Gurumurthy Kalyanaram, NYIT , former professor and Dean, presents a short report on latitude of price acceptance and price range.
The reference price range, also known as latitude of price acceptance, denotes one spread measure around the reference price. The width of the latitude of price acceptance depends on the three main factors – acceptable price level, purchase frequency and brand loyalty (Gurumurthy Kalyanaram & Little, 1994). Lichtenstein, Bloch, and Black (1988) found that reference price level and knowledge about prices significantly affect the latitude of acceptance. They suggest that higher reference price leads to wider latitude of acceptance. Consumers with greater knowledge of price distributions of the brands are more likely to observe deviations from their reference prices, thus leading to narrow latitude of price acceptance. Similarly, Rao and Sieben (1992) found that moderately knowledgeable consumers display wider latitude of price acceptance than more knowledgeable consumers.
Monroe (1973) finds a positive correlation between the width of acceptable range and the level of price acceptability. Brand loyalty is likely to affect the latitude of price acceptance. Higher brand loyal consumers are likely to have wider latitude of price acceptance, as they are more focussed on brand benefits than the price of brand. Higher deviation from the reference price is needed for a price change to be noticed. On the other hand, lower brand loyal consumer are more likely to focus on the prices than the brand benefits, thus they are likely to notice even a small deviation from the anchor price. Herrmann, Huber, Sivakumar, and Wricke (2004) found that price tolerance is directly influenced by customer satisfaction, the evoked set size (i.e., number of relevant purchase alternatives), consumer involvement, and indirectly through switching barriers and perceived price fairness.
Please refer to other articles by Gurumurthy Kalyanaram, NYIT former professor and Dean on his website: www.gurumurthykalyanaram.com/about.html
The reference price range, also known as latitude of price acceptance, denotes one spread measure around the reference price. The width of the latitude of price acceptance depends on the three main factors – acceptable price level, purchase frequency and brand loyalty (Gurumurthy Kalyanaram & Little, 1994). Lichtenstein, Bloch, and Black (1988) found that reference price level and knowledge about prices significantly affect the latitude of acceptance. They suggest that higher reference price leads to wider latitude of acceptance. Consumers with greater knowledge of price distributions of the brands are more likely to observe deviations from their reference prices, thus leading to narrow latitude of price acceptance. Similarly, Rao and Sieben (1992) found that moderately knowledgeable consumers display wider latitude of price acceptance than more knowledgeable consumers.
Monroe (1973) finds a positive correlation between the width of acceptable range and the level of price acceptability. Brand loyalty is likely to affect the latitude of price acceptance. Higher brand loyal consumers are likely to have wider latitude of price acceptance, as they are more focussed on brand benefits than the price of brand. Higher deviation from the reference price is needed for a price change to be noticed. On the other hand, lower brand loyal consumer are more likely to focus on the prices than the brand benefits, thus they are likely to notice even a small deviation from the anchor price. Herrmann, Huber, Sivakumar, and Wricke (2004) found that price tolerance is directly influenced by customer satisfaction, the evoked set size (i.e., number of relevant purchase alternatives), consumer involvement, and indirectly through switching barriers and perceived price fairness.
Please refer to other articles by Gurumurthy Kalyanaram, NYIT former professor and Dean on his website: www.gurumurthykalyanaram.com/about.html
No comments:
Post a Comment