• Journal of Global Scholars of Marketing Science
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• v.17 no.4
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• pp.247-269
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• 2007

In recent years, one of the major reasons for the fierce competition amongst firms is that they strive to increase their own market shares and customer acquisition rate in the same market with similar and apparently undifferentiated products in terms of quality and perceived benefit. Because of this change in recent marketing environment, the differentiated after-sales service and diversified promotion strategies have become more important to gain competitive advantage. Price promotion is the favorite strategy that most retailers use to achieve short-term sales increase, induce consumer's brand switch, in troduce new product into market, and so forth. However, if marketers apply or copy an identical price promotion strategy without considering the characteristic differences in product and consumer preference, it will cause serious problems because discounted price itself could make people skeptical about product quality, and the changes of perceived value might appear differently depending on other factors such as consumer involvement or brand attitude. Previous studies showed that price promotion would certainly increase sales, and the discounted price compared to regular price would enhance the consumer's perceived values. On the other hand, discounted price itself could make people depreciate or skeptical about product quality, and reduce the consumers' positivity bias because consumers might be unsure whether the current price promotion is the retailer's best price offer. Moreover, we cannot say that discounted price absolutely enhances the consumer's perceived values regardless of product category and purchase situations. That is, the factors that affect consumers' value perceptions and buying behavior are so diverse in reality that the results of studies on the same dependent variable come out differently depending on what variable was used or how experiment conditions were designed. Majority of previous researches on the effect of price-comparison advertising have used consumers' buying behavior as dependent variable. In order to figure out consumers' buying behavior theoretically, analysis of value perceptions which influence buying intentions is needed. In addition, they did not combined the independent variables such as brand loyalty and price discount rate together. For this reason, this paper tried to examine the moderating effect of brand loyalty on relationship between the different levels of discounting rate and buyers' value perception. And we provided with theoretical and managerial implications that marketers need to consider such variables as product attributes, brand loyalty, and consumer involvement at the same time, and then establish a differentiated pricing strategy case by case in order to enhance consumer's perceived values properl. Three research concepts were used in our study and each concept based on past researches was defined. The perceived acquisition value in this study was defined as the perceived net gains associated with the products or services acquired. That is, the perceived acquisition value of the product will be positively influenced by the benefits buyers believe they are getting by acquiring and using the product, and negatively influenced by the money given up to acquire the product. And the perceived transaction value was defined as the perception of psychological satisfaction or pleasure obtained from taking advantage of the financial terms of the price deal. Lastly, the brand loyalty was defined as favorable attitude towards a purchased product. Thus, a consumer loyal to a brand has an emotional attachment to the brand or firm. Repeat purchasers continue to buy the same brand even though they do not have an emotional attachment to it. We assumed that if the degree of brand loyalty is high, the perceived acquisition value and the perceived transaction value will increase when higher discount rate is provided. But we found that there are no significant differences in values between two different discount rates as a result of empirical analysis. It means that price reduction did not affect consumer's brand choice significantly because the perceived sacrifice decreased only a little, and customers are satisfied with product's benefits when brand loyalty is high. From the result, we confirmed that consumers with high degree of brand loyalty to a specific product are less sensitive to price change. Thus, using price promotion strategy to merely expect sale increase is not recommendable. Instead of discounting price, marketers need to strengthen consumers' brand loyalty and maintain the skimming strategy. On the contrary, when the degree of brand loyalty is low, the perceived acquisition value and the perceived transaction value decreased significantly when higher discount rate is provided. Generally brands that are considered inferior might be able to draw attention away from the quality of the product by making consumers focus more on the sacrifice component of price. But considering the fact that consumers with low degree of brand loyalty are known to be unsatisfied with product's benefits and have relatively negative brand attitude, bigger price reduction offered in experiment condition of this paper made consumers depreciate product's quality and benefit more and more, and consumer's psychological perceived sacrifice increased while perceived values decreased accordingly. We infer that, in the case of inferior brand, a drastic price-cut or frequent price promotion may increase consumers' uncertainty about overall components of product. Therefore, it appears that reinforcing the augmented product such as after-sale service, delivery and giving credit which is one of the levels consisting of product would be more effective in reality. This will be better rather than competing with product that holds high brand loyalty by reducing sale price. Although this study tried to examine the moderating effect of brand loyalty on relationship between the different levels of discounting rate and buyers' value perception, there are several limitations. This study was conducted in controlled conditions where the high involvement product and two different levels of discount rate were applied. Given the presence of low involvement product, when both pieces of information are available, it is likely that the results we have reported here may have been different. Thus, this research results explain only the specific situation. Second, the sample selected in this study was university students in their twenties, so we cannot say that the results are firmly effective to all generations. Future research that manipulates the level of discount along with the consumer involvement might lead to a more robust understanding of the effects various discount rate. And, we used a cellular phone as a product stimulus, so it would be very interesting to analyze the result when the product stimulus is an intangible product such as service. It could be also valuable to analyze whether the change of perceived value affects consumers' final buying behavior positively or negatively.

• Journal of Global Scholars of Marketing Science
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• v.18 no.4
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• pp.1-32
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• 2008

Brown and Dacin (1997) have investigated the relationship between corporate associations and product evaluations. Their study focused on the effects of associations with a company's corporate ability (CA) and its corporate social responsibility (CSR) on consumers' product evaluations. Their study has found that both of CA and CSR influenced product evaluation but CA association has a stronger effect than CSR associations. Brown and Dacin (1997) have, however, claimed that there are few researches on how corporate association impacts product responses. Accordingly, some of researchers have found the variables to moderate or to mediate the relationship between the corporate association and the product responses. In particular, there has been existed a few of studies that tested the influence of the reputation on the product-relevant perceived risk, but the effects of two types of the corporate association on the product-relevant perceived risk were not identified so far. The primary goal of this article is to identify and empirically examine some variables to moderate the effects of CA association and CSR association on the perceived risk of the product. In this articles, we take the concept of the corporate associations that Brown and Dacin (1997) had proposed. CA association is those association related to the company's expertise in producing and delivering its outputs and CSR association reflected the organization's status and activities with respect to its perceived societal obligations. Also, this study defines the risk, which is the uncertainty or loss of the product and corporate that consumers have taken in a particular purchase decision or after having purchased. The risk is classified into product-relevant performance risk and financial risk. Performance risk is the possibility or the consequence of a product not functioning at some expected level and financial risk is the monetary loss one perceives to be incurring if a product does not function at some expected level. In relation to consumer's knowledge, expert consumers have much of the experiences or knowledge of the product in consumer position and novice consumers does not. The model tested in this article are shown in Figure 1. The model indicates that both of CA association and CSR association influence on performance risk and financial risk. In addition, the effects of CA and CSR are moderated by product category knowledge (product knowledge) and product category involvement (product involvement). In this study, the relationships between the corporate association and product-relevant perceived risk are hypothesized as the following form. For example, Hypothesis 1a($H_{1a}$) is represented that CA association has a positive influence on the performance risk of consumer. Also, the hypotheses that identified some variables to moderate the effects of two types of corporate association on the perceived risk of the product are laid down. One of the hypotheses of the interaction effect is Hypothesis 3a($H_{3a}$), it is described that consumer's knowledges of the product moderates the negative relationship between CA association and product-relevant performance risk. A field experiment was conducted in order to examine our model. The company tested was not real but imagined to meet the internal validity. Water purifiers were used for our study. Four scenarios have been developed and described as the imaginary company: Type A with both of superior CA and CSR, Type B with superior CSR and inferior CA, Type C with superior CA and inferior CSR, and Type D with both inferior of CA and CSR. The respondents of this study were classified into four groups. One type of four scenarios (Type A, B, C, or D) in its questionnaire was given to the respondent who filled out questions. Data were collected by means of a self-administered questionnaire to the respondents, chosen in convenience. A total of 300 respondents filled out the questionnaire but 207 were used for further analysis. Table 1 indicates that the scales in this study are reliable because the range of coefficients of Cronbach's $\alpha$ are from 0.85 to 0.92. The composite reliability is in the range of 0,85 to 0,92 and average variance extracted is in 0.72-0.98 range that is higher than the base level of 0.6. As shown in Table 2, the values for CFI, NNFI, root-mean-square error approximation (RMSEA), and standardized root-mean-square residual (SRMR) are acceptably close to the standards suggested by Hu and Bentler (1999):.95 for CFI and NNFI,.06 for RMSEA, and.08 for SRMR. We also tested discriminant validity provided by Fornell and Larcker (1981). As shown in Table 2, we found strong evidence for discriminant validity between each possible pair of latent constructs in all samples. Given that these batteries of overall goodness-of-fit indices were accurate and that the model was developed on theoretical bases, and given the high level of consistency across samples, this enables us to proceed the previously defined scales. We used the moderated hierarchical regression analysis to test the influence of the corporate association(CA and CSR associations) on product-relevant perceived risk(performance and financial risks) and to identify the variables moderating the relationship between the corporate association and product-relevant performance risk. In this study, dependent variables are performance and financial risk. CA and CSR associations are described the independent variables. The moderating variables are product category knowledge and product category involvement. The results are, as expected, found that CA association has statistically a significant influence on the perceived risk of the product, but CSR association does not. Product category knowledge and involvement moderate the relationship between the CA association and the perceived risk of the product. However, the effect of CSR association on the perceived risk of the product is not moderated by the consumers' knowledge and involvement. For this result, it is necessary for a corporate to inform its customers CA association more than CSR association so that they could be felt to be the reduction of the perceived risk. The important theoretical contribution of this research is the meanings that two types of corporate association that Brown and Dacin(1997), and Brown(1998) have proposed replicated the difference of the effects on product evaluation. According to Hunter(2001), it was an important affair to accomplish the validity of a particular study and we had to take about ten studies to deduce a strict study. Next, there is the contribution of the this study to find that the effects of corporate association on the perceived risk of the product are varied by the moderator variables. In particular, the moderating effect of knowledge on the relationship between corporate association and product-relevant perceived risk has not been tested in Korea. In the managerial implications of this research, we suggest the necessity to stress the ability that corporate manufactures the product well(CA association) than the accomplishment of corporate's social obligation(CSR association). This study suffers from various limitations that imply future research directions. The moderating effects of product category knowledge and involvement on the relationship between corporate association and perceived risk need to be replicated. Next, future research could explore whether the mediated effects of the perceived risk has the relationship between corporate association and consumer's product purchase. In addition, to ensure the external validity of the study will be needed to use realistic company, not artificial.