Low Prices are Just the Beginning: Price Image in Retail Management

Recent managerial evidence and academic research has suggested that consumer decisions are influenced not only by the prices of individual items but also by a retailer's price image, which reflects a consumer's impression of the overall price level of a retailer. Despite the increasing importance of price image in marketing theory and practice, existing research has not provided a clear picture of how price images are formed and how they influence consumer behavior. This article addresses this discrepancy by offering a comprehensive framework delineating the key drivers of price image formation and their consequences for consumer behavior. Contrary to conventional wisdom that assumes price image is mainly a function of a retailer's average price level, this research identifies several price-related and nonprice factors that contribute to price image formation. The authors further identify conditions in which these factors can overcome the impact of the average level of prices, resulting in a low price image despite the retailer's relatively high prices, as well as conditions in which people perceive a retailer to have a high price image despite its relatively low average price level.