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International Journal of Retail Management 
and Research (IJRMR) 

ISSN (P): 2277-4750; ISSN (E): 2319 4502 
Vol.7, Issue 3, Aug 2017,1-8 
© TJPRC Pvt. Ltd. 

THE EFFECT OF RETAILER’S PRICE IMAGE ON PRICE 
FAIRNESS, CONSUMER SATISFACTION AND LOYALTY 

MYUNG SU CHAE 1 & JINSEO PARK 2 

'Professor, Hankuk University of Foreign Studies, Seoul, South Korea 
2 Research Scholar, Hankuk University of Foreign Studies, Seoul, South Korea 

ABSTRACT 

Existing studies, which explain that price-related factors are one of several sub-dimensions of store image, are 
limited to describing how price image strategies of retailers have an impact on the consumer behavior. To describe that kind 
of impact, in this study, using the framework of perception - emotion - behavior perspective based on expectancy value 
theory, we explain the effect of retailer’s price image on price fairness, consumer satisfaction and loyalty, focusing on the 
relationship between the retailer's price image and price fairness consumer perceived. The results identified that consumers 
perceive a retailer with low price image more fair than the other retailers, and indicated that the more fair consumers 
perceive, the more they are satisfied and the higher the repurchase intention and word of mouth. Moreover, the result also 
showed that price image fit, consumer perception of between actual product list price and retailer’s price image, strongly 
moderate the relationship between the price image and the price fairness. 

KEYWORDS: Retailer’s Price Image, Price Fairness, Fit of Price Image, Moderating Effect 



TRANS 

STELLAR 

■Journal Publications • Research Consultancy 


Received: May 25, 2017; Accepted: Jun 22, 2017; Published: Jul 12, 2017; Paper Id.: I JRMRAUG20171 

INTRODUCTION 

Although it is possible to easily access and compare prices of individual products through development in 
mobile internet, due to limitation of the accessible information and overwhelmed comparisons, consumers tends to 
make a purchase decision depending on the overall impression of the retailer's price rather than on prices of individual 
products (Hamilton and Chernev 2013). Since existing studies explain that price-related factors are one of several sub¬ 
dimensions of store image, there is limitation of describing how price image strategies of retailers have an impact on 
the consumer behavior. In addition, the conventional wisdom related to price research suggests that since consumers 
cannot recall most of the prices correctly (Vanhuele and Dreze 2002), they choose and visit any retailer store based on 
the knowledge of prices, the recall for price information including reference prices (Estelami and De Maeyer 2004). To 
overcome this kind of limitation for the information processing, some researchers have distinguished between objective 
product price and perceived price encoded and interpreted by the consumer. Since such a price have an impact on the 
formation of price related image (Zeithaml 1988; Zielke 2006), the formed price-related image may have an effect on 
both the consumer belief and behavior. However, these studies have focused on product price rather than on retailer’s 
price image. 

To explain how price image strategies of retailers have an impact on the consumer behavior, in this study, 
using the framework of perception - emotion - behavior perspective based on expectancy value theory, we explain the 
effect of retailer’s price image on price fairness, consumer satisfaction and loyalty, focusing on the relationship between 
the retailer's price image and price fairness consumer perceived. 


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Original Article 








2 


Myurig Su Chae & Jinseo Park 


CONCEPTUAL UNDERPINNINGS AND HYPOTHESES DEVELOPMENT 

The Impact of Retailer’s Price Image on Price Fairness 

Because price images do not change well, when formed affect the fairness of consumers, the perceived fairness 
affects to keep holding consumers (Chebat and Slusarczyk, 2005), and price fairness can be an important consequence of 
price image. The price fairness reflects the degree to which consumers assess that, the retailer's prices are reasonable, 
acceptable, or justifiable relative to the prices its competitors charge(Campbell 1999), and the price image could be one of 
important factors for price fairness. From prior research (Bolton, Warlop, and Alba 2003), we can imply that in a store with 
a low price image consumers would be less likely to be perceived unfair than in a store with a high price image which led 
them to expect a higher price in advance. Moreover, some studies like Hamilton and Chernev (2013) and Zieike (2006) 
indicated that, because retailers with a higher price image are more likely to charge higher prices relative to the 
competition, consumers are likely to perceive their prices as unfair because they are not on par with those of the 
competition. Thus, 

HI: Retailer’s price image (PI) will have a negative impact on perceived price fairness of consumer (PF). 

In the retailing, research related to fit is mainly focused on the fit of relationships between the self-congruity and 
retailer image, or core brands and brand extensions. For example, categorization process, which can transit from the 
assessment of core brand to the extended brands, will occur when the perceived similarity between the core brand and 
brand extension is higher (Boush and Loken 1991; Keller and Aaker 1992). Similarly, the categorization process, as means 
of evaluating the retailer's price image, will occur when the perceived fit between the price image presented by a retailer 
and the price image consumer perceived is higher. That is, the higher perceived fit is, the more associations linked with 
retailer's price image become to be related to associations linked with fairness. Therefore, we propose that retailer’s price 
image affects consumers to perceive retailer’s price fairness and the fit between a retailer’s price image and actual list 
prices in the retailer moderate the influence of between retailer’s price image and price fairness. Thus, 

H m0 d- The fit of price image have moderate effect on relationship between retailer’s price image (PI) and price 
fairness (PF). 

The Impact of Price Fairness on Consumer Satisfaction and Loyalty 

Xia, Monroe and Cox (2004) has argued that the perception of price fairness affect the evaluation of the consumer 
satisfaction and the product evaluation. Other researchers (Campbell 1999; Herrmann, Xia, Monroe, and Huber 2007; 
Oliver and Swan 1989) has identified that unfair price perception has effect on consumer satisfaction, purchase intention, 
or complaining behavior. Thus, 

H2: Consumer perceptions of price fairness for a retailer (PF) will have a positive impact on consumer satisfaction 
(S). 

Prior research has identified that trust is a necessary antecedent of loyalty. That is, fairness is an antecedent of trust 
(Buttle and Burton 2002) and trust is an antecedent of loyalty (Morgan and Hunt 1994), therefore, fairness can be an 
antecedent of loyalty. The reason why fairness is important is because; the breaking of trust could lead to the dissolution of 
the relationship between consumers and a firm (Sirdeshmukh, Singh and Sabol 2002). Therefore, consumers might 
recognize and believe that the retailer has broken the implicit trust of the relationship alone when they are aware that the 


Impact Factor (JCC):2.7832 


Index Copernicus Value (ICV): 59.87 



The Effect of Retailer’s Price Image on Price Fairness, Consumer Satisfaction and Loyalty 


3 


retailer is engaging in unfair to them. Thus, 

H3: Consumer perceptions of price fairness for a retailer (PF) will have a positive impact on retailer’s loyalty. 

H3-1: Consumer perceptions of price fairness for a retailer (PF) will have a positive impact on repurchase 
intentions (R). 

H3-2: Consumer perceptions of price fairness for a retailer (PF) will have a positive impact on word of mouth (W). 

The Impact of Consumer Satisfaction on and Loyalty 

So many researchers (Campbell 1999; Herrmann et al. 2007; Oliver and Swan 1989; Seiders, Voss, Grewal and 
Godfrey 2005) related to consumer behavior have identified that, when a consumer feel the satisfaction of the purchase, 
such a satisfaction on post-purchase have influence on loyalty such as repurchase intention, word-of-mouth behavior and 
complaints, and switching behavior. One of representative consequences for consumer satisfaction can be repurchase 
intention. Many empirical studies tested the relationship between consumer satisfaction and repurchase behavior have 
shown that repurchase behavior such as visiting for repurchase and repurchase spending has no significant relationship 
with consumer satisfaction, but repurchase intention has a positive impact on consumer satisfaction(Mittal and Kamakura 
2001). In addition, word of mouth having great attention as an alternative measure of loyalty so far can be divided into 
positive and negative effect. That is, higher consumer satisfaction can lead to a positive word-of-mouth, or high consumer 
dissatisfaction a negative complaining behavior (Anderson, Fornell, and Mazvancheryl 2004; Kumar et al. 2013). Thus, 


H4: Consumer satisfaction (S) will have a positive impact on retailer's loyalty 

H4-1: Consumer satisfaction (S) will have a positive impact on repurchase intentions (R). 

H4-2: Consumer satisfaction (S) will have a positive impact on word of mouth (W). 



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Myiing Su Chae & Jinseo Park 


EMPIRICAL ANALYSIS AND RESULTS 

Data and Variables 

To test the hypotheses proposed above, we collected by person to person survey and web survey after pretest. Our 
research subjects were consumers in Korea who had at least one time vegetable purchase experience in groceries. The 
respondents were asked to fill out the questionnaire on paper or website. The main survey had 681 responses (Response 
rate = 34.1%). A total of 14 were invalid, incomplete or gave the same rating for all items; these were eliminated, and thus 
667 questionnaires were retained for analysis. Demographically, 51% of the respondents were men; 41.1% were aged 
between 20 and 29; and 28.8% were aged between 30 and 39; and 22.3% were aged between 40 and 49. Ninety-six percent 
of the respondents’ education was at the institute/college level or above. 37.3% of the respondents were students, 37.3% of 
the respondents were housekeepers and 38.2% were employed. Approximately 72% of the respondents' monthly house 
income was over $4,000. The recent place for buying vegetable were convenience store (22.3%), department store (18.1%), 
Korean traditional farmer’s market (11.1%), mart (42.0%), online-store (3.0%), and others (3.4%). All items among the 
constructs were tested against demographic controls (age, gender, level of education and occupation) using Student’s t-test 
or ANOVA. The mean scores of the items were all insignificant (p > 0.05), but, the mean scores of the items for price 
image fit-unfit group was significant (p < 0.05); indicating the validity of analyzing the data as two groups. 


Table 1: Summary of Measurement Scale 


Item 

Measure 

Std. 

Estimate 

T-Value 

CR 

AVE 

PI1 

The prices are generally very low here 

0.80 

- 

0.89 

0.89 

PI2 

The price level is very high here 

0.85 

24.85 

PI3 

You can buy cheap groceries here 

0.87 

25.32 

PI4 

The prices are cheaper here than in other 
stores 

0.80 

22.89 

PF1 

The prices are understandable here 

0.83 

- 

0.88 

0.88 

PF2 

The prices are acceptable here 

0.86 

26.71 

PF3 

The prices are justifiable here 

0.84 

25.76 

PF4 

The prices are reasonable here 

0.82 

24.65 

SI 

I am completely satisfied with shopping 
here 

0.73 

- 

0.78 

0.78 

S2 

Shopping here is a delightful experience. 

0.80 

19.04 

S3 

I am satisfied with my decision to visit this 
retailer 

0.78 

18.61 

S4 

My choice to visit this retailer was a wise 
one. 

0.70 

16.81 

R1 

I have intentions to buy here again. 

0.79 

- 

0.80 

0.80 

R2 

Do business with this store in the future? 

0.73 

18.74 

R3 

Would you repurchase here, if you had to 
buy again? 

0.75 

19.20 

W1 

I will say positive things about this store to 
other people 

0.74 

- 

0.80 

0.80 

W2 

I will recommend it to someone who seeks 
my advice 

0.82 

20.43 

W3 

I will encourage friends and relatives to 
visit this store 

0.80 

20.09 

W4 

How likely are you to recommend this store 
to others? 

0.78 

19.57 


Note: t- value is significant at /?<0.05 when the t -value exceeds 1.96. 


Impact Factor (JCC):2.7832 


Index Copernicus Value (ICV): 59.87 




The Effect of Retailer’s Price Image on Price Fairness, Consumer Satisfaction and Loyalty 


5 


Analysis of the Measurement Model 

We first developed the measurement model by conducting confirmatory factor analysis. The structural equation 
model was then estimated for hypotheses testing. The final measurement model with purified items yielded a chi-square 
value of 667 with 142 degrees of freedom (p = 0.00) and the ratio of chi-square to degrees of freedom (x 2 /df = 3.33). 
However, the other indices satisfied the recommended values (GFI = 0.929, AGFI = 0.904, CFI = 0.958, NFI = 0.941, and 
RMSEA = 0.05). With the final measurement model, each construct also was evaluated by examining the indicator loading, 
construct reliability, convergent validity, and discriminant validity. Table 1 is demonstrating adequate convergent validity. 
Lastly, discriminant validity was tested. AVEs of each paired construct are greater than paired construct correlation except 
the relationship between repurchase intentions and word of mouth. 

Hypotheses Testing Results 

Table 2 summarizes the empirical results of the structural equation model to test hypotheses. As you see, all 
hypotheses are supported. 


Table 2: The Results of the Structural Equation Model 



Hypothesized Relationship 

Parameter 

Std. Estimate 

J-Value 

Conclusion 

HI 

Price image —> Price fairness 

y u 

-0.66 

- 15.90 

Supported 

H2 

Price fairness —» Consumer Satisfaction 

P 21 

0.58 

12.50 

Supported 

H3-1 

Price fairness —> Repurchase Intentions 

P 22 

0.27 

5.86 

Supported 

H3-2 

Price fairness —> WOM 

P 23 

0.31 

6.62 

Supported 

H4-1 

Consumer Satisfaction—> Repurchase 

Intentions 

Pn 

0.60 

10.91 

Supported 

H4-2 

Consumer Satisfaction —> WOM 

P 32 

0.47 

8.88 

Supported 

Model fit index: x 2 ( i4 S )=760.56, x 2 /df =5.21, GFI=0.90, AGFI=0.86, CFI=0.92, NFI=0.91, RESEA=0.08 


Note: t- value is significant at /?<0.05 when the /-value exceeds 1.96. 


We used a multi-group analysis to test the moderating effect of price image fit. Respondents were split into fit and 
unfit groups based on their perceptions of price image fit (performing a median-split). A structural model linking price 
image with price fairness was constrained to force equal loading between the fit and unfit price image groups. A chi-square 
difference test was then conducted between the groups to identify whether their paths were significantly different. As 
shown in <Table 3>, the chi-square difference was 15.51 (p < 0.001) for the price image - price fairness link, exceeding the 
critical value of 3.8 for one degree of freedom. HI proposed a positive moderating effect of price image fit on the 
relationship between price image and price fairness. 


Table 3: Chi-Square Difference Test between Fit and Unfit Price Image Group 


HI 

Fit Group 

Unfit Grouj 


Std. 

Estimate 

T-Value 

Std. Estimate 

J-Value 

Price image—>Price fairness 

-0.83 

- 14.40 

-0.46 

- 7.97 

X 2 ( 292 )= 923 . 82 , x 2 /df =3.16, GFI=0.87, AGFI=0.84, CFI=0.92, NFI=0.89, RESEA=0.05 

Model Fit Index 

Constrained 

Model 

Unconstrained 

Model 

A/ 2 

X 1 (d.f.) 

939.33(293) 

923.82(292) 

15.51 

GFI 

0.87 

0.87 



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Myung Su Chae & Jinseo Park 


\ Table 3: Contd., | 

AGFI 

0.83 

0.84 


CFI 

0.92 

0.92 


RMSEA 

0.05 

0.05 



Note: f-value is significant at /><0.05 when the f-value exceeds 1.96. 

DISCUSSIONS 

Practical Implications 

Practically, one of the strategic practices that a retailer's managers can take to develop and maintain the loyalty of 
their consumers is that among consumers the retailer will be perceived to be fair, and one of the ways to perceived to be 
fair is taking a low price image strategy. In addition, research on the moderating effect between price image and price 
fairness found that lower price image only doesn’t lead to higher price fairness. That is, the another way to be perceived 
more fair for retailers is taking the pricing strategy that fit between lower price image and the actual prices of products in 
the image. The results of this study also showed that not only important to maintain a low price image does retailers 
maintain, but presenting the actual list price consumers expect in retailers with low price image could have a stronger 
impact on price fairness, and further increase the customer satisfaction. Contrary, it is empirically shown that if retailers 
with higher price image will take strategic pricing choice inconsistent with their higher image, price unfairness can be 
reduced by a large margin, and then result in lower consumer dissatisfaction. 

Theoretical Implications 

Theoretically, we showed that price image which a retailer is communicating to consumers have an impact on 
consumer behavior through price fairness and customer satisfaction. That is, using the framework of perception - emotion - 
behavior perspective based on expectancy value theory, we empirically identified the effect of retailer’s price image on 
price fairness, consumer satisfaction and loyalty, focusing on the relationship between the retailer's price image and price 
fairness consumer perceived. This kind of explanation could be theoretical basis for strategic pricing selection of retailers, 
which existing studies related to store image couldn’t explain. The result is the same as the finding of Mittal and Kamakura 
(2001) indicating that consumer satisfaction have a positive effect on repurchase intention, and the arguments of Anderson, 
Fornell and Mazvancheryl (2004) and Kumar et al. (2013) studies demonstrating that while high customer satisfaction can 
leads to positive word-of-mouth, high consumer dissatisfaction can produce a negative complaining behavior. Moreover, 
the result of this study also is in line with the conceptual research like Hamilton and Chernev (2013) and Xia et al. (2004) 

CONCLUSIONS 

The retailer’s price image on price fairness is related to consumer behavior leading to satisfaction and loyalty. The 
representative consequence of consumer satisfaction can be repurchasing intention, which has positive impact on consumer 
satisfaction. The consumers perceive a retailer with low price image as fairer than other retailers. Nevertheless, more fair 
the consumers perceive, the more they are satisfied and higher will be the repurchase intention and publicity through word 
of mouth. Hence, there is need for at least moderate relationship between the dealer's price image and the price fairness. 


Impact Factor (JCC):2.7832 


Index Copernicus Value (ICV): 59.87 




The Effect of Retailer’s Price Image on Price Fairness, Consumer Satisfaction and Loyalty 


7 


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editor@tjprc.org 



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Myung Su Chae & Jinseo Park 


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Impact Factor (JCC):2.7832 


Index Copernicus Value (ICV): 59.87