Antecedents to consumer reference price orientation: an exploratory investigation

Purpose – This research paper aims to examine the relationships among the factors associated with changing shopping environment, consumer knowledge and reference price. Design/methodology/ approach – A self administered online survey was used to collect data (final sample size was 265). After checking for non‐response bias, data was factor analyzed and checked for reliability and validity. Hypotheses were tested using structural Equation Modeling procedure. Findings – Product search opportunity is associated with product and price knowledge. Price volatility is negatively associated with internal reference price. Further, consumers' price comparison propensity and price knowledge positively influence external reference price. Finally, price volatility has a significant negative influence on consumer knowledge and IRP orientation. Research limitations/implications – The sampling frame is a major limitation, in addition to not including variables such as product type and other measures of price volatility. Future research should expand the sampling frame and include other variables as well as other aspects of price volatility. Practical implications – These findings provide insights into advertised price claims in the information rich internet age. Managers also benefit from the finding that the internet, particularly price comparison, influences external reference price. Consequently, managers must be cautious with their advertised price claims and not exaggerate the value of offerings or cost savings too much. Originality/value – This topic is important because retailers extensively use reference price or price comparison to increase consumers' perception of the product value. However, not much research attention has been given to this topic.