E-tail and retail reference price effects

Purpose - The focus and intended contribution of this research are to understand better how retailers should strategically present external reference price information varying in the context from which it originates (online vs bricks and mortar). Design/methodology/approach - A two reference price environment (online e-tail, bricks-and-mortar retail) × two external reference price ($252.99, low; $379.99, high) between subjects experimental design with a single control condition was employed. Findings - Results from an experimental study provide empirical support, suggesting that consumers expect to pay less in online e-tail settings than bricks-and-mortar retail settings. Additionally, results suggest that bricks-and-mortar retail external reference prices influence consumer e-tail price expectations, price fairness, and satisfaction perceptions more than online e-tail external reference prices when reference prices are high. When external reference prices are low, both online e-tail and bricks-and-mortar retail external reference prices are equally effective. Research limitations/implications - Price setters should use bricks-and-mortar external reference prices when the external reference price is high, as consumers are impacted positively by these reference prices. Practical implications - The research results suggest a time to use bricks-and-mortar external reference prices and suggest that online external reference prices have similar impact regardless of the size of the external reference price. Originality/value - This research is the first of its kind to evaluate the impact of the context of the reference price on consumer evaluations.