Use of Internal Reference Prices for Deal Evaluations: Decision Structure and Role of Involvement

Price information is a key influencer in consumer decision-making. Consumers compare prices with their reference prices (both external and internal) to assess the value of an offer. In this study, we examine the role of involvement in the usage of internal reference prices (IRP). Using a two-dimensional operationalization of the IRP construct, we empirically demonstrate that high-involvement customers use market-based IRPs whereas low-involvement customers use aspiration-based IRPs. We then examine the structure of relationships between IRPs, perceived value of the offer, perceived shop-around savings, and purchase intention. Again, we find interesting differences between the low- and high-involvement groups. The standard of comparison varies across times and situations. Managerially, our results suggest that advertising price specials may not always be the best way to elicit favorable responses from consumers who have low levels of product involvement.