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When consumers cope with price-

persuasion knowledge: The role of
topic knowledge
a b
Luke Kachersky & Hyeong-Min (Christian) Kim
a
Fordham University , New York, USA
b
The Johns Hopkins Carey Business School , Maryland, USA
Published online: 18 Aug 2010.

To cite this article: Luke Kachersky & Hyeong-Min (Christian) Kim (2010) When consumers cope
with price-persuasion knowledge: The role of topic knowledge, Journal of Marketing Management,
27:1-2, 28-40, DOI: 10.1080/02672571003647719

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 Journal of Marketing Management
Vol. 27, Nos. 1–2, February 2011, 28–40

When consumers cope with price-persuasion

knowledge: The role of topic knowledge
Luke Kachersky, Fordham University, New York, USA
Hyeong-Min (Christian) Kim, The Johns Hopkins Carey Business
School, Maryland, USA

Abstract We identify the circumstances under which consumers’ beliefs about

the persuasive intent of alternative pricing formats influence their preferences
for offers using those formats. First, we assessed the existence of actual
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persuasion knowledge for partitioned and inclusive pricing formats. In a second

study, we tested hypotheses relating to persuasion knowledge and offer choice.
Results indicate that consumers choose offers with the price format they perceive
as having less persuasive intent. More important, this effect was stronger when
participants were unfamiliar with the target product category, but disappeared
when consumers perceived the price as unfair.

Keywords pricing; consumer knowledge; pricing formats; persuasion

Do consumers prefer inclusive prices or do they prefer their prices to be divided into
parts (e.g. ‘$24 book, inclusive of shipping’ vs. ‘$20 book þ $4 shipping’)? Following
Thaler’s (1985) integration-of-losses principle, which posits that consumers prefer to
combine costs to take advantage of diminishing marginal disutility, one could argue
that consumers should prefer prices that include all parts in a single price. However, in
a seminal paper on the topic, Morwitz, Greenleaf, and Johnson (1998) urged
marketers to ‘divide and prosper’. They show that by separating a price into two
mandatory components, demand for a product can increase because of consumers’
lack of willingness or ability to calculate the total price accurately. Other studies on the
topic have uncovered results in simular discord (Chakravarti, 2002; Lee & Han,
2002). Emerging research suggests that as Internet commerce has proliferated, in
which surcharges are often assessed, consumers’ knowledge of partitioned-pricing
tactics has also evolved (Schindler, Morrin, & Bechwati, 2005). Importantly, it has
also been shown that when consumers see certain pricing tactics as persuasive, they
react negatively towards offers using them (Hardesty, Bearden, & Carlson, 2007).
In this article, we explore the existence of persuasion knowledge of the specific tactic
used in partitioned pricing and examine its effect on offer preferences by couching the
issue within the terms of the persuasion-knowledge model (PKM) (Friestad & Wright,
1994), which posits that people’s perceptions of what constitutes a persuasion attempt
change over time. While prior work has shown that persuasion knowledge about pricing

ISSN 0267-257X print/ISSN 1472-1376 online

# 2010 Westburn Publishers Ltd.
DOI:10.1080/02672571003647719
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 Kachersky and Kim The role of topic knowledge on price-persuasion knowledge 29

Figure 1 Conceptual framework.

Topic Knowledge
Product Category Knowledge
Price Knowledge

Persuasion Knowledge Choice

PRICE PRESENTATION AND PERSUASION KNOWLEDGE

tactics can influence offer impressions (Hardesty et al., 2007), our work extends current
research by looking at two key issues: (1) persuasive intent of the pervasive tactic of
partitioned pricing; and (2) specifying the conditions under which persuasion
knowledge is more or less likely to exert an influence, which goes beyond simply
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showing that persuasion knowledge of partitioned pricing tactics can influence offer
preferences. As such, these results also have meaningful implications for pricing practice
and consumer research on the psychology of pricing.
The PKM suggests that people find it unpleasant to be the target of a persuasion
attempt. Our basic proposition is that people’s responses to different price presentations
will depend on which presentation format they perceive as a persuasion attempt.
According to the PKM, people should prefer price presentations they perceive as
having less persuasive intent. This effect, however, is subject to knowledge of the topic
of the persuasion episode. Specifically, knowledge about a product category should
nullify reliance on persuasion knowledge, and notions of price fairness should
supersede judgements based on persuasion knowledge (Bolton, Warlop, & Alba,
2003; Maxwell, 2002; Xia, Monroe, & Cox, 2004). This general framework is
presented in Figure 1. We now turn to a more detailed discussion of these effects.
Friestad and Wright (1994) introduced the PKM as a means to understand our use of
the knowledge of others’ intentions to manage everyday experiences. According to the
PKM, consumers perceive persuasion tactics as agent action–psychological event
connections; that is, another’s action is perceived as a persuasion attempt only if one
believes that the action is a strategic behaviour intended to cause psychological activity
that could result in changes in one’s beliefs, attitudes, or actions. When consumers think
an action is intended to be persuasive, the action becomes a persuasion episode, and they
bring to bear a variety of knowledge bases in order to cope with the persuasion attempt.
This perceived recognition of a persuasion attempt is referred to as a change of meaning
and can be triggered by a variety of cues; for example, how might one think about a
product recommendation when a family member provides it versus when a salesman
provides it? According to the PKM, if one is familiar with the product, it might not
matter. If one does not have such topic knowledge, however, then one is likely to infer
different motives about the persuasion agents, which in turn triggers a change of
meaning; that is, one would infer that the family member wants one to make the best
purchase, but that the salesperson wants one to buy a product for ulterior reasons, such
as extra commission or unloading a bad product. As a result, one might cope with the
salesperson’s persuasion attempt by discounting or even refuting the information.
In general, price information is often meant to be persuasive or is conveyed in a way
that is meant to be persuasive. Two popular ways that prices can have persuasive intent
are either by including a bundle of products and services, all of which are required, in
one price, or by presenting one price for a main product and presenting prices for
 30 Journal of Marketing Management, Volume 27

necessary related products and services separately. The former, called inclusive
pricing, can be persuasive because it gives consumers an impression of better value
by not specifying a surcharge (Estelami, 1999). The latter tactic, coined partitioned
pricing by Morwitz et al. (1998), can be persuasive because it entices consumers to pay
more attention to the base price and to ignore or discount the surcharge.
Given two equivalent prices that differ only in presentation format, one might
expect consumers to be indifferent to the two. Morwitz et al. (1998) showed that
consumers use heuristic processing when they encounter partitioned prices.
Specifically, consumers use the anchoring and adjustment heuristic (Tversky &
Kahneman, 1974), whereby they anchor on the base price and under-adjust for the
surcharge. For example, despite an equivalent total price, participants in one of
Morwitz et al.’s experiments recalled lower total product prices when the price was
partitioned rather than inclusive. Because partitioned pricing creates a perception of a
lower price, they argued, the strategy creates higher demand than an equivalent
inclusive price. However, other research has demonstrated contrary results. Lee and
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Han (2002), for example, showed that when consumers became aware that they had
under-adjusted for surcharges, they downgraded their attitudes towards the target
brand. Additionally, it is worth noting that consumers do, in fact, care about the
composition of total prices, as they want to ensure that the price is not covering
more than a fair amount of a company’s costs (Bolton et al., 2003), which could be
important for this research, given consumers’ expectations of companies’ costs for
both the product and the service surcharge (e.g. shipping).
We therefore propose that with the proliferation of partitioned pricing via
e-commerce, some consumers have now developed beliefs that inclusive versus
partitioned formats are intended to be persuasive. Just as experience with salespeople
influences one’s inferences about the persuasive intent of a salesperson’s actions,
experience with surcharges should influence one’s inferences about the persuasive
intent of price-presentation formats. This persuasion knowledge can influence
consumers’ preferences for offers using different price formats. In fact, Schindler et al.
(2005) have identified a group of consumers who distrust shipping charges altogether,
called shipping-charge skeptics, and show that they are less likely to shop from catalogues
or on the Internet.
When consumers become aware that a persuasion tactic is being used, they pursue
goals related to forming valid attitudes about the behaviour in which they are being
pressured to engage (Friestad & Wright, 1994). In general, reactions towards
persuasion attempts should be negative, or at least guarded. The very notion that
‘someone is using a tactic of influence ‘‘on me’’ is fundamentally ‘‘off-putting’’’
(Friestad & Wright, 1994, p. 13) because people do not like to be seen as those who
can be or need to be persuaded. Furthermore, persuasion attempts may be seen as
restrictions on behavioural freedoms (Petty & Cacioppo, 1979), thus invoking
counterarguments or even reactance (Brehm, 1966). Appropriately, it has been
shown that persuasion knowledge has a negative influence on consumer perceptions
of offers containing quantity surcharges (i.e. greater unit costs as the quantity
purchased increases) or tensile discounts (e.g. ‘Up to 50% off ’) (Hardesty et al., 2007).
While consumers may exhibit greater preference for price formats they perceive as
having less persuasive intent, we do not assert that this is the sole basis for price-format
preferences. A key contribution of this article is that we specify when persuasion
knowledge will be used. In the PKM, Friestad and Wright (1994) recognise two other
knowledge bases that help consumers cope with persuasion attempts. Consumers may
use their knowledge of either the entity making the persuasion attempt (the agent), or
 Kachersky and Kim The role of topic knowledge on price-persuasion knowledge 31

the topic of the persuasion attempt. Consumers’ use of each type of knowledge depends
on their level of expertise in each area (Maheswaran, Sternthal, & Gürhan, 1996).
Consumers should be more likely to use the knowledge structures in which they have the
most expertise (Friestad & Wright, 1994).
When comparing product offers, one factor that is part of consumers’ topic
knowledge is their knowledge of the product category, such as knowledge about
important attributes. If consumers rely on the knowledge structures in which they
have greater expertise (Maheswaran et al., 1996), then they should rely on persuasion
knowledge more when shopping for products of which they are not very knowledgeable
than when shopping for products of which they are very knowledgeable. For example, a
college student should rely on persuasion knowledge more when shopping for an
unfamiliar product (e.g. lawn mower) than when shopping for a familiar product
(e.g. MP3 player). In the former case, the student should rely more on cues of
persuasive intent such as a salesperson’s demeanour, whereas in the latter case, the
student can make evaluations based on things such as the design of the product. Thus:
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H1: For offers of unfamiliar compared to familiar products, consumers will prefer the
price format they perceive as having less persuasive intent.

Another element of topic knowledge, price knowledge, should also affect whether
consumers base their price-format preferences on their persuasion knowledge.
Perceptions of price fairness are based on price knowledge. Bolton et al. (2003)
demonstrated that in making fairness judgements, consumers consider how stores
arrive at their prices. Furthermore, consumers consider the perceived cost of the
product to the vendor in determining fairness (Bearden, Carlson, & Hardesty, 2003;
Thaler, 1985). When examining an inclusive price, consumers have few cues as to its
composition (i.e. how much of the price is for the base product and how much is for
the secondary product or service). When examining a partitioned price, consumers can
evaluate its composition. Thus although a partitioned price may be economically equal
to an inclusive price, a partitioned price is subject to fairness evaluations arising from
its composition (e.g. level of product mark up and level of shipping charge). It has been
demonstrated that price partitioning induces such separate evaluations (Bertini &
Wathieu, 2008), and that consumers are sensitive to variations in the levels of multi-
component prices (Hamilton & Srivastava, 2008). If either component is deemed
unfair, then consumers should perceive the total price as unfair and, hence, not pursue
that transaction. Xia et al. (2004) propose that perceived price unfairness leads to
feelings of disappointment or anger. Further, perceptions of price unfairness decrease
customer satisfaction and purchase intentions (Campbell, 1999; Huppertz, Arenson,
& Evans, 1978). Thus if a partitioned price is deemed unfair as a result of its
composition, then consumers should be more likely to reject that offer.
Because fairness is an evaluation and not a knowledge structure, we expect that it
arises along with other summary evaluations and judgements after consumers bring
their knowledge to bear on an examination of an offer (Xia et al., 2004). Consistent
with this idea, Campbell (2007) demonstrated that when cognitive resources are
available, knowledge-based inferences dominate perceptions of price fairness, but
when mental resources are constrained, feelings-based inferences dominate.
Therefore, consumers should use their persuasion knowledge prior to making an
evaluation of fairness. Recall that consumers should prefer the price format they
view as having less persuasive intent. Those who believe that partitioned prices have
 32 Journal of Marketing Management, Volume 27

greater persuasive intent should be equally likely to prefer inclusive prices regardless of
the composition of equivalent partitioned prices because their persuasion knowledge
should guide them away from partitioned prices before they would make evaluations
of them. In a sense, for consumers with this belief, partitioned prices are unfair simply
by employing that pricing tactic. However, those who believe that inclusive prices have
greater persuasive intent should prefer partitioned prices to inclusive prices only when
they evaluate the composition of the partitioned price as fair. If the composition of a
partitioned price is unfair, then they should prefer inclusive prices in spite of their
persuasion knowledge. Formally:

H2: Consumers who believe inclusive prices have greater persuasive intent will prefer
partitioned prices only when the partitioned price composition is perceived as fair,
while consumers who believe partitioned prices have greater persuasive intent will
prefer inclusive prices regardless of the perceived fairness of the composition of
equivalent partitioned prices.
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Study 1: Assessing actual price-format persuasion knowledge

The purpose of study 1 was to examine whether consumers actually perceived

partitioned or inclusive price formats to have persuasive intent, and, if so, which was
perceived to have greater persuasive intent. A total of 103 undergraduate students
participated, in exchange for course credit. Participants were told that the study was
about the evaluation of product offers and were given a questionnaire to complete.
The first page of the questionnaire included two offers for a digital camera. The offers
only differed in the format of their price presentation, with one being shown
as ‘$179.95 þ $20 shipping’ and the other being displayed as ‘$199.95 including
shipping’. The order of the offers was counterbalanced across participants. Participants
were asked to review the ads for a minute, before proceeding to the next page where they
were asked to respond to the open-ended question, ‘Why do you think that some sellers
present their price including the shipping charge while others list the shipping charge
separately?’ Following their response to this question, they finished the questionnaire by
indicating their gender and age.

Analysis
To measure participants’ actual persuasion knowledge regarding partitioned and
inclusive prices, responses to the open-ended were coded by two independent judges
for whether the respondent perceived: neither tactic as having persuasive intent; both
tactics as having equally persuasive intent; inclusive pricing as having greater
persuasive intent than partitioned pricing; or partitioned pricing as having greater
persuasive intent than inclusive pricing. For example, a statement like, ‘Some sellers
include shipping in the total price to make you think you are getting something for
free’ was coded as a perception that inclusive pricing has greater persuasive intent,
while a statement like, ‘Some sellers list the shipping charge separately to make you
think that the product is cheaper than it really is’ was coded as a perception that
partitioned pricing has greater persuasive intent. Participants that listed both types of
thoughts were coded as such, while others who listed only innocuous reasons
(e.g. ‘The prices are listed separately to work with the seller’s transaction processing
system’) were coded as a perception that neither tactic has persuasive intent.
 Kachersky and Kim The role of topic knowledge on price-persuasion knowledge 33

Results
Consumers did have varying perceptions about which, if any, pricing format had
greater persuasive intent. The majority (47%) of participants viewed partitioned
pricing as having greater persuasive intent than inclusive pricing. A total of 13%
perceived inclusive pricing as having greater persuasive intent, whilst 18% thought
both tactics had equal persuasive intent, and 22% did not find that either tactic had
persuasive intent. These results suggest that consumers have developed persuasion
knowledge about partitioned and inclusive pricing. If there were no systematic pattern
in knowledge structures, then each of our four response categories should be equally
represented. This was not found to be the case, w2 (4, N ¼ 103) ¼ 60.62, p < .001.

Study 2: The role of persuasion knowledge in offer choice

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Knowing that consumers have varying perceptions of the persuasive intent of inclusive
and partitioned price formats, we then sought to examine the role of persuasion
knowledge in consumer decisions. This study used a 2  2  2 between-subjects
design, with persuasion knowledge (partitioned prices have greater persuasive intent
vs. inclusive prices have greater persuasive intent), product familiarity (familiar vs.
unfamiliar), and partitioned price-composition fairness (fair vs. unfair) as the three
factors. A total of 167 undergraduate participants were randomly assigned to the eight
conditions. Participants were given a questionnaire to complete and were told that the
study was about the evaluation of product offers.
A persuasion-knowledge manipulation was the first piece of information participants
encountered. We decided to manipulate rather than measure persuasion knowledge in
order to provide the most stringent test of the conceptual framework. The persuasion-
knowledge manipulations were created using the responses from study 1. A common
response from people who perceived inclusive prices as having greater persuasive intent
was that inclusive prices hide the breakdown of the total price, hindering a proper
evaluation of it. A common response from people who thought that partitioned prices
had greater persuasive intent was that partitioned prices entice them by drawing
attention to the base price but not to the required surcharge. From these responses,
two passages were created, each reflecting one of these themes. Approximating
Williams, Fitzsimons, and Block (2004), the passages were presented to participants
as being drawn from leading consumer research. The passages were intended to explain
an agent action–psychological event connection as described by the persuasion-
knowledge model. Participants in the partitioned-belief condition were exposed to
the passage explaining how partitioned prices cause differential attention, while
participants in the inclusive-belief condition were exposed to the passage explaining
how inclusive prices create perceptions of value. To minimise the possibility of demand
effects, the passages were not a part of the questionnaire.
Following the persuasion-knowledge manipulation, participants completed an
unrelated multi-item scale to clear short-term memory. Upon completing the scale,
participants read a description of a product that was actually the product for which
they unknowingly were about to compare offers. Their price knowledge for both product
and surcharge was ascertained by asking them to indicate the highest price they would
pay and their estimate of the actual price of both the product and shipping of the product.
Participants then reviewed two offers for the same product, which included the
product-familiarity and surcharge-fairness manipulations. The offers included the
 34 Journal of Marketing Management, Volume 27

same model number in all conditions, along with a picture of the product, a list of the
product attributes, and the price. The offers differed from each other in only two ways.
First, one offer presented its price as inclusive while the other presented its price as
partitioned. The presentation order of the inclusive and partitioned price offers was
counterbalanced. Second, the order of the attribute list was shuffled between the offers
as a guard against demand effects. In the familiar-product condition, participants
compared offers for an MP3 player. In the unfamiliar-product condition, participants
compared offers for a ring and pinion set, a somewhat obscure car part. In the fair
partitioned price-composition condition, the partitioned price was presented as
‘$189.95, plus $10 shipping’. In the unfair partitioned price-composition condition,
the partitioned price was presented as ‘$139.95, plus $60 shipping’. The inclusive price
was always presented as ‘$199.95 including shipping’.
After reviewing the offers, participants were asked to imagine that they were
shopping for the product and had narrowed their choices down to the offers they
just reviewed. They were then asked to choose the offer from which they would
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purchase the product. This was the dependent measure. They then responded on
nine-point scales to two questions, adapted from Campbell and Kirmani (2000),
which indicated the degree to which they perceived the price format discussed in the
persuasion-knowledge manipulation to have been intended to persuade them in the
offers. This served as a manipulation check for the activation of persuasion knowledge.
Next, they responded on nine-point scales to items that indicated their perceptions of
the fairness of the surcharge in the partitioned price. Then they completed two items
on nine-point scales that indicated their perceptions of which total price was fairer,
anchored by 1 ¼ ‘Seller 1’s total price is more acceptable’, 9 ¼ ‘Seller 2’s total price is
more acceptable’ and 1 ¼ ‘Seller 1’s total price is more fair’, 9 ¼ Seller 2’s total price
is more fair’. The latter scale was a check of the price fairness manipulation. Last, they
indicated their gender and age.

Manipulation checks
The manipulations worked as intended. The two items measuring perceived persuasive
intent were averaged to form an index of the activation of persuasion knowledge
(r ¼ .65). Participants believed that the price format discussed in the persuasion-
knowledge passage was persuasive. They rated the perceived persuasive intent of the
format higher than midpoint of the index, M ¼ 6.71; t(166) ¼ 14.56, p < .001. The
two items measuring perceived price fairness were also averaged to form an index of
perceived price fairness (r ¼ .71). Participants in the fair partitioned price-
composition condition indeed viewed the partitioned price as more fair (M ¼ 4.89)
than those in the unfair partitioned price-composition condition, M ¼ 4.27,
t(165) ¼ 2.04, p < .05.

Results
A logit model was fit to examine the probability of choosing the inclusive priced offer
as a function of persuasion knowledge, product knowledge, and partitioned price-
composition fairness. Consistent with the first hypothesis – that for offers of
unfamiliar compared to familiar products, consumers would prefer the price format
they perceived as having less persuasive intent – a significant two-way interaction
between persuasion knowledge and product familiarity emerged, b ¼ 1.46, Wald
statistic ¼ 4.66, p < .05. As indicated in Figure 2, when participants were familiar
with the product under consideration, they did not rely on persuasion knowledge
 Kachersky and Kim The role of topic knowledge on price-persuasion knowledge 35

Figure 2 The influence of persuasion and product knowledge on choice.

80

70
Percentage Choosing inclusive offer

60

50

Familiar Product
40
Unfamiliar Product

30
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20

10

0
Inc. Belief Part. Belief

when making choices. Those in the familiar-product condition who believed that
partitioned prices had greater persuasive intent chose the inclusive price offer 56%
of the time, while those who believed inclusive prices had greater persuasive intent
chose the inclusive price offer 57% of the time. Neither is significantly different from
the chance value of 50%, w2 ¼ .392, p < .05, w2 ¼ .440, p < .05, suggesting that when
participants were familiar with the product, they based their choices on something
other than their persuasion knowledge. When participants were unfamiliar with the
product under consideration, they did rely on persuasion knowledge in making
choices. Those in the unfamiliar-product condition who believed that partitioned
prices had greater persuasive intent chose the inclusive price offer 72% of the time
while those who believed that inclusive prices had greater persuasive intent chose the
inclusive price offer only 45% of the time. The difference was significant, w2 ¼ 6.24, p
< .05, indicating that participants reacted against the perceived persuasive intent of
the price presentation when they were unfamiliar with the product.
Consistent with the second hypothesis that consumers who believe inclusive prices
have greater persuasive intent will prefer partitioned prices only when the partitioned
price-composition is fair, while consumers who believe partitioned prices have greater
persuasive intent will prefer inclusive prices regardless of the fairness of the
composition of equivalent partitioned prices, a significant two-way interaction
between partitioned price-composition fairness and product familiarity
emerged, b ¼ 1.61, Wald statistic ¼ 5.74, p < .05. As indicated in Figure 3, when
participants believed partitioned prices had greater persuasive intent, regardless of
partitioned price-composition fairness they were equally likely to choose inclusive
prices. In both surcharge-fairness conditions, these participants chose the inclusive
price offer 63% of the time. When participants believed inclusive prices had greater
persuasive intent, partitioned price-composition fairness did influence their use of
 36 Journal of Marketing Management, Volume 27

Figure 3 The influence of persuasion knowledge and fairness perceptions on choice.

80

70
Percentage Choosing inclusive offer

60

50

Unfair Surcharge
40
Fair Surcharge

30
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20

10

0
Inc. Belief Part. Belief

persuasion knowledge. When the partitioned price composition was fair, these
participants chose the inclusive price offer only 33% of the time. When the
partitioned price composition was unfair, inclusive belief participants chose the
inclusive price offer 69% of the time. This difference was significant, w2 ¼ 10.95,
p < .01, indicating that participants reacted against the persuasive intent of inclusive
prices when the partitioned price was fair, but accepted the persuasive intent of the
inclusive price when the partitioned price was perceived as unfair.
The three-way interaction of persuasion knowledge  product familiarity  fairness
was not significant. That was expected because most participants had a fair degree
of surcharge price knowledge; that is, they had a general idea of shipping prices, even if
they were not familiar with the product category or the product prices. Therefore, we did
not expect a three-way interaction here.
Finally, supporting our theorising, the influence of surcharge fairness on choice was
mediated by perceptions of total price fairness. This was confirmed with the four-step
procedure described by Baron and Kenny (1986). First, perceived surcharge fairness
was significantly related to offer choice, w2(1, N ¼ 167) ¼ 4.15, p < .05. Second,
perceived surcharge fairness was significantly related to perceived total price fairness,
F(1, 162) ¼ 10.15, p < .01. Third, perceived total price fairness, the mediator, was
significantly related to offer choice, w2(1, N ¼ 167) ¼ 27.96, p < .001. Last,
including perceived surcharge fairness and perceived total price fairness in a logistic
regression on choice, perceived total price fairness was significantly related to offer
choice, w2(1, N ¼ 167) ¼ 26.46, p < .001, but perceived surcharge fairness was not,
w2(1, N ¼ 167) ¼ .102, p ¼ .75.
The results of this experiment lend support to the notion that under certain
circumstances consumers will use their persuasion knowledge to decide between
offers that differ only in their price-presentation format. Specifically, they are more
 Kachersky and Kim The role of topic knowledge on price-persuasion knowledge 37

likely to rely on their persuasion knowledge if they are not familiar with the product
category and only if the composition of the partitioned price is perceived as fair.

General discussion

This research demonstrates that consumers differentially use two knowledge bases
when comparing economically equivalent offers. Ceteris paribus, when consumers
believe inclusive prices have persuasive intent, they tend to choose partitioned price
offers and vice versa. Different types of topic knowledge moderate this effect. When
consumers are familiar with the product for which they are comparing offers, they
tend to not rely on their persuasion knowledge. They bring other knowledge to bear on
the choice and thus are indifferent between two offers that only differ in price-
presentation format. Furthermore, even though some consumers may perceive that
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inclusive prices have greater persuasive intent, they will continue to choose inclusive
priced offers if they perceive equivalent partitioned prices as unfair.

Theoretical contribution
Morwitz et al. (1998) demonstrated that consumers used heuristic processing when
encountering partitioned prices. Consistent with Schindler et al. (2005), we find that
consumers have gained significantly more experience with partitioned pricing and
inclusive pricing because of their extensive use in e-commerce. Along with gaining
experience with these tactics, consumers have developed beliefs about which price
formats have persuasive intent. Expanding on Schindler et al. (2005), we have shown
that consumers react against the price format they perceive as having greater
persuasive intent, and that this effect is subject to consumers’ product knowledge
and notions of fairness. Participants in Morwitz et al.’s (1998) study presumably had a
sufficient level of product knowledge because of the use of a familiar product – a
telephone. Thus persuasion knowledge about pricing tactics, if participants at that
time had any, would not have been likely to have an effect. Furthermore, the
compositions of the partitioned prices used in Morwitz et al.’s (1998) experiments
were seemingly fair (e.g. $69.95 telephone þ $12.95 shipping) and therefore should
not have caused consumers to react against partitioned-priced offers. Indeed, there is
no evidence of such reactions in their experiments. In a more recent study, Burman and
Biswas (2007) showed that consumers high in need for cognition reacted unfavourably
to partitioned prices in which the surcharge was high. Our results suggest that
persuasion knowledge could be responsible for such behaviour.
Friestad and Wright (1994) note that persuasion knowledge performs schema-like
functions. Hardesty et al. (2007) showed that this applies to certain pricing tactics, such
as quantity surcharging and tensile discount phrasing. We have extended this to the
context of partitioned pricing and identified important boundary conditions under
which persuasion knowledge does not perform a schema-like function. When
consumers are familiar with a product under consideration, their price-format
persuasion knowledge does not perform schema-like functions. Rather, their topic
knowledge dominates decision making. It is when consumers are unfamiliar with a
product under consideration that their persuasion knowledge guides them to evaluate
offers more favourably that do not include the perceived persuasive tactic. Additionally,
if consumers’ persuasion knowledge guides them to offers they consider unfair, they will
refute their schema’s guidance and follow their evaluations of price fairness, which is
 38 Journal of Marketing Management, Volume 27

consistent with Xia et al. (2004) and supports Campbell’s (2007) assertion that
knowledge tends to precede affect in price evaluations. Finally, consumers do this
despite equivalent total prices, which is in harmony with Bolton et al.’s (2003)
findings that consumers do care about how prices are determined.

Managerial implications
How should managers approach a decision on partitioned or inclusive pricing?
Foremost, they must recognise that this decision is important. If they make the
wrong decision, customers could be driven away. With this imperative fact in mind,
managers must first consider the target market’s knowledge of the product category.
Our results indicate that consumers with low product knowledge are more prone to
reactions against persuasive price formats. Thus if selling products that consumers buy
infrequently, for example, it would be worth a manager’s time and budget to research
the target market’s price-format preferences and to make the inclusive-versus
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partitioned-pricing decision based on those results. Last, if choosing partitioned

pricing, it is important for a manager to set the right levels for the respective
components. Our results show that consumers will reject a partitioned-price offer if
even one component is perceived as unfair. Therefore, managers should select both
base prices and surcharge levels in a way that consumers perceive as fair, which often
means basing the decision on the cost of each component and adding a fair rate of
return (Bolton et al., 2003).

Limitations and future research

In this research, we investigated the influence of persuasion knowledge on choices
between two economically equivalent offers by manipulating persuasion knowledge.
The persuasion-knowledge model is contingent on people’s own, right or wrong,
beliefs about what constitutes a persuasion attempt. While our persuasion-
knowledge manipulation in study 2 was based on common themes from study 1,
future research may want to measure individual persuasion knowledge directly and
test similar hypotheses examined in this research. Such a test is in part captured by
Schindler et al.’s (2005) shipping-charge skepticism, whose result is consistent with our
findings, but a more complete picture requires the other side of such a construct; that
is, some consumers might be sceptical of inclusive prices and show behaviours
opposite to what this research has shown.
This research also does not consider the influence on choice of perceiving that both
inclusive and partitioned price formats have equally persuasive intent. Despite
showing evidence that some consumers do have such beliefs, we expect that those
perceptions vary by product category. For example, in shopping on the Web for a
camera, as was the scenario in study 1, it is more likely that a consumer will view both
price formats as having equally persuasive intent. In contrast, when that consumer has
his automobile repaired, he probably wants to see the breakdown of the total price into
parts and labour, and might suspect an inclusive price as having greater persuasive
intent. It would be worthwhile to explore product-category characteristics that create
variations in consumer perceptions of the persuasive intent of pricing formats over
different purchase occasions.
Last, this research held participants’ knowledge about the agent of the persuasion
attempt (i.e. the store) constant in order to isolate best the interactions of persuasion
knowledge and topic knowledge. Friestad and Wright (1994) propose that people’s
knowledge about persuasion agents, along with their topic and persuasion knowledge,
 Kachersky and Kim The role of topic knowledge on price-persuasion knowledge 39

is used in coping with persuasion attempts. It may be, for example, that a high-end
store can get away with using a surcharge that in this study was perceived as unfair
because perhaps consumers of such stores make inferences about the quality of
product procurement (e.g. handled with care, packaged in special material) based on
the surcharge level. Preliminary work in this area has shown that consumers pay less
attention to surcharges from high-reputation sellers (Cheema, 2008). Alternatively, as
in the work of Lee and Han (2002), when consumers can attribute the persuasive
price format to factors other than the agent, their persuasion coping behaviour
(e.g. a downgrade in attitude or purchase intention) will not be as severe towards the
agent. Such scenarios highlight the potential contribution to be made by systematic
study of agent knowledge in persuasive pricing.

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About the authors

Luke Kachersky is an assistant professor of marketing at Fordham University’s Schools of
Business Administration, Bronx, New York. He holds a PhD in marketing from City
University of New York and an MBA with a specialization in marketing management from St.
John’s University, New York. His research interests include the psychology of pricing and the
influence of self-concept in consumer decision making.

Corresponding author: Luke Kachersky, Assistant Professor of Marketing, Fordham

University, Schools of Business Administration, 441 E. Fordham Road, Faber Hall 450,
Bronx, NY 10458, USA.
T (718) 817-5921
E kachersky@fordham.edu

Hyeong Min Kim is an assistant professor at The Johns Hopkins Carey Business School in
Maryland. He holds a PhD in marketing from University of Michigan, Ann Arbor, and an
MBA from Columbia University, New York. His main research interest is behavioural pricing.

T (410) 516-3331
E chkim@jhu.edu