Discounts Off a Store's Own Price Signal Quality Better Than 'Compare At' Claims

ConversionGrewal, D.; Roggeveen, A.; Lindsey-Mullikin, J. · 2014Journal of Retailing

Topicssemantic price cues·reference price·perceived quality·retail pricing·comparative advertising·shopping context

Imagine your apparel leadership team is setting promotion policy across stores and advertising seen at home. “Regular price/Sale price” compares the retailer’s own prices. “Compare at/Our Price” implies a price at other stores. Perceived quality here means how confident shoppers feel about the product’s quality, not their sense of its value or price. Should your team use the same price cues everywhere?

For practical purchases in stores, shoppers see a sale price beside the store’s own regular price as a stronger sign of quality than a “Compare at” price from other stores.

Data chart

For practical shirt purchases in stores, shoppers rate perceived quality higher when a sale price sits beside the store’s own regular price

Average of three ratings, from 1 (not confident) to 7 (confident), of how sure shoppers felt that a shirt for a job interview, seen on a store display, was reliable, good quality and durable.

In this experiment, shoppers at home show no reliable difference.

Shoppers making a practical shirt purchase in a store report higher perceived quality when a sale price sits beside the store’s own regular price than beside a “Compare at” price from other stores.

Average ratings for a hypothetical shirt for a job interview seen on a store display, pooling shoppers alone and with a companion; the reference and sale prices stay the same and only their wording changes. Shoppers who saw the same offer at home show no clear difference (5.82 with a “Compare at” price, 5.69 with the store’s own regular price).

Data chart

Shoppers with little motivation rate quality higher with the store’s own regular price in stores, but with a ‘Compare at’ price at home

Average of three ratings, from 1 (not confident) to 7 (confident), of how sure shoppers felt that a shirt for a job interview was reliable, good quality and durable.

Less motivated shoppers rate different comparisons higher in stores versus home.
Highly motivated shoppers show no clear difference in either place.

Shoppers with little motivation to examine product information report higher perceived quality with the store’s own regular price in stores and with a “Compare at” price at home; highly motivated shoppers show no clear difference in either place.

Average ratings from a separate experiment in which every shopper imagined buying a shirt for a job interview, seen in a store or at home; highly motivated shoppers were told their opinions would be weighted heavily by the retailer. The gaps for shoppers with little motivation are reliable; the gaps for highly motivated shoppers are not. The reference and sale prices stay the same and only their wording changes.

Action guide

Match your store promotion to practical purchases.For practical purchases in your stores, favor a sale price shown beside your own regular price over a “Compare at” price from other stores, and keep that regular price genuine. Shoppers rate quality moderately higher with the comparison within your store.
Test a different cue for your offers seen at home.Have your channel leaders test “Compare at” prices for practical purchases when shoppers have little motivation to examine product information. In an experiment about buying a shirt for a job interview, the perceived quality advantage at home appeared under low motivation.
Require your category teams to distinguish shoppers’ goals.Prioritize a sale price shown beside your own regular price to lift perceived quality meaningfully when your customers make practical purchases in stores. Customers buying for enjoyment show no clear perceived quality advantage for either the comparison within your store or the comparison with other stores.
Pilot substantive quality information for your highly motivated shoppers.Have your insights team compare product details with price cues for practical purchases. Highly motivated shoppers evaluating a shirt for a job interview show no clear perceived quality advantage for either price comparison. The experiment did not compare product details against price cues.

Evidence

Shoppers making a practical shirt purchase in a store report higher perceived quality when a sale price sits beside the store’s own regular price than beside a “Compare at” price from other stores. Average ratings are 5.92 versus 5.43 on a 7-point scale.
In a shirt experiment, shoppers imagine buying for a job interview. Those with little motivation to examine product information report higher perceived quality in a store with a sale price beside the store’s own regular price than beside a “Compare at” price. Average ratings are 5.83 versus 5.19 on a 7-point scale.
In a shirt experiment, shoppers imagine buying for a job interview. Those with little motivation to examine product information report higher perceived quality at home with a sale price beside a “Compare at” price than beside the store’s own regular price. Average ratings are 5.57 versus 4.87 on a 7-point scale.
On average, shoppers judge an offer more favorably when its sale price sits beside the store’s own regular price in stores, and beside a “Compare at” price at home. This holds when the shirt and tire studies are pooled with earlier studies of how shoppers judge an offer’s value, not product quality.
Shoppers highly motivated to examine information about a shirt for a job interview show no clear perceived quality difference between the two price comparisons, in stores or at home. Neither do shoppers buying a shirt for enjoyment.

Key takeaway

Shoppers making practical purchases in stores rate quality higher when a sale price sits beside your own regular price.

Limitations

The experiments cover hypothetical shirt and tire purchases in the United States and measure perceived quality, not purchases or sales. The reference prices and discounts stay constant, so the findings concern price cues rather than the size of a price cut.

Source

Grewal, D., Roggeveen, A., & Lindsey-Mullikin, J. (2014). The Contingent Effects of Semantic Price Cues. Journal of Retailing, 90(2), 198–205. https://doi.org/10.1016/j.jretai.2014.01.005.

https://doi.org/10.1016/j.jretai.2014.01.005