Comparing fixed price and discounted price strategies: the role of affect on evaluations
| Date | 01 June 2002 |
| Published date | 01 June 2002 |
| DOI | https://doi.org/10.1108/10610420210430051 |
| Pages | 160-173 |
| Author | Rajneesh Suri,Rajesh V. Manchanda,Chiranjeev S. Kohli |
| Subject Matter | Marketing |
Comparing fixed price and
discounted price strategies:
the role of affect on evaluations
Rajneesh Suri
Assistant Professor of Marketing, LeBow College of Business,
Drexel University, Philadelphia, Pennsylvania, USA
Rajesh V. Manchanda
University of Manitoba, Winnipeg, Canada
Chiranjeev S. Kohli
Cal State Fullerton, USA
Keywords Pricing strategy, Fixed costs, Price, Price discounts
Abstract Price is an important variable because it has a direct impact on a company's
profitability. However, there is limited evidence to support the effectiveness of competing
strategies of fixed pricing and discounted pricing. As a result, both strategies are
practised extensively in the industry. This paper draws on theories on affect, information
processing, and pricing to provide a conceptual framework. The aim is to examine the
effect of fixed pricing and discounted pricing on consumers' affect and evaluation of
products. Results from an experiment indicate that a fixed price format elicits more
positively valenced thoughts and stronger positive affect than a discounted price format.
This affective response, in turn, results in a less thorough processing of price information
and, consequently, higher perceptions of quality and value for the fixed price format.
Managerial implications of these findings are discussed.
While a recent advertisement for Wal-Mart screams, ``You do not have to
wait for advertised specials to get low prices. Our prices are low everyday,''
the debate regarding the effectiveness of ``everyday low pricing'' (fixed
pricing) continues. Several industries (automobiles, telecommunications, and
fast-moving consumer products, etc.) now offer their products and services at
prices that are not discounted and do not vary. For example, Saturn
Automobiles, as well as some of the new car superstores like CarMax and
AutoNation, have successfully employed a fixed price strategy. These
companies believe that price discounts turn away customers because the
complexity of discounting schemes makes it difficult to evaluate the deal
(Kerwin, 1997).
Further, research suggests that the widespread use of discounting strategies
has led consumers to question the validity of a discount ± whether the
so-called regular price is not just an artificially inflated price, while the
discounted price is the ``real'' price. While some marketing practitioners
consider the adoption of a fixed price strategy as ``revolutionary'' (Cook,
1994, p. 7) as it addresses many of the concerns with discounts discussed
above, others contend that there is insufficient evidence to claim that a fixed
price strategy is indeed a success (Nagle and Holden, 1995). In fact, some
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This research was conducted while Rajneesh Suri was a faculty member at Drexel
University.
Debate over effectiveness
of fixed pricing
Validity or otherwise of
discounts
160 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 11 NO. 3 2002, pp. 160-173, #MCB UP LIMITED, 1061-0421, DOI 10.1108/10610420210430051
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