Reference Pricing How Effectiv

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1993). The second major type of reference price is the internal reference price. These exist in the consumer's mind as either a point or a range of points (Putler, 1992). In either case, the reference price is used to evaluate the value of a price under consideration. The concept of the reference price is consistent with a number of psychological theories including adaptation level theory and assimilation-contrast theory (Kalyanaram & Winer, 1995).
Two important sides to the reference-pricing debate have emerged. Gijsbrechts (1993) takes a cognitive-based approach by saying he believes that it is important to examine three key areas. First, whether the reference price is a point or range. Second, determining how a consumer formulates the reference price (that is whether it is based on the highest, lowest median, etc.) and finally to examine how consumers store the reference price.
An opposing viewpoint takes the behaviorist's approach. These researchers (for example ...

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to be lower than necessary for consumers to have accurate internal reference prices for many products.

Gijsbrects (1993) disputes this and points out a number of reasons why. First, these studies concentrated on convenience, fast moving consumer goods. These goods tend to be low involvement goods, so the consumer doesn't take much note of the price of the product. Second the degree of pricing knowledge varies from consumer to consumer. Those with little price knowledge may have just begun to buy the product, while those who have extensive knowledge may have a very firm reference price. Finally, the lack of knowledge may simply be due to the encoding methods that the consumer uses ...

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