Understanding cultural influence on price perception: empirical insights from a SEM application

Purpose – The purpose of this paper is to review and understand the underlying structure of price perception, to recognize how cultural factors influence price perception, and to develop and empirically test a model of cultural differences and price perception. Design/methodology/approach – This project gathered data from both China and the USA. Using the LISREL 8.52 program, a proposed model was tested and modified in order to obtain a parsimonious underlying structure explaining cultural influences on consumers' price perceptions. Findings – Results of the data analysis show that culture factors do have significant effects on price perception. Internal reference price has a consistent and negative effect on the overall price perception of both goods and services purchase and durable and non‐durable goods purchase. However, the significant associations between price perception factors and overall price perception were only found in the services and non‐durable goods purchase but not in the durable goods purchase. Practical implications – This study helps international marketers understand the cross‐cultural consumer behavioral differences in general and the price perception differences in particular. It also provides a series of guidelines for international pricing strategy and international promotion strategy on an operational level. Originality/value – Theoretically, the paper integrates the solid base of work on domestic pricing from the Lichtenstein et al. study on price perception as well as work on culture from anthropology and sociology, international business, international marketing, and Hofstede's culture theory.