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Abstract
Online price comparison sites (shopbots) like PriceGrabber.com are the most powerful tools for consumers to easily compare prices and find offers
for desired products. Besides providing distributions of actual prices in price comparison tables, shopbots like NexTag.com have recently introduced
price charts (line charts) displaying a product's full price history. Price charts should support consumers in forming expectations about future prices.
Nevertheless, it is currently unclear how price charts influence consumer price expectations and purchase decisions. The results of this study show that
the provision of past prices leads to strong adjustments of price expectations depending on price chart characteristics. In particular, the trend, variance and
range of past prices in the chart strongly affect price expectations and purchase timing decisions. Furthermore, in the case of a strong downward trend and
high variance in past prices, results show that nearly 50% of the total effect is caused by the visualization of the price history.
2011 Direct Marketing Educational Foundation, Inc. Published by Elsevier Inc. All rights reserved.
Keywords: Price expectations; Purchase timing; Shopbots; Price comparison sites; Information visualization
Introduction
Nielsen NetRatings (2007) shows that the ability to
efficiently compare offers is one of the most popular reasons
for consumers to shop on the Internet, as it is cited by 62% of
those surveyed. Thus, online price comparison sites (shopbots)
like PriceGrabber.com and YahooShopping.com are the most
powerful tools for consumers to easily compare prices and find
offers for desired products. As such, shopbots reduce the cost of
search for information about products and facilitate better and
more efficient purchase decisions (e.g., Hubl and Trifts 2000;
Trifts and Hubl 2003).
Besides providing distributions of actual prices for any
product in the form of price comparison tables, shopbots like
NexTag.com, PriceScan.com, and Skinflint.co.uk have recently
introduced line charts displaying a product's full price history.
NexTag.com, for instance, calls this feature price history,
Corresponding author at: Strothoff Chair of Retailing, Goethe University
Frankfurt, Department of Marketing. Grueneburgplatz 1, 60323 Frankfurt,
Germany.
E-mail addresses: wenzel.drechsler@wiwi.uni-frankfurt (W. Drechsler),
natter@wiwi.uni-frankfurt.de (M. Natter).
1094-9968/$ - see front matter 2011 Direct Marketing Educational Foundation, Inc. Published by Elsevier Inc. All rights reserved.
doi:10.1016/j.intmar.2011.02.001
96
over time like consumer durables (Ofir and Winer 2002). Since
price decreases over the product life cycle are fairly common
among durable products, they are widely anticipated by
purchasers of durable products (Balachander and Srinivasan
1998). Marketing literature suggests that consumers form
expectations regarding a product's attributes (most notably
price) based on historical patterns for the attributes of the
product category; they then incorporate these expectations in
their purchase decisions (Bridges, Yim, and Briesch 1995).
There is evidence that consumers form forward-looking
expectations that affect consumer durable purchases (Winer
1985). Consumers expect price declines due to experience curve
effects and plan or delay their purchases accordingly (Doyle and
Saunders 1985). This discussion suggests that due to prior
experiences, consumers develop mental schemas or a set of
expectations about a product category (Sujan, Bettman, and
Sujan 1986). Erdem et al. (2005), for instance, find that in the
case of PCs, consumers generally expect a steady-state rate of
price decline. Further, they find that consumers seem to expect
mean reversion in price declines; i.e., if the decline over the past
few months was greater (or less) than normal, then consumers
expect a lesser (greater) price decline over the next few months.
However, since durables have longer interpurchase times
than frequently purchased packaged goods (FPPG) consumers
are normally less informed about the development and changes
of attribute configuration, technology, and price level of a
durable. The information acquired during prior purchase
occasions is therefore less salient in the formation of price
expectations for a durable product than it is for a FPPG
(Mazumdar, Raj, and Sinha 2005). With the introduction of
information about a product's price history displayed in a price
chart, consumers no longer have to rely on likely obsolete price
knowledge based on prior experience when forming price
expectations for purchase timing of durables. Therefore, it is
essential to investigate whether the introduction of price charts
induces reference price effects in terms of adjusting prior price
expectations and how different chart patterns affect price
expectations and purchase timing.
Price Chart Information and Consumer Purchase Decisions
In the marketing literature, the influence of price history
visualized in a line chart and chart pattern characteristics on
consumer decisions is not discussed.
Research on behavioral finance suggests that investors base
their investment decisions on specific stock price chart
characteristics. Standard economic theory, however, assigns
little informative value to stock price charts due to the random
walk assumption (Brealey, Myers, and Allen 2007). Accordingly, historical price movements shown in a chart should not
predict how a stock will behave in the future. Nevertheless,
research shows that some investors base their investment
decisions on specific stock price-chart characteristics. Mussweiler and Schneller (2003) show that investors use salient
standards in price charts such as salient highs or lows for their
future stock price expectations and, thus, for investment
decisions. Additionally, Benartzi and Thaler (1999) show that
97
98
99
100
PEt =
PEt =
PEt after
; with t = 4; 8; 12 weeks
850
Mean
Std.
101
Table 2
Adjusted price expectations.
4 weeks
8 weeks
12 weeks
823
42
795
54
756
74
N = 427.
and the treatment groups' prior expectations. Hence, participants seem to have homogeneous expectations about the future
development of notebook prices. In particular, participants seem
to expect a monthly steady-state rate of price decline of 3.8%.
Table 1 shows the mean expected prices for the next 4, 8 and
12 weeks.
After the treatment groups were exposed to the price chart,
nearly all groups adjusted their price expectations. Table 2
reports the percentage change in price expectations (PEt) for
the eight different chart version groups and shows whether this
change significantly deviates from zero.
Results clearly demonstrate that the different price charts
lead to adjustments of price expectations in both directions. For
instance, in the conditions including the strong downward trend
(versions 1, 3, 5 and 7), participants significantly lower their
price expectations for all three point estimates. The strongest
downward adjustments take place for the long-term price
expectations (i.e., 12 weeks) ranging from 4.9% (version 3) to
10.6% (version 5). In contrast, the low-trend condition leads
to an adjustment in the other direction. In particular, participants
of the chart versions 2, 4, and 6 raised their prices expectations,
especially for weeks 8 and 12.
The results clearly show that the availability of price charts
induce reference price effects in terms of adjusting price
expectations, which stresses the chart's relevance for purchase
decisions. Additional analyses that compare the price expectations (PEt) of the different treatment groups with those of the
control group point in the same direction. For instance, control
group comparisons reveal the strongest differences for the longterm price expectations (i.e., 12 weeks). As compared to the
control group, chart version groups 1, 3, 5, and 7 show
significantly (p b .05) lower price expectations ranging from
5.2% (version 3) to 9.3% (version 3). Furthermore,
participants of the chart version groups 2, 4 and 6 show higher
price expectations (p b .10) than the control group. Hence, these
results indicate that consumers adjust their prior price expectations depending on chart patterns.
Influence of Price Chart Characteristics
In this section we test hypotheses H1 to H4, i.e., whether
different charts lead to different price expectations and purchase
timing decisions. Therefore, we first analyze the influence of
different chart characteristics on price expectations (PEt) for
weeks 4, 8, and 12. In a second step, we test the effects of price
charts characteristics on participant purchase timing decisions
while accounting for price expectations.
Effects of Price Chart Characteristics on Price Expectations. Since the three dependent variables, i.e., the three
Week 4
Week 8
Week 12
Range: low
1) ST_LV
52
2) WT_LV
51
3) ST_HV
50
4) WT_HV
50
.038***
(6.68)
.005
(0.72)
.015**
(2.46)
.014*
(1.72)
.073***
( 7.11)
.020**
(2.06)
.032***
( 3.28)
.021*
(1.70)
.086***
( 5.02)
.048**
(3.26)
.049***
( 3.86)
.048***
(2.79)
Range: high
5) ST_LV
56
6) WT_LV
61
7) ST_HV
55
8) WT_HV
52
.037
(5.45)
.016
(1.42)
.026***
(2.65)
.023***
(3.12)
.077***
( 6.05)
.022**
(1.96)
.049***
( 4.75)
.029***
( 3.08)
.106***
( 6.78)
.033***
(2.32)
.075***
( 5.42)
.028**
( 2.21)
t = 4; 8; 12
102
Table 3
Influence of price chart characteristics on price expectations.
Week 12
Coefficient St.error
Coefficient St.error
Coefficient St.error
.005
.007
.007
.010
.02***
.08***
.02*
.04***
.007
.009
.010
.014
.03***
.11***
.03**
.05***
.009
.013
.013
.018
.00
.002
.00
.002
.00
.003
.00
.07**
.11(.10)
.006
.008
.01
.11***
.18(.17)
.008
.012
.02*
.18***
.22(.21)
.011
.016
Chart characteristics
Range
.01***
Trend
.04***
Variance
.01*
Trend variance .02*
Covariates
Notebook
expertise
Price chart user
Constant
R2 (Adj.)
Week 4
= exp@
+ 5 PEt + 5 + m Covariates +
1
A
m=1
3
This model allows us to test hypotheses H1b to H4b, which
propose direct effects of price chart characteristics on the time
of purchase. Prior research indicates that price expectations and
purchase timing are conceptually related (Kalwani et al. 1990).
Therefore, we control for price expectations by estimating the
model for each of the three different price expectation measures
PEt (t = 4, 8, 12 weeks). In addition to the covariates included in
the price expectations models, we control for general deal
proneness and the perceived expensiveness of the notebook's
current price.
In line with previous research on purchase timing decisions,
we assume that the baseline survivor function S0(t) follows a
Weibull distribution (Helsen and Schmittlein 1993; Seetharaman
and Chintagunta 2003).1 For the estimation, the AFT model in
Eq. (2) is put into the log-linear form with respect to purchase time
t (Bradburn et al. 2003). The estimation results are presented in
Table 4.
A positive coefficient indicates that increasing values of the
respective independent variable lead to a delay of the purchase.
By exponentiation of the coefficients, we further obtain the time
ratio which can be interpreted as a deferral factor (DF) in our
context (Bradburn et al. 2003). DF indicates whether the chart
characteristics lead to a delay of the purchase (DF N 1) as
compared to the respective reference group. Results for Model 1
with price expectations for four weeks as a control variable
reveal strong significant effects for the trend and variance
(p b .01), showing that a strong downward trend and a high
variance of price charts increase the probability that participants
would defer their purchase. In particular, the probability to defer
increases by 32% (DF = 1.32) in response to a strong trend and
by 34% (DF = 1.34) in response to a high variance. Hence,
hypotheses H1b and H2b are supported. These findings also
largely hold for Models 2 and 3 (with price expectations for
8 and 12 weeks, respectively). However, the effect of the trend
seems to decrease from Model 1(p b .01) to Model 3 (p b .10). At
the same time, the effect of the price expectations increases.
This result indicates that the variance in the chart is the main
driver of purchase timing decisions, whereas the direct effect
of trend weakens when long-term price expectations are
considered for purchase timing. In particular, higher longterm price expectations for week 12 favor earlier notebook
1
We also tested other distributions to specify the baseline survivor function
(e.g., exponential and log-logistics). Likelihood-ratio tests and the Bayesian
information criterion (BIC) confirm that the Weibull distribution best describes
the underlying purchase timing process. Further, the shape parameter of the
Weibull distribution is highly significant (p b .01) and larger than 1 in all
models, indicating that the Weibull distribution is more appropriate to describe
the underlying purchase timing process as compared to, for instance, an
exponential distribution.
103
Table 4
Influence of price chart characteristics on purchase timing.
Model 1
Model 2
Model 3
Coefficient
St.-error
DFa
Coefficient
St.-error
DFa
Coefficient
St.-error
DFa
Chart characteristics
Range
Trend
Variance
Trend variance
.01
.27***
.29***
.23*
.068
.095
.095
.134
0.99
1.32
1.34
0.79
.03
.22**
.29***
.20
.068
.098
.095
.134
0.97
1.24
1.33
0.82
.04
.18*
.27***
.18
.068
.099
.094
.134
0.96
1.19
1.32
0.83
Price expectation
PE4
PE8
PE12
.12
.651
0.89
.85*
.483
0.43
.94**
.369
0.39
Covariates
Notebook expertise
Deal proneness
Perceived expensiveness
Price chart user
Constant
(shape parameter)
LL (2)
.07***
.025
.07***
.022
.10***
.026
.25***
.079
1.70***
.183
1.56***
.068
502.26 (58.23***)
0.93
1.07
1.10
0.78
5.45
.07***
.024
.07***
.022
.10***
.026
.24***
.079
1.67
.182
1.57***
.068
503.86 (55.04***)
0.93
1.07
1.10
0.79
5.31
.08***
.024
.07***
.022
.09***
.026
.22***
.079
1.65***
.182
1.57***
.068
500.42 (61.92***)
0.93
1.07
1.10
0.80
5.19
104
trend and variance in a price history are more visible in a linechart than in a table presentation. Accordingly, we expect that
trend and variance exert stronger effects on price expectations
and purchase timing when visualized in a price chart. The
influence of the price range, however, should not be affected by
its presentation format since the start- and endpoints are easily
observable independent of the presentation format. Overall, this
discussion leads to the following hypothesis:
H5. The visualization of the price trend and price variance in a
line chart as compared to the presentation in a table leads to a) a
stronger downward shift in price expectations and b) a
postponement of the purchase time.
Methodology
To assess the influence of the visualization of a product's
past prices in a line chart, we gathered additional data in an
online experiment from N = 399 people who were exposed to the
experimental setting and questionnaire used in Study 1. The
major difference is that the notebook's price history was
presented in a table instead of a chart. Similar to Study 1, 81%
of the participants indicated that they regularly use shopbots for
searching for offers. In addition, 38% of these shopbot users use
price chart information provided by these shopbots.
To guarantee fair comparison between both studies, bi-weekly
prices were shown in the table. This interval was chosen because it
corresponds to the intervals on the horizontal axis in the chart
conditions from Study 1. Everything else (i.e., dependent and
independent variables) were measured in the same way as in
Study 1. Fig. 3 shows two examples with the prices corresponding
to the chart versions 1 (that is, low range, strong trend and low
variance) and chart version 2 (that is, low range, weak trend and
low variance).
Results
In this section we first report the empirical results of table
conditions. Second, we explicitly test hypothesis H5, i.e., we
show how the visualization itself (chart vs. table) affects price
expectations and purchase timing.
The Influence of Tabulated Price Histories on Price
Expectations and Purchase Timing
As in Study 1, participants show no significant differences in
their a priori price expectations (PEtbefore). ANOVA and pair
105
Table 5
Influence of the visualization of past prices on price expectations.
Price Expectations (PEt)
Week 4
Week 8
Week 12
Coefficient
St.-Error
Coefficient
St.-Error
Coefficient
St.-Error
.01**
.02***
.00
.00
.005
.008
.008
.011
.02***
.05***
.00
.01
.007
.010
.010
.014
.03***
.07***
.01
.02
.009
.013
.013
.019
Visualization
Chart vs. table
Chart range
Chart trend
Chart variance
Chart trend variance
.01
.00
.02
.02
.02
.008
.007
.010
.010
.015
.01
.00
.03**
.02
.03
.011
.010
.014
.014
.020
.02
.01
.04**
.02
.03
.015
.013
.018
.018
.026
Covariates
Notebook expertise
Price chart user
Constant
R2(Adj.)
.00
.00
.03***
.08(.07)
.001
.004
.008
.00
.01*
.06***
.15(.13)
.002
.006
.011
.00
.02***
.09***
.15(.17)
.002
.007
.000
Table 6
Influence of the visualization of past prices on purchase timing.
Model 1
Model 2
Model 3
Coefficient
St.-error
DFa
Coefficient
St.-error
DFa
Coefficient
St.-error
DFa
.11
.06
.08
.10
.072
.101
.101
.142
.89
.94
.93
1.10
.13*
.08
.07
.08
.072
.101
.101
.142
.87
.92
0.93
1.09
.15**
.10
.07
.09
.072
.101
.100
.141
.86
.91
.93
1.09
Visualization
Chart vs. table
Chart range
Chart trend
Chart variance
Chart trend variance
.29***
.11
.34**
.38***
.33*
.112
.099
.139
.141
.199
0.75
1.11
1.40
1.46
.72
.28**
.12
.31**
.37***
.29
.112
.099
.139
.140
.199
.75
1.12
1.36
1.44
.75
.27**
.11
.29**
.36**
.27
.112
.099
.139
.140
.199
.76
1.12
1.33
1.43
.76
Price expectation
PE4
PE8
PE12
.21
.455
.81
.89**
.362
.41
.92***
.278
.40
Covariates
Notebook expertise
Deal proneness
Perceived expensiveness
Price chart user
Constant
(shape parameter)
LL (2)
.08***
.017
.06***
.017
.12***
.019
.17***
.057
1.89***
.141
1.50***
.047
1006.86 (100.03***)
.93
1.07
1.13
.84
6.65
.08***
.017
.07***
.017
.12***
.019
.17***
.057
1.85***
.141
1.51***
.047
1003.83 (106.35***)
.92
1.07
1.12
.85
6.35
.08***
.017
.06***
.017
.12***
.019
.15***
.057
1.83***
.141
1.51***
.047
1001.21 (111.58***)
.92
1.07
1.12
.86
6.22
106
Indeed, these results confirm that in all three survival models, the
visualization of the trend (strongly decreasing) and variance
(high) as a chart increases the tendency to defer the purchase
(interaction terms; p b .05). Hence, hypothesis H5b is supported.
Similar to Study 1, we again find that the variance exerts the
strongest impact on purchase timing decisions.
Fig. 4 shows that in the case of a price chart with a strong
downward trend, the survival model (model 3)predicts that
participants would in general defer their purchase by 41.1 % as
compared to the control group without a price history. Further, the
predictions show that 16.9 percentage points can be attributed to the
visualization. In the case of a price chart with a high variance, this
effect becomes much stronger. In particular, 20.3 percentage points
of the total effect can be attributed to the visualization, which is
nearly the half of the total effect. Hence, 50% of the total effect is
caused by the price history information and 50% by the
visualization.
Summary Study 2
Study 2 reveals that the negative impact of the strong
downward trend of a notebook's past prices on price expectations
can partly be attributed to its visualization. Furthermore, the
visualization of the trend and variance exhibits a strong influence
on a consumer's purchase timing decisions. This means that not
only the information about past prices influence consumer
decision-making but also the graphical presentation itself.
Discussion
General Findings
This research investigates whether price charts regarding a
product's price history induce reference price effects and how
chart characteristics affect consumer price expectations and
purchase timing decisions. The results of Study 1 show that the
price chart is perceived as highly relevant information with
which to form price expectations and to plan purchase time.
We find that charts illustrating a product's price history induce
strong reference price effects. This means that consumers adjust
their prior price expectations according to chart characteristics.
Like investors, consumers especially follow price trends in
predicting prices and planning purchase timing. Besides a strong
downward trend and high variance, a high range of past prices,
107
Acknowledgements
The authors gratefully acknowledge many helpful comments
from the editors and the two anonymous reviewers.
Appendix
Coefficient
alpha
Construct
Deal
proneness
Scale items
Source
Study Study
1
2
Roy (1994)
.73
.71
Roehm and
Sternthal
(2001)
.73
.77
.90
Yoo,
.85
Donthu, and
Lee (2000)
.80
108
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