Consumers price awareness at the point-of-selection

What constitutes the most appropriate measure of consumers price awareness

and what determines the differences?

by
Birger Boutrup Jensen

31st EMAC (European Marketing Conference)

28th 31st May 2002, Braga, Portugal

Track indication: Pricing or Retailing

Birger Boutrup Jensen

Researcher at the MAPP Centre
The Aarhus School of Business
Haslegaardsvej 10
DK-8210 Aarhus V
Denmark
Phone +45 89486680
Fax +45 86150177
E-mail: bbo@asb.dk

Consumers price awareness at the point-of-selection

What constitutes the most appropriate measure of consumers
price awareness and what determines the differences?

Abstract
This paper focuses on consumers price information processing at the point-of-selection.
Specifically, it updates past results of consumers price awareness at the point-of-selection
applying both a price-recall and a price-recognition test and tests hypotheses on potential
determinants of consumers price awareness at the point-of-selection. Both price-memory
tests resulted in higher measured price awareness than in any of the past studies. Results also
indicate that price recognition is not the most appropriate measure. Finally, a discriminant
analysis shows that consumers who are aware of the price at the point-of-selection are more
deal prone, more low-price prone, and bought a special-priced item. Implications are
discussed.
KEYWORDS: Price awareness, Point-of-selection, Determinants, Consumers

Introduction
Price is one of the most important types of information used when buying grocery items (e.g.,
Lichtenstein et al., 1993). It therefore comes as a surprise that studies regarding consumers
price information processing found most consumers to be unaware of prices for grocery items
recently purchased (e.g., McGoldrick and Marks, 1987; Dickson and Sawyer, 1990;
Wakefield and Inman, 1993). In a classical field study, Dickson and Sawyer (1990) checked
shoppers price recall of grocery items within 30 seconds after an item had been chosen. They
found that 53 percent could not recall the price of the item just chosen.
The findings of low levels of price recall at the point-of-selection are important for several
reasons. First, since price awareness has a great impact on price promotion effectiveness
(McGoldrick and Marks, 1987), low levels of price awareness at the point-of-selection could
indicate a need for better in-store communication of prices and price promotions. Second,
retailers and manufacturers base for pricing and promotion decisions may be biased, if they
assume that consumers are highly aware of prices in a buying situation. Third, price
information processing models assume that consumers update their internal reference prices at
the point-of-selection in order to have an updated internal cognitive representation of a fair
price against which to compare future prices (e.g., Briesch et al., 1997). Low levels of price
awareness at the point-of-selection question this assumption.
Past studies have typically applied a price-recall test to measure consumers price awareness.
In this approach consumers are asked to state the exact price of a grocery item unaided.
According to Monroe et al. (1986), this approach could, however, be a possible explanation of
the low levels of price awareness detected in past studies. Price information can be learned
incidentally while shopping. Picking a product from the shelf and noticing its price may not
lead to recalling this price, because it is not linked to long-term memory. They therefore argue
that a price-recognition test may be a more appropriate measure of incidentally learned price
information, because it provides respondents with price cues that can retrieve the weak price
information from working memory. Unfortunately, few, if any, price-recognition tests have
been carried out at the point-of-selection. Thus, the first objective of this study is to update the
results of past studies applying both a price-recall and a price-recognition test to measure
consumers price awareness of grocery items at the point-of-selection. In doing so, this study
gives insight into whether the price-recognition test is more useful than the price-recall test.

From a theoretical and a practical point of view it is important to improve the understanding
of the determinants of price information processing (e.g., Wakefield and Inman, 1993). Thus,
the second objective of this study is to examine potential determinants of consumers price
awareness at the point-of-selection. Specifically, the impact of brand loyalty, planned brand
purchase, five dimensions of price involvement, and buying a special-priced item is explored.

Theory and hypotheses

According to Monroe et al. (1986), grocery shopping is a low involvement project for most
consumers, which is why they seldom search actively for in-store information. For many
consumers, price information will therefore be learned incidentally, almost by chance, while
shopping grocery items contrary to intentional learning that involves active in-store
information search (Mazumdar and Monroe, 1990). The incidentally learned price
information will seldom be cognitively associated or organised with other stored price or
product information from memory. Thus, incidental learning of price information results in a
short-lived and weak memory trace that is difficult to retrieve from memory. Monroe et al.
(1986) therefore concluded that price-recall testing does not fully measure consumers price
awareness at the point-of-selection when it comes to grocery items. Instead, they argue for a
price-recognition test. In a price-recognition test consumers are presented with a set of visual
price cues to trigger the retrieval of the weak, although existing, price information of the
chosen item. Thus, the price-recognition test should be able to capture both consumers who
have learned price information incidentally, and consumers with stronger memory traces who
therefore also are able to recall the exact price in the price-recall test. Hence:
H1: The proportion of consumers able to recognise the price in a price-recognition test is
higher than the proportion of consumers able to recall the price in a price-recall test.
Brand loyalty involves habitual buying behaviour. Thus, the brand-loyal consumer has a
tendency to use an established decision plan consequently engaging in no or minimal external
information search before choosing the favourite brand. For this reason, the brand-loyal
consumer seldom seeks or considers the price when choosing a brand. In this connection,
several studies have shown brand-loyal consumers to be less sensitive towards in-store price
promotions and price adjustments (e.g., Bronnenberg and Vanhonacker, 1996). Hence:
H2: Consumers who are aware of the price at the point-of-selection are less brand loyal
than consumers who are not.
According to Stiglers (1961) cost/benefit search theory, planning shoppers do not find it
profitable to search for the same price information in the supermarket that they have already
obtained from a circular at home. Possibly planning shoppers are aware of an items price
when processing price information at home. But this exact price information is likely to
deteriorate from memory before entering the supermarket. When asked to state the price of
the item just chosen, planning shoppers are assumed to answer from their brand-specific
internal reference price. According to conceptualisations of an internal reference price, the
resulting price estimate should be inaccurate (e.g., Briesch et al., 1997). Hence:
H3: Consumers who are aware of the price at the point-of-selection are less likely to have
planned the purchase of a specific brand before entering the supermarket.
Consumers are exposed to a mass of in-store stimuli. Whether these stimuli will affect the
consumers decision-making depends on their motivation to process the information. This can
2

be conceptualised as the consumers involvement in price stimuli (Celsi and Olson, 1988).
Consumers, who are price involved and thus motivated to process price information, will
engage in more active price search and be more aware of price information. The hypothesis
includes five possible dimensions of the term price involvement derived from previous
conceptualisations (e.g., Lichtenstein et al., 1993; Urbany et al., 1996). Hence:
H4: Consumers who are aware of the price at the point-of-selection a) have higher
perceived budget constraints; b) are more price maven; c) are more deal prone; d) are
more low-price prone; and e) are more value conscious.
It is generally accepted that promotion signals can arouse consumer attention. According to
Thalers (1985) theory of transaction utility, a transactions attractiveness influences the
probability of an item being bought. Buying an item on promotion creates utility for the
consumer. But in order to assess the size of this utility, the consumer needs to check the
items actual price to compare it with an expected price and/or the prices of other items.
Likewise, binary encoding of a promotion signal should lead to an increase in price search in
order to assess the promotions attractiveness (Dickson and Sawyer, 1990). Consumers who
buy a special-priced item are thus assumed to have undertaken more price search. Hence:
H5: Consumers who buy a special-priced grocery item are more aware of the price at the
point-of-selection than consumers who buy a regular-priced item.

Method
Limited cognitive capacity results in just processed price information being cleared from
working memory when subsequent information processing takes place. Thus, similar to
Dickson and Sawyer (1990), shoppers were contacted immediately after they had picked a
particular grocery item from the shelf. By asking shoppers later than this could result in
measurement lag biases due to forgetting, which could give an inaccurate picture of the extent
of price awareness at the point-of-selection. Awareness of product prices cannot be measured
directly, but exact price recall is regarded as a legitimate first measure of it (Gabor, 1977). In
the price-recall test shoppers were asked to state the exact price of the just chosen item
unaided. A price-recognition test was carried out in direct continuation of the price-recall test.
In the price-recognition test, shoppers were asked to point out the exact price on a scale,
regardless of their estimate in the price-recall test. The recognition scale was based on the
Forced-choice method (Monroe et al., 1986). It consisted of between nine and fifteen prices
one being the correct price. The price alternatives were listed in numerical order and depicted
in the supermarkets normal price format. A price-ranking test (e.g., Mazumdar and Monroe,
1990) was not carried out. Some consumers will be able to rank prices within a product
category correctly simply by using the internal reference price - without having noticed the
price at the point-of-selection. Thus, a price-ranking test is not an appropriate measure of
consumers price awareness at the point-of-selection, which is in focus here.
The price-awareness tests were followed by a series of questions concerning possible
determinants of price awareness. The in-store interview included specific questions regarding
the brand just chosen, whereas a questionnaire that respondents were asked to complete at
home included more general and elaborate questions. The empirical study was carried out in
October 1998 in two large supermarkets in Aarhus, Denmark; 213 shoppers were asked to
participate. Through the selection of product categories, three factors that might influence the
price awareness results were controlled for. These factors were promotion frequency,
purchase frequency, and the relative price level of the category. Eight categories of grocery
items were selected so that they represented high and low levels of each of these factors.

Major results and implications

82.6 percent of the shoppers asked both participated in the in-store interview and returned a
correctly completed questionnaire. Without any cues, 68.6 percent of the respondents were
able to recall the exact price of the item just chosen, whereas 71.7 percent were able to
recognise the exact price from the recognition scale. Thus, both price-memory tests resulted
in higher measured price awareness than in any of the past studies. Reasons for this could be
manifold, including: a) Past studies have become outdated because of the dynamic
environment; b) the Danish environment could be decisively different; c) the supermarkets
investigated are relatively more effective in communicating their price information; and d)
fine-tuning of the study design from past design mistakes.
The high degree of price awareness at the point-of-selection in this study implies that at least
the supermarkets studied stand a good chance of influencing the in-store decision process of
shoppers to whom the price matters in some way. Furthermore, this result suggests that a
large percentage of consumers had the opportunity to adjust their internal reference price at
the point-of-selection, thus confirming the basis of reference price theory.
As many as 92.7 percent of the respondents were aware of the promotion status of the just
chosen item, whereas only 35 percent reported that they have searched actively for price
promotions within the product category. This result suggests that many consumers are passive
receivers of price-promotion communication. Encoding of promotion status is binary by
nature and therefore less cognitively demanding than encoding of exact price information.
This could be the reason why encoding of promotion status apparently enters the in-store
decision process for most consumers this also goes for consumers who are not particularly
price involved when it comes to grocery shopping.
Hypothesis H1 is not supported. According to a t-test, the proportion of consumers able to
recognise the exact price was not significantly higher than the proportion able to recall the
exact price. Together with the relatively high percentage (68.6%) of consumers that were able
to recall the exact price, this result suggests that the price-recognition test is not a more
appropriate measure of consumers price awareness at the point-of-selection. Contrary to
Monroe et al.s (1986) assumptions, retrieval of price information from the working memory
is not necessarily conditional on the depth of price information processing provided that the
measurement takes place in direct continuation of the item choice. Recognition testing seems
more appropriate for brand and commercial recognition. The visual cues associated with
brand names and commercials are thus far more prominent than the stereotype price labels
that are almost indistinguishable besides the numerical information.
A two-group discriminant analysis was applied to investigate which variables determine
consumers price awareness - the two groups respectively consisted of consumers who were
and consumers who were not able to recall the correct price. The efficacy of predictor
variables was assessed by means of F to enter/remove. According to the discriminant
function, consumers who are aware of the price at the point-of-selection, are more deal prone,
more low-price prone, and bought a special-priced item.
Thus, H4c and H4d are supported. Consumers, who are deal and/or low-price prone, are more
motivated to search for and to process in-store price information. Thus, deal and low-price
proneness represent dimensions of consumers price involvement. Likewise, H5 is supported.
In-store promotion signals attract consumers attention leading to increased price-checking
behaviour to assess the attractiveness of the promotion. This result highlights the danger of
retailers trying to lure consumers with promotion signals followed by no or minimal price
cutting thinking that the promotion signal alone will function as a buying heuristic.
Surprisingly, brand loyalty was not a determinant of price awareness. Thus, H2 is not
supported. This result suggests that brand loyal consumers are more price-sensitive than
previously assumed, which could be attributable to brand loyal consumers being price4

sensitive when it comes to deciding the quantity to obtain at each purchase. Thus, at least
some brand loyal consumers seem to notice the price of their preferred brand to check if it is
promoted and if so assess whether stockpiling can pay off. The resulting purchase
acceleration can have negative effects for retailers and manufacturers because it consists of
borrowing future regular-price sales, or past regular-price sales if the brand loyal consumers
expected the offer. Thus, product categories characterised by a high degree of brand loyalty
must be identified and price and trade promotions in these product categories should be
considered extra carefully in order to manage the negative effects of purchase acceleration.
Furthermore, H3 is not supported. Planned brand purchase is not a determinant of price
awareness. One possible explanation could be the existence of information complementarity
contrary to Stiglers (1961) cost/benefit theory. Some planning shoppers undertake in-store as
well as out-store price information search for the planned purchases in order to check whether
the in-store price corresponds to the price in the circular or perhaps in order to decide how
many units to buy. Information complementarity provides supermarkets with a double chance
to influence consumers brand choice through their price-communication efforts.
A number of socio-economic variables (age, gender, income, and family size) were included
as control variables. None of them were significant in the discriminant analysis.
Monroe et al. (1986) assume that price involvement is low in general when it comes to
grocery items. This assumption is partly questioned in this study. Two dimensions of price
involvement were able to discriminate between consumers price awareness at the point-ofselection. Furthermore, as many as 68.6 percent of the respondents in this study were able to
recall the exact price. These results indicate that at least some consumers associate price
information search with situational and/or personal self-relevance when buying grocery items.

Key references
Briesch, R.A. Krishnamurthi, L. Mazumdar, T. Raj, S.P., 1997. A comparative analysis of
reference price models. Journal of Consumer Research 24, 202-215.
Bronnenberg, B.J. Vanhonacker, W.R., 1996. Limited choice sets, local price response and
implied measures of price competition. Journal of Marketing Research 33, 163-173.
Celsi, R.L. Olson, J.C., 1988. The role of involvement in attention and comprehension
processes. Journal of Consumer Research 15, 210-224.
Dickson, P.R. Sawyer, A.G., 1990. The price knowledge and search of supermarket shoppers.
Journal of Marketing 54, 42-53.
Gabor, A., 1977. Pricing principles and practices. Heinemann, London.
Lichtenstein, R.D. Ridgway, N.M. Netemeyer, R.G., 1993. Price perceptions and consumer
shopping behavior: A field study. Journal of Marketing Research 30, 234-245.
Mazumdar, T. Monroe, K.B., 1990. The effects of buyers intentions to learn price
information on price encoding. Journal of Retailing 66(1), 15-32.
McGoldrick, P.J. Marks, H.J., 1987. Shoppers awareness of retail grocery prices. European
Journal of Marketing 21(3), 63-76.
Monroe, K.B. Powell, C.P. Choudhury, P.K., 1986. Recall versus recognition as a measure of
price awareness. Advances in Consumer Research 13, 594-599.
Stigler, G.J., 1961. The economics of information. Journal of Political Economy 69, 213-235.
Thaler, R., 1985. Mental accounting and consumer choice. Marketing Science 4, 199-214.
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