Measuring reference price perceptions for new product categories: which measure is best?

Abstract: Purpose – The purpose of this paper is to provide guidance within the reference price literature by investigating which is the best measure of reference price for the, as yet, unstudied context of new product categories. The paper also intends to examine another reference price issue for the new product category context: whether greater price uncertainty in this context makes it worthwhile to measure consumer confidence in reference price perceptions. Design/methodology/approach – This research uses the experimental method to determine which measures of reference price are best suited to the new product context, by removing all other confounding influences. Findings – The findings confirm that consumers tend to evoke the fair price concept for new product categories and the expected price concept for existing categories. The paper also finds that confidence in reference price measures, while theoretically useful, does not add to the understanding of reference price effects in new product categories, probably because respondents tended to be overly confident in their perceptions, despite lacking in more objective measures of product category knowledge. Originality/value – Several studies in the literature have commented on the issue of fragmented measurement in the reference price domain. Some studies have offered theoretical guidance on measures to use. This is the first study to provide empirically tested theory on which measures to use and is the first study to examine reference price effects in new product categories including testing the usefulness of the confidence measure.