Consumers’ use of an expected future price as a reference: An investigation of the psychological and contextual antecedents

Consumers often use an expected future price of a product as a reference for judging the current price, and consequently make purchase decisions such as whether to buy and how much to buy. Extant literature has acknowledged the use of an expected future price of a product in formation of price judgments in relatively expensive and infrequently purchased product categories such as technological products and consumer durables. Although previous research has argued that consumers may also use an expected future price as a reference in the relatively inexpensive, frequently purchased categories such as consumer packaged goods, research has not clearly identified the factors that may lead consumers to use an expected future price as a reference in these product categories. The current dissertation research addresses this research gap in the extant literature by investigating the factors that may lead to the use of an expected future price of a product as a reference in formation of price judgments. Specifically, the current dissertation research argues for and provides evidence in support of the influence of contextual factors such as the frequency of price promotions, temporal pattern of price promotions, and price trends as the factors that may lead to the use of an expected future price as a reference. Further, the current research also discusses the influence of psychological factors such as consumers’ motivation to process price information and their mode of acquisition of price information in the use of an expected future price as a reference.The current dissertation research contributes to marketing theory in the areas of behavioral pricing and consumers’ forward looking behaviors. In the area of behavioral pricing, this research contributes to the discussion on reference prices by identifying the factors that may lead to the use of expected future prices as a reference. In the area of consumers’ forward looking behaviors, the current research contributes by showing direct evidence to the psychological mechanisms underlying the purchase timing and quantity decisions in response to the frequency and temporal pattern of price promotions. The current dissertation research also contributes to managerial understanding of consumers’ likely responses to the frequency of price promotions, temporal pattern of price promotions, and price trends. The research findings suggest that when a brand is promoted frequently, it may influence consumers’ expectations about the future promotions, and consumers may try to postpone their purchases during a regular period to a promotional period. Further, the research findings suggest if a brand is promoted less frequently, then consistently (versus randomly) spaced promotions are less likely to lead to the use of expected future prices as a reference. The research findings imply that managers may want to promote their brands relatively infrequently and keep their price promotions consistently spaced in order to minimize the likelihood of purchase postponement during regular periods.