The Influence of Price Presentation Order on Consumer Choice. Kwanho Suk, Jiheon Lee, and Donald R. Lichtenstein WEB APPENDIX. I. Supplemental Studies

Transcription

1 1 The Influence of Price Presentation Order on Consumer Choice Kwanho Suk, Jiheon Lee, and Donald R. Lichtenstein WEB APPENDIX I. Supplemental Studies Supplemental Study 1: Lab Study of Search Patterns and Consumer Choice The central purpose of this study was to provide a direct test for a critical assumption underlying the price order effect. Specifically, inherent in the expectation that prices presented at the top of a list are more likely to serve as reference values for prices presented subsequently in the list is the assumption that consumers will attend to prices at the top of a list prior to attending to prices elsewhere in the list. While eye-tracking studies cited in the paper support this premise, given its central role to the present research, we sought to gain additional evidence specifically in the context of price lists. Consequently, we used the Mouselab program (Payne, Bettman, and Johnson 1988) to explore patterns of information search when choice options are presented simultaneously. Method Forty-three participants were asked to select a room for a stay at a resort hotel. Information about eight hotel rooms was displayed in a matrix in which the rows were eight brands and the columns were four product attributes. The rooms varied in size, view, extra services, and price (from $40 to $110, with $10 increments). Each piece of information was hidden in a box that could be opened by clicking a mouse. The eight rooms were presented in either ascending (n = 22) or descending (n = 21) price order. Participants were asked to examine as many or as few boxes as they wanted and to select

2 2 the hotel option that was most attractive to them. Results Consistent with expectations and prior literature, a review of patterns used to search the presented information provides evidence that the information searches tended to start at the top and move downwards. On average, the respondents opened of the 32 available boxes. Forty-one participants (95.3%) started their search by opening a box in the first row. Analyzing the directions of the vertical searches (across options), we found that 80.5% of the searches were downward scans and 19.5% were upward scans. When the sequences were horizontal (i.e., across attributes), 65.0% of the scans were leftto-right and 35.0% were right-to-left. Whether the prices were listed in ascending or descending order made no difference in the search patterns (p s >.77). We should also note that, consistent with the price order effect, the price of the selected option was higher when the hotels were presented in descending price order than in ascending price order (M descending = $93.33 vs. M ascending = $80.00; F(1, 41) = 5.00, p =.031, d =.65). Supplemental Study 2: Moderating Role of Product Knowledge Supplemental Study 2 represents a close replication of Study 5 with the following differences. First, a sample of U.S. consumers was used and as such, prices were represented in U.S. dollars instead of Korean won. Second, the nine camera models were updated by visiting the Amazon.com website and downloading pictures and descriptions of current models (as the models used in Study 5 were over a year old). Rather than using the actual prices of the cameras, we used prices that were more uniform and ranged from $79.99 to $ Third, the survey was administered to an online sample of consumers.

3 3 Method A total of 148 online participants from Amazon Mechanical Turk (AMT) were randomly assigned to condition in a two-cell price order (ascending vs. descending) between-subjects study. The sample from AMT was restricted to respondents from the US. In exchange for their participation, AMT participants received a twenty-cent payment. Participants reviewed nine pictures and descriptions for digital camera models (downloaded from Amazon.com) presented in a list format, along with fictitious prices (ranging from $79.99 to $299.97) constructed by the researchers to ensure price variance. Depending on the experimental conditions, the alternatives were presented either in ascending or descending price order. Along with price, the nine digital cameras were defined in terms of brand and model name, and key attributes (e.g., pixels, LCD screen, and optical zoom). The participants were instructed to select the model they wanted to purchase. In addition, we measured the participants subjective knowledge about digital cameras by assessing and averaging the same two scales used in Study 5 (r =.53). Results To test for the predicted moderation, price level of the product choice was regressed on the price order dummy, mean-centered product knowledge, and the interaction between the two. Results showed that price order had a significant influence on the dependent variable (b = 19.97, t = 3.62, p <.01). However again, this effect was qualified by the predicted interaction with knowledge (b = -6.51, t = -2.74, p <.01). This interaction was tested using the Johnson-Neyman technique described in Study 5 (Hayes and Matthes 2009; Johnson and Neyman 1936). The Johnson-Neyman point for p <.05 (t = 1.98) for the product knowledge moderator occurs at a value of 3.60, or.62 standard

4 4 deviations above the mean of This indicates that the descending price order results in a significantly higher level of product price chosen than the ascending price order for all values knowledge below As such, these data are consistent with the conclusion that people with lower levels of product knowledge are more influenced by price order. Discussion Results of this study replicate those of Study 5 and in so doing, provide confirmatory evidence for the moderating role of product knowledge on the price order effect. Moreover, and different from all previous studies, Supplemental Study 2 was conducted with a western (U.S.) sample as opposed to an eastern (Korean) sample. As mirror studies of each other with convergent results, Supplemental Studies 2 and Study 5 provide evidence of the robustness of the price order effect across samples from western and eastern cultures, one a web-based sample, the other a student sample. Supplemental Study 3: Simultaneous and Sequential Presentation As a check on the robustness of the price order effect, we conducted a study in order to test for the generalizability of the effect across prices presented sequentially one at a time as well as presented simultaneously (as done in the prior studies). Method Participants, design, and stimuli. One hundred and eighteen undergraduate students participated in a 2 (presentation format: simultaneous vs. sequential) x 2 (price order: ascending vs. descending) between-subjects design study. The participants were asked to choose the hotel room they would most likely book from a set of 11 hotel rooms that were presented either simultaneously or sequentially, and either in ascending or

5 5 descending price order. The hotel rooms were described by view, room size, additional services, and price. The features and prices of the rooms were selected from real online hotel reservation services. The prices ranged from $30.00 and $ per night in $10.00 increments. Procedure and measures. The study was conducted using PCs in a laboratory setting with 5 to 15 participants in each session. The participants were asked to choose a hotel room for a vacation trip with their best friend. In the simultaneous presentation condition, all the hotel rooms were presented in a tabular format on a single PC screen. In the sequential choice condition, the options were presented in succession on separate screens and each hotel description was displayed on the screen for 10 seconds. In the ascending price order condition, the presentation sequence was from the lowest-priced option to the highest; this sequence was reversed in the descending price condition. In all conditions, the participants were asked to make their choice while the hotel rooms were presented on the PC monitor and write it down on the questionnaire. The perceived importance of quality and price in making their choice was measured by questions asking how seriously they considered price and how seriously they considered quality (1 = not considered at all ; 7 = considered a lot ). Results and Discussion Price order effect. The tests on the price of the selected hotel room revealed significant main effects for both price order (F(1, 114) = 13.94, p <.001, d =.67) and presentation format (F(1, 114) = 7.38, p =.008). The interaction was not significant (F(1, 114) < 1.0). The average price of the selected hotel room was higher in the descending order (M = $94.36) than in the ascending order (M = $76.00), indicating an overall price

6 6 order effect. Planned contrasts in each presentation format condition showed that the price order effect was significant for both the simultaneous (M ascending = $70.00 vs. M descending = $87.00; F(1, 114) = 5.97, p =.016, d =.59) and the sequential (M ascending = $82.00 vs. M descending = $101.72; F(1, 114) = 8.04, p =. 005, d =.69) conditions. The significant main effect of presentation format showed that the price of the chosen option was higher when the options were presented sequentially (M = $91.86) than when they were presented simultaneously (M = $78.50). Perceived importance of quality and price. The relative importance of quality was calculated for each participant by dividing the quality importance rating by the sum of the importance ratings for both quality and price. It is predicted that quality would be considered more important if the price order was descending (quality loss) than ascending (quality gain). A 2 x 2 ANOVA assessing the relative importance of quality showed a significant main effect of presentation order (F(1, 114) = 4.14, p =.044). As expected, quality was perceived to be more important relative to price when the options were presented in descending price order (M =.53) than in ascending price order (M =.49). The main effect of presentation format was also significant (F(1, 114) = 4.14, p =.044), indicating that quality was perceived to be more important when the options were presented sequentially (M =.53) than simultaneously (M =.49). Mediation test. We also tested whether the price order effect is mediated by relative importance of quality to price. First, there was a significant main effect of order on choice (b = 9.18, t = 3.73, p <.001). Second, the relationship between price order and mediator was significant (b =.02, t = 2.04, p =.044). Third, when the dependent variable was regressed on both presentation order and mediator, (1) the mediator was significant

7 7 (b = , t = 8.90, p <.001) and (2) the presentation order was significant (b = 5.97, t = 3.10, p =.002) but this coefficient was significantly reduced compared with the one not including the mediator (t(116) = 4.85, p <.001). These results also support that the price order effect is mediated by the by relative importance of quality to price due to differential loss aversion (Baron and Kenny 1986; Freedman and Schatzkin 1992). In addition, we also tested the mediation using the bootstrapping technique (Preacher and Hayes 2008; Zhao, Lynch, and Chen 2010). Our results showed that the relative importance of quality to price significantly mediated the main effect of presentation order (indirect effect = 6.54, 95% CI [.65, 13.37]).

8 8 II. Supplemental Analyses Supplemental Analysis 1: Choice Share of Market Pens from Study 2 As in study 1 we examined the effects of price order on the choice share of the listed items. A 2 (order) x 7 (price of selected item) chi-square test revealed a marginally significant association ( 2 (6) = 10.46, p =.10). Web Figure 2 presents the smoothed choice share for each price. As expected, higher-priced items were selected more frequently in the descending price order, whereas the choice shares of the lower-priced items were higher in the ascending price order. Web Figure 1: Study 2 Choice Share of Marker Pens as a Function of Price Order Choice share Ascending Descending 15 cents 20 cents 30 cents 35 cents 60 cents 70 cents 90 cents Pen Prices Supplemental Analysis 2: Choice Share of Menu Items from Study 3 We also examined the effects of price order on the choice share of menu items. Due to the small number of observations for each menu choice, we examined the choice shares of each price point. A 2 (order) x 10 (price of selected/most preferred item) chi-

9 9 square test revealed a marginally significant association ( 2 (9) = 14.96, p =.092). Web Figure 3 presents the smoothed choice share for each price. As expected, higher-priced items were selected/most preferred more frequently in the descending price order, whereas the choice shares of the lower-priced spaghetti menus were higher in the ascending price order. Web Figure 2: Study 3 Choice Share of Menu Items as a Function of Price Order Choice share Ascending Descending $6.0 $6.5 $7.0 $7.5 $8.0 $8.5 $9.0 $10.0 $11.0 $12.0 Spaghetti Menu Price Supplemental Analysis 3: Tests of Price and Quality Loss Aversion from Study 4 We tested the loss aversion for quality and price in Study 5 using a multinomial logit model (e.g., Guadagni and Little 1983). Because the stimuli in the positive PQ relation and zero PQ relation conditions included both price and quality information, we were able to test the relative impact of price and quality on choice in those conditions. The reference-dependent model estimates the magnitude of the price gain, price loss, quality gain, and quality loss (e.g., Bronnenberg and Wathieu 1996; Hardie, Johnson, and Fader 1993). The model posits that the preference for (or utility of) option j in condition i,

10 10 v ij, is determined by the reference-dependent price and quality perceptions, in addition to the intrinsic preference for the option ( 0j ). (1) v ij = 0j + 1 P-GAIN ij + 2 P-LOSS ij + 3 Q-GAIN ij + 4 Q-LOSS ij. The gain and loss terms are defined as the difference between the actual price (p ij ) and quality (q ij ) from the reference price and reference quality, respectively. The reference price (rp ij ) and the reference quality (rq ij ) were defined according to the price and quality ratings of the options presented earlier in the menu. Specifically, the arithmetic mean of the prices and quality ratings of the items that were presented above in the list became the reference price and reference quality for the items being evaluated (e.g., Rajendran and Tellis 1994). If a price is lower than its reference price (p ij < rp ij ), the difference is coded as a price gain (P-GAIN = rp ij - p ij, P-LOSS = 0). If a price is higher than its reference price (p ij > rp ij ), the difference is coded as a price loss (P-LOSS = p ij - rp ij, P-GAIN = 0). Similarly, quality is coded as a gain (loss) if the quality rating of the option is higher (lower) than the reference quality (if q ij > rq ij, Q-GAIN = q ij - rq ij, Q- LOSS = 0; if q ij < rq ij, Q-LOSS = rp ij - q ij, Q-GAIN = 0). We estimated the logit model (Eq. 1) separately for the positive PQ and the zero PQ conditions and the results showed that the estimated gain and loss coefficients were as predicted (see Web Table 1). In the positive PQ relation condition, the price loss was about 1.25 times greater than the price gain ( P-GAIN = 6.50, P-LOSS = -8.13). The quality loss was 2.02 times greater than the quality gain ( Q-GAIN = 2.58, Q-LOSS = -5.22). These results showed that for both price and quality, the impact of losses on choice is greater

11 11 than that of gains. In the zero PQ relation condition, both price loss and price gain coefficients were significant and the impact of loss was greater than that of gain ( P-GAIN = 8.51, P-LOSS = ). Further, the ratio of price loss to price gain (1.15) is approximately equal to that found in the positive PQ condition (1.25). However, the gain and loss coefficients for quality were not significant ( Q-GAIN = -1.07, Q-LOSS = -1.69). This finding suggests that the effects of quality gain and loss were reduced when the information about quality bore no relation to price. As predicted, this eliminated the price order effect because there were no tradeoffs between quality and price, and the choice is less strongly influenced by loss aversion.

12 12 Web Table 1 Study 4: Parameter Estimates for the Reference-dependent Multinomial Logit Models Positive PQ relation Zero PQ relation Option 1 Base Base Option (7.60) (-3.78) Option (12.31) 5.92 (6.23) Option (23.82) 8.20 (13.00) Option (37.64) 8.08 (20.42) Option (20.65) 9.63 (10.67) Option (53.71) (40.27) Option (37.05) (22.65) Option (22.12) (18.46) Option (19.93) (15.85) Option (14.17) (12.31) Price gain 6.50 (4.40) 8.51 (5.75) Price loss (-4.87) (-5.86) Quality gain 2.58 (3.14) (-1.31) Quality loss (-6.02) (-1.94) Log likelihood BIC Notes: t-values are in parentheses.

13 13 References Baron, Reuben M. and David A. Kenny (1986), The Moderator-Mediator Variable Distinction in Social Psychological Research: Conceptual, Strategic, and Statistical Considerations, Journal of Personality and Social Psychology, 51 (6), Bronnenberg, Bart J. and Luc Wathieu (1996), Asymmetric Promotion Effects and Brand Positioning, Marketing Science, 15 (4), Freedman, Laurence S. and Arthur Schatzkin (1992), Sample Size for Studying Intermediate Endpoints with Intervention Trials of Observational Studies, American Journal of Epidemiology, 136 (9), Guadagni, Peter M. and John D. C. Little (1983), A Logit Model of Brand Choice Calibrated on Scanner Data, Marketing Science, 2 (3), Hardie, Bruce G. S., Eric J. Johnson, and Peter S. Fader (1993), Modeling Loss Aversion and Reference Dependence Effects on Brand Choice, Marketing Science, 12 (4), Hayes, Andrew F. and Jörg Matthes (2009), Computational Procedures for Probing Interactions in OLS and Logistic Regression: SPSS and SAS Implementations, Behavioral Research Methods, 41 (3), Johnson, Palmer O. and J. Neyman (1936), Tests of Certain Linear Hypotheses and Their Application to Some Educational Problems, Statistical Research Memoirs, 1, Payne, John W., James R. Bettman, and Eric J. Johnson (1988), Adaptive Strategy Selection in Decision Making, Journal of Experimental Psychology: Learning,

14 14 Memory, and Cognition, 14 (3), Preacher, Kristopher J. and Andrew F. Hayes (2008), Asymptotic and Resampling Strategies for Assessing and Comparing Indirect Effects in Multiple Mediator Models, Behavioral Research Methods, 40 (3), Rajendran, K. N. and Gerald J. Tellis (1994), Contextual and Temporal Components of Reference Price, Journal of Marketing, 58 (1), Zhao, Xinshu, John G. Lynch, Jr., and Qimei Chen (2010), Reconsidering Baron and Kenny: Myths and Truths about Mediation Analysis, Journal of Consumer Research, 37 (2),