Consumers' Interpretations of the Semantic Phrases Found in Reference Price Advertisements

Larry D. Compeau, Clarkson University School of Business
Joan Lindsey-Mullikin, Babson College
Dhruv Grewal, Babson College
Ross Petty, Babson College

Abstract

Consumers are frequently presented with a higher reference price to compare with a lower advertised selling price. The research on reference prices has traditionally been conducted based on the implicit assumption that consumers' interpretations of a given semantic phrase, e.g., "Regular Price / Sale Price," are consistent across all consumers, but this fundamental assumption has never been tested. Guidelines issued by the Federal Trade Commission and the Council of Better Business Bureaus, as well as regulations enacted by approximately half of all states, appear to be based on a similar assumption. However, given the variability among consumers' perceptions found in other areas of consumer research, it is reasonable to expect that consumer interpretations of semantic phrases may vary. Given the potential variability, a pricing claim may be deemed informative or deceptive depending on the meaning the particular consumer attaches to the claim. This article presents a discussion of the vagueness in pricing claims as a step toward evaluating deception.

 

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