age;
46 percent were female. The PRL reliability estimate for
PTPK was 0.77. Evidence of known group validity was pro-
vided by comparing the tenth grade students’ mean scores
(n = 44) with the adult samples collected previously in our
item development effort (n = 42) and test–retest assessment
(n = 71) for both time periods. Adult consumers should have
higher knowledge scores than young consumers as persua-
sion knowledge develops over time with greater exposure
to persuasion episodes, and because it becomes more valu-
able to consumers in a larger number of everyday tasks
and goals when more diverse and subtle persuasion tactics
are encountered (Boush et al. 1994; Friestad and Wright
1994). Consistent with these expectations, the tenth-grade
sample averaged fewer correct responses than the general
adult samples. Specifically, the mean for the high school
respondents was 8.61, while the means for the adult sam-
ples were 11.14 (item development), 11.54 (time period one
test–retest), and 11.85 (time period two test–retest), respec-
tively (all p’s < .01).4
4 Comparison of two subgroups within another sample not reported here
also enabled an additional test of known group validity. Specifically, 69 adult
respondents were asked whether or not they had prior retail work experience.
Additional known group validity support was found in that those respondents
with retail experience had higher knowledge levels (M = 12.24) than those
without retail experience (M = 10.60, t67 = 2.38; p < .01).
204 D.M. Hardesty et al. / Journal of Retailing 83 (2, 2007) 199–210
Further validation of the pricing knowledge measure
In the next section, we describe three studies that were
conducted to further validate the PTPK scale. In Study 1,
empirical evidence supports the prediction that individuals
with higher levels of pricing tactic knowledge are more likely
to have knowledge-related thoughts than those with lower
levels of pricing tactic knowledge. Next, Study 2 contributes
to the retailing literature by demonstrating the ability of PTPK
to moderate consumer responses to quantity surcharge offers
(Sprott et al. 2003). Finally, Study 3 investigates the ability
of PTPK to moderate consumer responses to tensile price
claim offers and rules out additional potential alternative
explanations not addressed in the first two studies.
According to the PKM, consumers can elaborate upon
the message tactics included in persuasion attempts, and
these elaborations include the assessment of prior knowl-
edge (Ahluwalia and Burnkrant 2004, p. 27). As such, PTPK
is expected to moderate the impact of marketers’ persua-
sion attempts. Low-knowledge individuals are less likely
to have knowledge-related thoughts regarding pricing-tactic
information. In contrast, high-knowledge individuals are
more likely to have knowledge-related thoughts regarding
pricing-tactic information and to effectively process persua-
sion attempts (Petty and Cacioppo 1981). Moreover, high
knowledge individuals should be less likely to be persuaded
by pricing-persuasion appeals. This expectation is also con-
sistent with the assertion made by Compeau and Grewal
(1998) regarding the greater potential for less knowledge-
able individuals to be deceived by marketplace offers. Thus,
and as a guide to studies 1–3, we predict:
H1. As compared with consumers with lower levels of
pricing tactic persuasion knowledge, consumers with higher
levels of pricing tactic persuasion knowledge (a) will have
more knowledge-related thoughts regarding pricing tactic
information, (b) will be less impacted by quantity surcharge
persuasion attempts, and (c) will be less impacted by tensile
price claim offers.
Study 1: knowledge-related thoughts
Method
We exposed 252 undergraduate students to the surcharge
stimuli used later as part of Study 2 and to a tensile price
claim offer (“Save up to 50 percent off”) employed later
in Study 3. The surcharge stimuli included a 40-oz bot-
tle of well-known ketchup for $2.99 ($0.075 per oz) and
a 32-oz bottle priced at $1.69 ($0.053 per oz). After read-
ing each set of stimuli, participants were asked to describe
their reactions to the offers. Then, respondents completed
the PTPK items. Pricing tactic persuasion knowledge was
assessed after respondents were exposed to the surcharge and
tensile claim scenarios to minimize the potential for demand
bias (cf. Wheeler et al. 2005). Two independent coders then
determined whether each respondent generated knowledge-
related thoughts for each tactic. Reactions were coded as
knowledge-related thoughts for the surcharge stimuli if par-
ticipants commented on the sizes of the prices-per-oz. For
the tensile claims stimuli, reactions were labeled knowledge-
related thoughts if participants indicated that some of the
products might not be 50 percent off. The inter-rater relia-
bility for this coding was 0.84. Differences were resolved by
discussion.
Results
Of individuals with high levels of PTPK (based on
a median split), 60 percent generated knowledge-related
thoughts for the tensile claim tactic whereas only 42 percent
(χ2 (1) = 4.16, p < .05) of those with low levels of PTPK had
knowledge-related thoughts. Similarly, 67 percent of those
with high levels of PTPK had knowledge-related thoughts
on the quantity surcharge information, whereas only 49
percent (χ2 (1) = 5.10, p < .05) of those with low levels of
PTPK had knowledge-related thoughts. These two assess-
ments of consumer open-ended thought data support the
notion that those with higher levels of PTPK are more likely to
have knowledge-related thoughts regarding tensile claim and
quantity surcharge information than those with lower PTPK.
For the tensile price claim stimuli, a significant positive cor-
relation was observed between knowledge-related thoughts
and PTPK (r = .21, p < .01). Likewise, results indicated a
significant positive correlation between knowledge-related
thoughts on quantity surcharge information and PTPK
(r = .27, p < .01). All of these results provide support for H1a.
In the next study, the predictive validity of the PTPK scale is
assessed relative to several competing measures in an attempt
to further validate the scale.
Study 2: quantity surcharges
In an effort to investigate consumer knowledge as it mod-
erates individuals’ reactions to marketplace phenomena, we
conducted a study involving quantity surcharge offers. This
study investigates the effects on a choice-dependent variable
involving quantity surcharge offers, a recently investigated
tactic that is not included in the PTPK measure. Knowl-
edge was measured one week earlier in a separate phase from
subsequent experimental tests of the surcharge stimuli.
Surcharge offers occur when large packages are priced
higher per unit than small packages of the same brand (Sprott
et al. 2003). Marketers may not necessarily be trying to
deceive consumers, but they are often affected nonetheless
(Manning et al. 1998; Sprott et al. 2003). Sprott et al. (2003, p.
34) note that, “in general, consumers expect different sizes of
a brand to be priced in a quantity-discount fashion, such that
a brand’s larger packages cost less per unit than do smaller
packages.” Likewise, Wansink (1996) showed that many con-
sumers believe larger packages have lower unit costs. The
expectation guiding Study 2 is that individuals scoring high
in PTPK will be less likely to choose an item with a quantity
 D.M. Hardesty et al. / Journal of Retailing 83 (2, 2007) 199–210
surcharge than low knowledge respondents. Several compet-
ing variables were also assessed in an effort to investigate the
relative explanatory power of pricing persuasion knowledge.
Method
Data were collected across two time periods from 176
undergraduate students who received extra course credit
for their participation. Of the respondents, 49 percent were
female. In time period one, respondents completed the
knowledge items and an eighteen-item measure of need
for cognition (Cacioppo et al. 1984). One week later, we
employed a three-group (no surcharge, n = 61; small sur-
charge, n = 55; large surcharge, n = 60) between-subjects
design. Using stimuli consistent with Manning et al. (1998),
participants were asked to consider offers for 32 and 40-oz
bottles of “well-known” ketchup. Like study 1, and based
on an evaluation of marketplace prices, the 40-oz bottle of
ketchup was priced at $2.99 ($0.075 per oz) across all con-
ditions. The no-surcharge condition priced the 32-oz bottle
at $2.39 with a unit price of $0.075 per oz. The small-
surcharge condition priced the 32-oz bottle at $2.09 with a
unit price of $0.065 (a 15.4 percent surcharge for the 40-oz
bottle). The large-surcharge condition priced the 32-oz bottle
at $1.69 with a $0.053 unit price (a 41.5 percent surcharge
for the 40-oz bottle). After viewing one of these ketchup
offers, participants responded to a choice measure which
asked “If you were in the scenario described on the previ-
ous page, which package size would you buy?” Respondents
chose either to purchase the 32-oz bottle (the smaller size)
of ketchup, purchase the 40-oz bottle (the larger size) of
ketchup, or to purchase neither bottle of ketchup. Then, the
study participants completed a five-item price consciousness
scale (Lichtenstein et al. 1993), a six-item general persuasion
knowledge confidence measure (Bearden et al. 2001), and a
five-item sale-proneness scale (Lichtenstein et al. 1993), as
well as manipulation check and demographic questions.
Results
Two items were used to check the manipulation of the
quantity surcharge. Respondents indicated the difference in
cost-per-oz between the two offers by answering the follow-
ing questions: “The difference in cost-per-oz between the
two bottles of ketchup presented was 1: a little to 7: a lot
and 1: not considerable to 7: considerable.” Analysis of this
two-item manipulation check measure (r = 0.77) revealed that
the manipulation was successful (F2, 154 = 25.38, p < .01). All
pairwise comparisons across the three surcharge conditions
(no, low, high surcharge) were significant (p < .05). Moreover,
and in tests of potential crossover effects, the manipula-
tion check results were non-significant for the PTPK levels
(p > .10) and the interaction between PTPK and the surcharge
levels (p > .10). The coefficient alpha estimates of reliability
for the need for cognition, price consciousness, persuasion
knowledge confidence, and sale proneness measures were
0.85, 0.83, 0.78, and 0.81, respectively. The PRL reliability
estimate for PTPK was 0.87.
205
Fig. 1. Knowledge by quantity surcharge interaction: Study 2.
The ability of the price knowledge measure to moderate
the quantity surcharge level-choice relationship was evalu-
ated by analyzing participants’ choices using logit analysis.
Choice was coded “0” if a participant chose the 32-oz ketchup
and “1” if the participant chose the 40-oz. Subjects who chose
not to purchase either bottle were excluded from the analyses.
Two dummy variables were created and included as indepen-
dent variables along with PTPK and the interactions between
each dummy variable and PTPK. A significant interaction
of surcharge condition with knowledge was observed as pre-
dicted for the comparison between the large surcharge condi-
tion and the no surcharge condition (β = −0.38, p = .07). For
ease of explication, a high/low PTPK median split variable
was coded “0” for low knowledge and “1” for high knowl-
edge. Fig. 1 displays the percentage of participants selecting
the surcharged product across surcharge conditions. When
there was no surcharge, 69 percent of respondents with both
low and high knowledge chose the larger item. In contrast,
when large surcharges were present, low knowledge individ-
uals selected the surcharged item 26 percent of the time, while
those with higher knowledge chose the surcharged item only
10 percent of the time. These findings are consistent with
the expected moderating role of PTPK. The slopes for the
small surcharge versus no surcharge condition did not differ
between high and low PTPK groups (β = −0.11, p = .57).
Lastly, these analyses were repeated using the competing
measures as potential moderators. Results of these addi-
tional analyses indicated that price consciousness (β = −0.09,
p = .16), persuasion knowledge confidence (β = 0.12, p = .22),
sale proneness (β = −0.04, p = .60), and need for cognition
(β = −0.04, p = .29) failed to moderate the surcharge – choice
relationship for the large surcharge condition versus the no
surcharge condition. In addition, none of these competing
measures moderated the surcharge-choice relationship for the
small surcharge condition versus the no surcharge condition
(all p’s > .48). These follow-up analyses, when coupled with
the knowledge results, suggest that PTPK impacts behavior
in response to a frequently encountered marketplace-pricing
phenomenon, while other related measures do not.
206 D.M. Hardesty et al. / Journal of Retailing 83 (2, 2007) 199–210
While the results of Study 2 are encouraging, two alter-
native explanations may have been operative. First, the
respondents’ level of engagement in the task of answering
the PTPK items may be consistent with the results. To assess
this alternative, a five-item measure of task engagement is
included in Study 3 regarding tensile claim offers. A second
potential alternative explanation is that a person’s cognitive
skill level is consistent with the PTPK results. In an effort
to investigate this alternative, participants self-reported ACT
scores, a test similar to the SAT, were assessed in Study 3 as
a proxy for cognitive skill. Thus, Study 3 was conducted to
assess a larger number of potential alternative explanations,
including task engagement and cognitive skills, as well as to
demonstrate the moderating ability of PTPK in responses to
tensile price claim offers. Moreover, other competing mea-
sures (e.g., advertising persuasion knowledge, advertising
skepticism, and value consciousness) were included in an
expanded effort to assess the relative predictive validity of
PTPK and to investigate other alternative explanations.
Study 3: tensile price claims
In a final effort to investigate consumer knowledge as
it moderates individuals’ reactions to marketplace phenom-
ena, we conducted a third study involving tensile price claim
offers. Prior research has argued that vague wording in ten-
sile price claims (e.g., “Save up to 50 percent off”) causes
consumers to perceive that the advertised offers are ambigu-
ous (Mobley et al. 1988, p. 273). In particular, Biswas and
Burton (1993) demonstrated that tensile price claims pro-
viding the maximum amount of savings (e.g., “Save up to 50
percent off”) raise consumer price expectations considerably.
Overall, prior results suggest that tensile price claims are par-
ticularly influential when the maximum amount of potential
savings is stated.
As part of Study 3, and in addition to the present
knowledge index, an expanded set of alternative moderat-
ing variables was assessed to investigate PTPK’s explanatory
power vis-à-vis other constructs. In addition to the constructs
included in Study 2, study participants also responded to
measures of value consciousness (Lichtenstein et al. 1993),
advertising persuasion knowledge (Boush et al. 1994), adver-
tising skepticism (Obermiller and Spangenberg 1998), task
engagement, and ACT performance. Measures of these addi-
tional constructs were included as they arguably represent
alternative explanations to knowledge effects, due to either
their similarity to PTPK or their potential impact on infor-
mation elaboration.
Method
Data were collected from 241 undergraduate students who
received extra course credit for their participation. Fifty-one
percent of respondents were female. Similar to study 2, and
in an effort to inhibit demand effects, knowledge was mea-
sured in an earlier phase from subsequent experimental tests
of the tensile price claim stimuli. Prior to responding to an
advertising offer, participants completed the seventeen-item
knowledge measure, a five-item task engagement measure
(e.g., “I was motivated to answer the questions included in
the PTPK scale.”), and the eighteen-item need for cognition
scale (Cacioppo and Petty 1982).
After a 30-min filler task was completed, participants
reacted to either a sale claim (i.e., “Save 50 percent off”)
or a tensile price claim offer (i.e., “Save up to 50 percent
off”) for Nike running shoes. After viewing the advertising
information, participants responded to a single-item pur-
chase interest measure, labeled 0: Not Very Interested and
10: Very Interested. Next, respondents completed a single-
item manipulation check measure which asked “How was
the sale on Nike running shoes stated?” Response options
included “Save 50 percent Off,” “Save up to 50 percent
Off,” and “I don’t remember.” Then, respondents indicated
their overall attitude toward Nike running shoes on a single-
item measure ranging from 0: Very Undesirable to 10:
Very Desirable. Next, respondents completed potential alter-
native explanation measures including the five-item price
consciousness scale (Lichtenstein et al. 1993), the six-item
persuasion knowledge confidence scale (Bearden et al. 2001),
the five-item sale proneness measure (Lichtenstein et al.
1993), the nine-item advertising skepticism scale (Obermiller
and Spangenberg 1998), the seven-item value consciousness
scale (Lichtenstein et al. 1993), and the four-item advertis-
ing persuasion knowledge measure adapted from Boush et al.
(1994). Finally, respondents indicated their gender and ACT
scores.
Results
Analysis of the manipulation check measure revealed that
the manipulation was successful (χ2 (2) = 142.04, p < .01).
The coefficient alpha estimates of reliability were 0.90, 0.88,
0.67, 0.80, 0.75, 0.91, and 0.79 for the task engagement, need
for cognition, price consciousness, persuasion knowledge
confidence, sale proneness, advertising skepticism, and value
consciousness measures, respectively. The PRL reliability
estimates for PTPK and the Boush et al. (1994) advertising
persuasion knowledge measure were 0.90 and 0.72, respec-
tively.
The ability of the price knowledge measure to moder-
ate the tensile price claim-purchase interest relationship was
evaluated by using regression analysis. In the analysis, a
significant interaction of tensile price claim condition with
knowledge was observed as predicted (β = −0.25, p < .01).5
For ease of explication, a high/low PTPK median split vari-
able was coded “0” for low knowledge and “1” for high
knowledge. Fig. 2 displays the mean interest levels across
tensile claim conditions and pricing tactic knowledge levels.
When there was no tensile claim offer, respondents with high
knowledge were more interested in the offer (M = 5.76) than
those with low knowledge (M = 5.33; t117 = 1.37, p < .10).
5 Similar significant results were found when those respondents who
missed the manipulation check item were removed.
 D.M. Hardesty et al. / Journal of Retailing 83 (2, 2007) 199–210
Fig. 2. Knowledge by tensile price claim interaction: Study 3.
In contrast, when a tensile price claim was offered, low
knowledge individuals were significantly more interested
(M = 5.05) in the offer than those with high knowledge
(M = 4.57, t120 = 1.42, p < .10). These findings then are con-
sistent with the expected moderating role of PTPK and
H1c.
Lastly, the competing measures were investigated in a
series of similar analyses in an attempt to test for alterna-
tive explanations for the results. These analyses indicated
that advertising persuasion knowledge (β = −0.03, p = .91),
need for cognition (β = 0.00, p = .76), price conscious-
ness (β = 0.03 p = .37), persuasion knowledge confidence
(β = −0.06, p = .19), advertising skepticism (β = −0.01,
p = .81), value consciousness (β = 0.00, p = .91), sale prone-
ness (β = 0.10, p = .99), task engagement (β = 0.03, p = .37),
and cognitive skill (i.e., ACT scores) (β = −0.03, p = .64)
failed to moderate the tensile claim offer – interest in
the purchase offer relationship. These follow-up analyses,
when coupled with the PTPK results, suggest that PTPK
again moderates responses to a frequently encountered
marketplace-pricing phenomenon, while other measures do
not.
Discussion
Consumers’ persuasion knowledge and its effects on con-
sumer behavior have recently received significant research
attention (e.g., Friestad and Wright 1994, 1995; Wright
2002). Our literature review suggests that, while substantial
research attention has been given to consumer responses to
individual pricing tactics, minimal research has investigated
consumers’ persuasion knowledge regarding marketers’ pric-
ing tactics and the effects of that knowledge on consumer
responses to various marketplace offers. As such, the research
presented here extends the typical focus of consumer research
to market-level knowledge reflecting beliefs about market-
place dynamics (e.g., Bolton et al. 2003, p. 489; Wright 2002).
The present research is also consistent with Wright (2002)
assertion that researchers should treat consumer knowledge
207
as a competency like other essential aspects of life. Simi-
larly, Mick (2003) argues that consumer knowledge remains
important as individuals must be ever skillful in the myriad
contexts of marketing in daily life.
The overall objectives of the present research were to
develop and validate a reliable index to assess consumers’
knowledge regarding pricing tactics and to understand the
role of persuasion knowledge as a moderator of consumer
reactions to surcharge offers. As part of the index develop-
ment effort, a true–false measure was proposed and tested.
Based on both indices of discrimination and point biserial
correlation results, as well as results of our other devel-
opment efforts, the knowledge measure was found to be
reliable and suggested that consumers differ in their knowl-
edge regarding pricing tactics. Briefly, our studies reveal that,
as predicted, less-knowledgeable consumers are more sus-
ceptible to surcharge and tensile claim offers and to making
suboptimal decisions. Study 1 provided further validation
for the PTPK scale by showing that consumers had more
knowledge-related thoughts regarding pricing tactic informa-
tion than those with low levels of PTPK. Importantly, Studies
2 and 3 underscore the importance of consumer pricing tac-
tic persuasion knowledge. Specifically, greater pricing-tactic
persuasion knowledge was shown to lessen the impact asso-
ciated with large quantity surcharges (no knowledge effect
was found for small quantity surcharges) and tensile claim
offers.
The present research not only enhances our understanding
of consumer persuasion knowledge and consumer reactions
to marketers’ tactics, it also has public policy implications.
Policy makers may feel that if knowledge differences affect
consumer acquisition, comprehension, and interpretation of
price tactics, it might be necessary to limit misleading impres-
sions (Compeau and Grewal 1998). Grewal et al. (1998) argue
that buyers who have less knowledge in terms of prices and
products have greater potential for being deceived. The cur-
rent research supports the PKM arguments that persuasion
knowledge indeed can enhance consumer decision-making.
Our findings underscore the need to monitor promo-
tional communications to limit the potential for marketers to
deceive vulnerable consumers and to search for methods to
enhance how consumers interpret and use marketplace infor-
mation. Like earlier efforts to improve consumers’ use of unit
price information, it could be worthwhile to provide educa-
tion, especially in areas where the population is relatively
less educated (Aaker and Ford 1983). For example, programs
might help consumers recognize the persuasive techniques
agents use (Boush et al. 1994), as enlightened consumers are
more able to exert greater control in response to persuasion
attempts (Friestad and Wright 1994; Pechmann et al. 2003).
Limitations and future research
Caveats are warranted regarding certain limitations of this
research. First, pretests of prices will be needed to periodi-
208 D.M. Hardesty et al. / Journal of Retailing 83 (2, 2007) 199–210
cally update the proposed knowledge measure. For instance,
in the random discounting item, the example included current
prices for orange juice. In a few years, perhaps these prices
will warrant revision. Second, items might also need to be
added as new pricing tactics are implemented or deleted as
tactics become infrequent. Third, the studies were all con-
ducted in a lab setting. Certainly, knowledge effects may be
more pronounced when marketing tactics are encountered
in more realistic shopping environments. Finally, PTPK was
measured prior to being exposed to the scenarios in Studies 2
and 3 and there might be a threat of demand effects. However,
in Study 2, a 1-week separation was included and a filler task
was employed in Study 3.
Future research is warranted studying the extent to which
marketplace knowledge differences affect the inferences con-
sumers make in arriving at judgments of the fairness of prices
paid (cf. Bolton et al. 2003). Moreover, higher knowledge
may help consumers be less susceptible to other tactics, par-
titioned pricing (Morwitz et al. 1998)6 , pennies-a-day pricing
(Gourville 1998) and moderate other signaling effects as
described by Kirmani and Rao (2000). In addition, the role
of prior knowledge regarding consumer generalizations of
pricing-related message claims to other non-promoted prod-
ucts remains uncertain. Future research might also consider
the use of disclosure statements, as well as the development
of methods for enhancing consumer abilities to process and
understand marketplace information.
Researchers have recently provided evidence that cogni-
tive capacity and motivation affect consumer utilization of
persuasion knowledge (Campbell and Kirmani 2000). Future
research should investigate how cognitive capacity con-
straints and motivational deficiencies affect consumers’ use
of marketplace knowledge when encountering marketplace
offers. Another area of concern involves the determinants of
PTPK and how this knowledge is obtained. Carlson et al.
(2007) recently found that age, need for cognition, experi-
ence, and a best friend’s perceived knowledge are related to
objective PTPK and/or subjective PTPK. Future researchers
could investigate the effect of additional factors such as fre-
quency of marketer use and propensity to search and evaluate
persuasive messages on PTPK, as those factors have been
found to affect price knowledge in prior research (Estelami
and De Maeyer 2004; Vanhuele and Dreze 2002). Another
issue that warrants additional research involves the extent to
which consumer persuasion knowledge extends across sub-
domains. In this research, the correlation in the test–retest
study between advertising persuasion knowledge and pricing
tactic persuasion knowledge was 0.27. These findings pro-
vide some evidence that knowledge levels for sub-domains
of consumer persuasion knowledge may vary.
Another interesting area for future research is pricing tac-
tic knowledge calibration (Alba and Hutchinson 2000). We
6 Data from two other studies suggest that higher levels of PTPK are
associated with less vulnerability to partitioned pricing (Morwitz et al. 1998).
have conducted an initial experiment and the results sug-
gest that individuals with calibrated pricing tactic persuasion
knowledge are less impacted by the presence versus absence
of manufacturer suggested retail prices than miscalibrated
individuals. One final area that warrants consideration is the
study of pricing persuasion tactics that may lead to consumers
being better off if they are persuaded by the pricing tactic.
In our surcharge study, consumers are worse off if they pur-
chase the surcharged item. However, if a tactic like loss leader
pricing results in high knowledge individuals purchasing the
loss leader product while avoiding buying other higher priced
products, the persuasion episode aids the high-knowledge
consumer. Studies investigating these positive persuasion
attempts could be quite interesting.7
Acknowledgments
The first author (David M. Hardesty) received a James
W. McLamore summer research grant from the University of
Miami for this research. The authors would like to thank Meg
Campbell, Allan Chen, Kristin Diehl, Kelly Haws, Tatiana
Levit, Joe Urbany, and Stacy Wood for their helpful com-
ments and direction.
Appendix A. Pricing tactic persuasion knowledge
(true/false/do not know)
1. Captive pricing—“$3.00 for a non-disposable, easy-grip
razor, and $10.00 for a package of eight replacement
razor blades.” Captive pricing is used by marketers in
order to take advantage of the fact that, eventually,
consumers will need to purchase the high-priced replace-
ment components if they want to continue using the
product. TRUE
2. Customer value pricing—“$0.79 for a hamburger on the
value menu at a fast-food restaurant chain.” Customer
value pricing is used by marketers to attract consumers
who seek low prices to the marketer’s store. TRUE
3. Everyday-low-pricing—“Always low prices at store
XYZ.” Everyday-low-pricing is used by marketers so
that they will be perceived as having really low prices on
some items and higher prices on others. FALSE
4. Image pricing—“$100.00 for a brand of wine (‘Brand
X’). The same wine is currently sold for $20.00 a bot-
tle under the name ‘Brand Z’.” Image pricing is used by
marketers in order to have a higher-priced version of a
product available for consumers who view higher-priced
goods as having higher quality, and a lower-priced ver-
sion of the same product available for consumers who
strongly desire lower prices. TRUE
5. Invoice external reference prices—“2002
automobile–$500 over invoice.” Invoice external
7 We thank an anonymous reviewer for this suggestion.
 D.M. Hardesty et al. / Journal of Retailing 83 (2, 2007) 199–210
reference prices are used by marketers to persuade
consumers to seek out complete price information for a
product. FALSE
6. Loss leader pricing—“Box of a dozen ‘Grade A’ eggs for
$0.80.” Loss leader pricing is used by marketers to get
consumers to not only purchase the low-priced item but
also other regularly priced items within the store. TRUE
7. MSRP’s (Manufacturer’s Suggested Retail Prices)—“A
new 19 in. color television (with remote control): MSRP
$300, Sale Price $200” MSRP’s are used by marketers in
efforts to cause consumers to perceive that the sale price
looks attractive. TRUE
8. No haggle pricing—“All automobiles for sale at the low-
est price possible–no haggling!” No haggle pricing is
used by marketers in order to convince buyers that nego-
tiations will be fair. FALSE
9. No interest pricing offers—“Buy a dining room set today
and pay no interest for twelve months.” No interest pric-
ing offers are used by marketers to persuade consumers
that the price has been reduced. FALSE
10. Partitioned pricing—“$30.00 for a button-up, 100
percent cotton long-sleeve shirt, plus $5.00 ship-
ping and handling.” Partitioned pricing is used
by marketers to persuade consumers that the mar-
keter is offering an attractive shipping and handling
rate. FALSE
11. Penetration pricing—“A four-pack of a new brand of
batteries–$2.00.” Penetration pricing is used by mar-
keters so that, by setting prices low, consumers will be
encouraged to try the product. TRUE
12. Pennies-a-day or XXX-per-day—“Just $1.00 per issue
for a 1-year subscription to sports magazine XYZ.”
Pennies-a-day or XXX-per-day is used by marketers to
provide price information in the most understandable
format to consumers. FALSE
13. Price bundling—“Computer having a 1.1 GHz proces-
sor and 128 MB memory and laserjet printer for $1100.”
Price bundling is used by marketers in order to increase
revenue over what would have been obtained had the
products been priced separately. TRUE
14. Price signaling—“A new pair of running
shoes–$140.00.” Price signaling is used by mar-
keters since consumers may make quality judgments
for products or services based on price (i.e., high
price = high quality, low price = low quality). TRUE
15. Price skimming—“Brand new product—videophone
$500.” Price skimming is used by marketers to appeal
to consumers who are willing to pay a high price for a
new product. TRUE
16. Random discounting—“A brand of orange juice’s (64 oz.
or 1/2 gallon) price over a four-week time period was as
follows: Week 1 $2.50, Week 2 $2.50, Week 3 $1.50,
Week 4 $2.50.” Random discounting is used to obtain
sales from both consumers who carefully search for low
prices and consumers who do not check prices carefully.
TRUE
209
17. Tensile price claims—“Products X, Y, and Z: Up to 50
percent off.” Tensile price claims are used by marketers
in order to take advantage of consumers who may inad-
vertently perceive most or all products to be discounted
by the stated amount (i.e., 50 percent off). TRUE
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