Implications of Consumer Price Expectations and Managerial Takeaways
These results support our hypotheses that are developed from the dual information processing theories. Our study is the first in the marketing literature to provide evidence that, under different market environments, consumers’ purchase decisions are influenced by the two types of price expectations in different ways. The results also help retailers to understand the impact of different pricing and promotion strategies and offer important managerial takeaways. We use the results to explain why a promotion scheme with deep discounts may increase store sales more than several shallow discounts over a longer duration. we illustrate the importance of managing price expectations when running a price promotion. To maximize the sales increase, it is important for stores to maintain consumers’ PRIOR and POST unchanged.
We have acknowledged some of the limitations of our analysis, including ignoring the competitive effects from other products and that it is conditional on the list of products that our participants plan to purchase, and discussed mitigating actions. We also realize that our setup gives high internal validity but somewhat limited external validity. Field experiments in real stores would provide a good reality check of our results. It is important for future research to address these issues.