Journal of Retailing 80 (2004) 5366

The influence of redundant comparison prices and other price presentation

formats on consumers evaluations and purchase intentions
Rajesh Chandrashekaran
College of Business Administration, H-DK2-06, Fairleigh Dickinson University, 1000 River Road, Teaneck, NJ 07666, USA

Abstract
Two studies explore the conditions under which redundant reference price information (ARP) is likely to influence consumers perceptions
of an advertised sale price. Study 1 suggests that an ARP enhances offer-value, but only for consumers who are not involved with the product.
Study 2 incorporates a wider array of price presentation tactics (SP Only, SP +ARP, SP +%Saving and SP +ARP +%Saving) and investigates
a range of responses (transaction value, acquisition value and subsequent purchase intentions). Again, results suggest that ARP only influences
perceived transaction value, and saving information only impacts purchase intentions. Most importantly, these effects are seen only when
involvement is low.
2004 by New York University. Published by Elsevier. All rights reserved.
Keywords: Redundant comparison prices; Consumers evaluations; Purchase intentions

Introduction
Using comparison prices in retail price advertisements
to enhance consumers evaluations is a common tactic.
Chandrashekaran, Monroe, and Viswanathan (2003) conducted a content analysis of over eight hundred sale announcements by six popular retail chains and discovered that
approximately nineteen percent (19%) of the ads presented
a sale price (SP) by itself, an astounding seventy-three percent (73%) provided a comparison using the items regular,
non-sale price and a mere eight percent (8%) presented the
sale price in conjunction with the savings offered without
a comparison price. The authors report that approximately
sixty-six percent (66%) of ads providing a comparison price
advertised it in conjunction with the corresponding sale
price, and thirty-four percent (34%) presented it along with
both the selling price and the implied saving.
Almost two decades of research has consistently shown
that comparison prices influence consumers evaluations
positively (Blair & Landon, 1981; Della Bitta, Monroe,
& McGinnis, 1981; Grewal, Monroe, & Krishnan, 1998;
Mobley, Bearden, & Teel, 1988; Urbany, Bearden, &
Weilbaker, 1988). However, none of these studies has
specifically addressed the role of ARPs when other infor

Tel.: +1-201-692-7245; fax: +1-201-692-7219.

E-mail address: rajeshc@fdu.edu (R. Chandrashekaran).

mation that is easier to process is available. For example,

given a sale price (say $29.99) and information on the saving offered (say $10) one could easily estimate the implied
regular price. This is especially true when the saving is
presented in a dollar-off format. In such cases, the mental
arithmetic may be more easily performed because the sale
price and saving information are structurally aligned, that
is, they are in the same format (dollars). Buyers who are
interested in doing so may estimate the regular price via
simple addition ($29.99 + $10.00 = $39.99). Furthermore,
the cognitive requirement for such an operation is far less
than that required for estimating the regular price from
percentage-off information, which requires both multiplication and addition/subtraction operations (Bettman, Johnson,
& Payne, 1990; Chase, 1978; Johnson, Payne, & Bettman,
1988; Morwitz, Greenleaf, & Johnson, 1998). Therefore,
from a purely logical standpoint, the extra piece of information (i.e., ARP) provides no new/additional information to
consumers. Yet, a whopping 34% of all ads surveyed contained this redundancy. A key question addressed by this
research is: How are consumers influenced by the provision
of presumably redundant ARP information?
This article presents results from two studies. The first
study investigates whether an advertised reference price
(ARP) enhances consumers evaluations even when its
presence is superfluous. Results show that evaluations of
an advertised offer are indeed significantly higher in the

0022-4359/$ see front matter 2004 by New York University. Published by Elsevier. All rights reserved.
doi:10.1016/j.jretai.2004.01.004

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R. Chandrashekaran / Journal of Retailing 80 (2004) 5366

presence of an ARP, but only when the level of involvement is low. The second study incorporates a wider array
of price presentation tactics and examines how the presence of ARP and Saving information (both separately and
together) influence consumers evaluations and subsequent
purchase intentions. Again, results are consistent in that
involvement plays a moderating role in determining how
ARP and Saving information influence perceptions of value
and subsequent purchase intentions.

Motivation and objectives

The motivation for this study comes from the intriguing observation that comparison prices influence consumers
evaluations (see Grewal et al., 1998) even though they may
not offer consumers any additional information. To confirm that at least some consumers actually perceive such
redundant information to be useful in evaluating an advertised offer, a survey was conducted using 35 graduate business students (not included in the main study). They were
shown a mock ad for a pair of jeans without any price
information, and were asked to indicate their preferences
(rank order) for six different presentation formats: (i) Sale
Price only, (ii) Sale Price + Regular Price, (iii) Sale Price +
Competitors Price, (iv) Sale Price + Saving, (v) Regular
Price+Saving, and (vi) Sale Price+Regular Price+Saving.
It is interesting to note that, despite the obvious redundancy,
forty-one percent (41%) perceived the format containing
SP + Regular Price + Saving to be quite useful (ranked as
#1 or #2) in evaluating advertised deals, second only to the
SP + Regular Price format (ranked as #1 or #2 by 65% of
respondents).
Therefore, the primary objectives of this study are: (i) to
investigate whether, given sale price and dollar-off saving
information, the mere presence of an apparently redundant
comparison price can influence consumers evaluations? (ii)
If so, are some consumer groups more prone to their influence than others? As discussed, prior research has not explicitly examined the effects of ARP when its presence is redundant. Although previous research has demonstrated that
ARPs have a positive influence on consumers evaluations,
there have been no empirical investigations of whether particular sub-groups (market segments) are more prone to the
effects of ARPs than others. This research intends to shed
new light on the process by which consumers react to retail
price advertisements.
Such issues may have implications for public policy as well because increased vulnerability within some
sub-segments of the population creates room for possible
deception (Grewal & Compeau, 1992). Thus far, research
on the public policy implications of the use of comparative
price advertising has analyzed possible deception for the
entire population (Compeau & Grewal, 1998). However,
vulnerability of particular sub-segments of the population
has not been addressed.

Theory and hypotheses

Extant research supports the notion that consumers
evaluate retail prices by comparing them to some internal reference price or IRP (Briesch, Krishnamurthi,
Mazumdar, & Raj, 1997; Mayhew & Winer, 1992; Monroe,
1973; Rajendran & Tellis, 1994; Winer, 1986). Retailers
attempt to influence consumers IRPs and subsequent evaluations by including an ARP in conjunction with a temporarily reduced sale price (SP). The ARP is intended to serve as
an anchor that increases the likelihood that consumers will
evaluate the reduced SP favorably against a higher reference
price. There is evidence to indicate that consumers utilize
ARP information to adjust their own internal standards
(Chandrashekaran & Grewal, 2003; Urbany et al., 1988). In
general, the larger the discount (claimed saving), the better
is the response. In addition, when saving information is to be
provided, retailers must decide whether to display the saving using a dollar-off or a percentage-off format (see Chen
& Monroe, 1998). As discussed earlier, each format places
different demands on consumers cognitive resources.1
The moderating role of involvement
Although prior research has discovered an overall positive influence of the presence of ARPs on consumers
evaluations, it has not investigated whether particular
sub-populations (market segments) are more prone to the
effects of ARPs. Common sense logic would suggest that all
consumers should be able to estimate the regular from the
other two pieces of information. However, there are some
important caveats. Specifically, consumers must consider
price to be a relevant variable that is important enough to
demand the attention and cognitive resources required for
processing it. Furthermore, consumers must be willing, able
and motivated to expend the cognitive resources (albeit a
small amount) needed to estimate the implied regular price.
Consumers willingness to engage in such a process is
likely to be a function of whether the additional information
is central to the task at hand. If the available price information (particularly the additional and seemingly redundant
comparative price information) is not deemed to be relevant, then consumers may not attend to this information.2
Therefore, consumers choice of information processing
strategy is directly related to their motivations and perceived relevance, that is, involvement. This construct has
been defined in the literature as consumers interest in and
1 Study 1 addresses the less demanding dollar-off format, which requires
a simple subtraction task to estimate the regular price, and Study 2
incorporates %-off saving to explore if similar pattern of responses is
obtained.
2 It is important to clarify that, by itself, a comparison price is neither relevant nor irrelevant. Rather, its relevance and the likelihood that
consumers will elaborate on it is determined by the availability of other
information that may be easier to process, for example, dollar-off saving
information. That is the specific focus of this study.

R. Chandrashekaran / Journal of Retailing 80 (2004) 5366

perceived importance/relevance of the advertised product

(see Celsi & Olson, 1988; Petty, Cacioppo, & Schumann,
1983; Zaichkowsky, 1985).
Consumers, who are involved are more knowledgeable of
products and prices, and are less susceptible to the influence
of peripheral cues. They are also more likely to base their
evaluations on well-established internal reference prices. For
example, prior research (Biswas & Blair, 1991; Biswas &
Sherrell, 1993) has found that involved consumers are more
confident of their internal reference prices than those who
lack involvement with the product. In addition, Mazumdar
and Monroe (1992, p. 67) point out that consumers who lack
confidence in their own estimates of market prices are likely
to be more susceptible to merchant-supplied reference prices
than buyers who are confident of their price knowledge.
Consequently, it is reasonable to expect that an ARP is likely
to influence evaluations only when involvement is low.
Therefore,
H1. Consumers with low levels of involvement evaluate the
offer more positively in the presence of (redundant) comparative price information.
H2. Consumers with high levels of involvement are unaffected by the presence of such (redundant) comparative price
information, that is, these consumers have the same offer
evaluations regardless of whether or not (redundant) comparative price information is present.

Study 1
The data for this study was obtained from one hundred and
three graduate business students during regular class hours.
The task involved evaluating a retail price advertisement for
a model of Levis jeans that normally retails for about $42.
This product was selected because the student subjects are
likely to be familiar with the product/brand, and are likely
to have adequate personal experience in the category.
Method
First, subjects saw a picture of the product, and they provided information about their internal reference prices and
involvement.

55

Mayhew & Winer, 1992; Rajendran & Tellis, 1994; Thaler,

1985; Winer, 1986), internal reference price was measured
on multiple dimensions. Specifically, it was operationalized
as the mean of (i) perceptions of normal market price, (ii)
price expected on the next purchase occasion, (iii) maximum price willing to pay, and (iv) recall of the price paid
on the last purchase occasion.3
To minimize undue influence of the recently elicited IRP
measures on subsequent tasks, the initial task was followed
by several distractions. Specifically, subjects were assigned
an in-class, non-quantitative exercise for about 20 min. This
was followed by a short lecture and class discussion (unrelated to price advertising) for another 20 min.
Finally, subjects saw a mock sale announcement for a
pair of Levis jeans. The ad was based on an actual sale
announcement for the product, but the sale price and saving
information were modified for the purposes of this study.
Each subject saw one of three levels of sale price ($37.95, or
$29.95, or $20.95). These sale prices were chosen to reflect
total savings of $4, $12 and $21, respectively. All subjects
were provided with sale price and saving information (in
$-off format). However, only one-half the subjects saw the
regular non-sale price ($41.95) of the product, whereas the
other half did not. The advertised regular price of the item
was selected to reflect the average of the prices for the same
product in several nearby stores.
Offer evaluation
Subjects evaluated the offer contained in the sale announcement on four items corresponding to their perceptions
of the perceived attractiveness of the offer. Overall perception of the value contained in the offer was assessed as the
mean of subjects responses on the four scale items. The
items corresponded to: (i) sale price acceptability, (ii) perceived worth, (iii) attractiveness of the deal, and (iv) overall
value for money. On each item, subjects indicated the extent to which they agree/disagree with the statement (e.g.,
If I were buying a pair of jeans, I would find the advertised sale price to be acceptable,and Taking advantage of
an attractive deal like this will make me happy). Similar
scales items have been used in previous research investigating how consumers respond to advertised reference prices
(e.g., see Grewal et al., 1998).
Analysis

Involvement
Subjects overall interest in the product/brand and their
perceived importance/relevance of the product/brand was
operationalized as the arithmetic mean of three scale
items (e.g., I am particularly interested in [the advertised
brand]), each ranging from a minimum of 1 (Strongly
Disagree) to a maximum of 5 (Strongly Agree).
Internal reference price
Consistent with previous research (Bearden, Kaicker,
de Borrero, & Urbany, 1992; Klein & Oglethorpe, 1987;

Factor analysis confirmed that the items for the dependent

variable (perceived value) and the independent variables (internal reference price and involvement), loaded on distinct
factors that explained 75% of the total variance. In addition,
3 Rather than unrealistically force all subjects to provide information on
all the measures, they were asked to provide information on the estimates
that they would normally use when evaluating a sale price for this product.
In cases where subjects failed to provide information on one or more of the
measures, the mean was computed using only the information provided.

56

R. Chandrashekaran / Journal of Retailing 80 (2004) 5366

the scale reliabilities were high (coefficient alpha = .76 for

IRP, .85 for involvement and .90 for Perceived Offer Value).
Subsequently, IRP was assessed as the arithmetic mean of its
indicators, high and low involvement groups were formed by
performing a median split on the distribution of involvement
scores defined as the sum of the three scale items (mean =
2.87, median = 3.00, Nlow = 53 and Nhigh = 50), and the
four measures of offer value were averaged to provide an
estimate of perceived offer-value.
The experiment constitutes a 2 (high vs. low involvement) 2 (ARP Absent vs. ARP Present) 3 (Saving
Levels) between subjects design. Based on prior research
demonstrating the role of reference prices in determining
offer value (see Briesch et al., 1997 for a comprehensive review), IRP was included in the analysis as a covariate. The
results of a three-way analysis of variance of the dependent
measure (perceived offer value) are shown in Table 1.
Results
Hypotheses H1 and H2 describe that involvement is likely
to moderate the effect of ARP information on perceived offer
value. Although not explicitly stated, the hypotheses imply

that the moderation will occur at all three levels of SP. The
significant ARP Involvement interaction (p .01) shown
in Table 1 generally supports the arguments made in this
study. Specifically, the presence of redundant ARP information exerts a significantly positive influence on evaluations
only when involvement is low (Mean Perceived Value =
3.43 and 2.92 in the ARP-present and ARP-absent conditions, respectively, t = 2.08, p .05). However, involved
consumers are unaffected by the presence/absence of ARP
information (Mean Perceived Value = 3.45 and 3.44 in the
ARP-present and ARP-absent conditions, respectively). Furthermore, the mean responses across the two involvement
groups are significantly different only in the ARP-absent
condition. However, this difference vanishes when the redundant ARP information is present.
Although the results are consistent with the hypotheses,
they are qualified by the presence of a significant three-way
ARP SP Level Involvement interaction that was not hypothesized (see Table 1). The exact nature of the three-way
interaction is shown graphically in Fig. 1AC. In addition,
Table 2 displays the comparison of mean responses across
ARP conditions (absent vs. present) within each involvement group for each level of SP. These exhibits show a sig-

Table 1
Effect of ARP and sale price on perceived value (Study 1)
Source

Type III sum of squares

df

Mean square

(A) Analysis of variance: tests of between-subjects effects (dependent variable: PERCVALU)

Corrected model
56.04a
13
4.31
Intercept
6.50
1
6.50
Covariate: perceived quality
8.53
1
8.53
Covariate: IRP
5.61
1
5.61
Presence of ARP information
0.37
1
0.37
Sale price level
27.16
2
13.58
Involvement
0.53
1
0.53
ARP Information SP Level
0.12
2
0.06
ARP Information Involvement
3.64
1
3.64
SP Level Involvement
0.08
2
0.04
ARP Information SP Level Involvement
2.87
2
1.43
Error

36.55

87

Total

1210.38

101

92.59

100

Corrected total

Significance

10.26
15.46
20.30
13.35
0.88
32.32
1.26
0.14
8.67
0.09
3.42

.00
.00
.00
.00
.35
.00
.27
.87
.00
.91
.04

Mean response

SD

0.42

Sale price

Involvement

ARP

Cell sizes

(B) Cell means by SP, involvement and ARP

$20.95

Low

Absent
Present
Absent
Present

8
8
7
11

3.63
4.22
4.29
3.98

0.94
0.43
0.62
0.84

1.63
(.13)
.83
(.42)

Absent
Present
Absent
Present

9
8
7
9

3.06
3.34
3.04
3.47

0.48
0.42
0.53
0.88

1.31
(.21)
1.16
(.27)

Absent
Present
Absent
Present

8
11
10
6

2.06
2.91
3.18
2.42

0.78
0.76
1.05
1.20

2.38
(.03)
1.33
(.21)

High
$29.95

Low
High

$37.95

Low
High

R squared = .605 (adjusted R squared = .546).

|t-value| (p)

R. Chandrashekaran / Journal of Retailing 80 (2004) 5366

(A)

5.0

4.5

Perceived Value

4.0

3.5

3.0

2.5

2.0

Involvement

1.5

Low

1.0
ARP Absent

(B)

High
ARP Present

Discussion

Perceived Value

4.0

3.5

3.0

2.5

2.0

Involvement

1.5

Low

1.0
ARP Absent

High
ARP Present

5.0

4.5

4.0

Perceived Value

nificant difference across ARP conditions only in the low

involvement group and in the high SP condition (t = 2.38,
p .05). All other differences are not significant. In light
of this key finding, we must conclude that H1 is supported
only in the high price condition. However, H2 is supported
at all price levels.
Consistent with a wide body of research, this study also
finds that IRP plays a significant role (p .01) in determining offer value. In contrast to prior research findings that
report a main effect for the mere presence of comparison
prices (see review by Compeau & Grewal, 1998) no such effect was obtained here.4 Finally, and as common sense logic
might suggest, a significant main effect of saving level was
found such that higher saving (i.e., lower sale price) yielded
better evaluations. This effect was found regardless of level
of involvement (as substantiated by the non-significant
Involvement SP Level interaction seen in Table 1).

5.0

4.5

(C)

57

3.5

3.0

2.5

2.0

Involvement

1.5

Low

1.0
ARP Absent

High
ARP Present

Fig. 1. Effects of sale price, ARP information and involvement on evaluation (Study 1). Sale price: (A) $20.95; (B) $29.95; (C) $37.95.

Study 1 addressed the specific case where ARP information is redundant, i.e., when SP and saving information are
readily available. The results support the conjecture that such
contextual cues as ARPs influence evaluations only under
low involvement conditions and with a relatively high SP.
A key question that was raised at the outset is whether retailers can follow an undifferentiated communications strategy and provide redundant information for all consumers, or
whether they need to adopt a segmented strategy. The results
obtained here indicate that the redundancy enhances evaluations significantly among low involved consumers without
actually lowering evaluations among those who are involved
with the product. Therefore, it appears that the optimal approach would be for retailers to implement an undifferentiated strategy and offer redundancy for all.
Interestingly, the content analysis revealed that almost
10% of the retail price advertisements surveyed presented
price information using a SP + Saving format. The results
obtained here indicate that such a tactic is not likely to yield
overall optimum results because individuals with low levels
of involvement are unable to process the saving information provided. One implication of the findings is that retailers may be able to deceive consumers who have low levels
of involvement by simply including a (redundant) ARP, in
conjunction with a high sale price and saving information.5
4 One reason for the different results may be the context in which
ARP effects are examined. It appears that prior researchers were mainly
concerned with investigating the effects of the presence/absence of ARP
by comparing a SP Only condition with a SP + ARP format. However,
one key difference is that this study investigates the role of ARP when
its presence is redundant. Specifically, it compares SP + Saving and
SP + Saving + ARP formats.
5 Given the relatively small cell sizes, one must exercise caution when
interpreting the results and drawing conclusions. Nevertheless, this result
is new and may contain implications for practice and public policy.
Therefore, this issue is one of the objectives of Study 2.

58

R. Chandrashekaran / Journal of Retailing 80 (2004) 5366

Table 2
Pattern of factor loadings (Study 2)
Involvement

Perceived quality

Internal reference price (IRP)

.85
.89
.91
.11
.21
.33
.22
.07
.13

.29
.25
.15
.79
.84
.77
.09
.06
.10

.04
.10
.10
.08
.02
.02
.77
.90
.77

Purchase intention

Transition value

.77
.80
.77
.05
.07
.05
.34
.22

.09
.23
.09
.89
.85
.00
.20
.23

measuresa

(A) Independent
Perceived relevance
Level of interest
Overall involvement
Levis are durable
Levis are of good quality
Levis are comfortable
Maximum price
Normal/average price
Lowest price

Offer evaluation
Acquisition value
measuresb

(B) Dependent
Low likelihood of buying (reverse coded)
Intend to take advantage of this sale
High probability that I will buy the advertised product
Advertised deal is attractive
Finding a good deal like this makes me happy
I am getting a lot more than I will be giving up
Good quality jeans for reasonable price
Good value for money

.11
.00
.29
.08
.20
.83
.75
.79

a %Variance: involvement = 28.7; perceived quality = 23.4; IRP = 22.5. Scale properties (coefficient alpha): involvement = .91; perceived quality =
.78; IRP = .72.
b %Variance: AV = 25.10, TV = 25.04, PI = 20.86. Scale properties: AV (coefficient alpha) = .76; TV (bivariate correlation) = .59, p < .01; and PI
(coefficient alpha) = .70.

Study 2
Motivation and objectives
Study 2 was designed to addressed some of the limitations of Study 1 and to gain a more complete understanding
of consumers utilize and respond to additional price-related
information. Specifically, the second study further explores
the ARP Involvement interaction obtained in the high SP
condition. It also includes two additional price presentation tactics (SP Only and SP + ARP) that were revealed by
the content analysis. Such a study is likely to offer a more
comprehensive understanding of how different ARP and
Saving (both separately and together) influence consumers
evaluations.6
Another difference between the two studies is in the way
the saving information is presented. Study 1 assumed that
$-off information should be easier to process than relative
(%-off) information. However, there is evidence that consumers utilize $-off information and/or ARP to estimate
the relative saving (see Chen & Monroe, 1998; Grewal &
Marmorstein, 1994; Kahneman & Tversky, 1979, 1984).
Most recently, Chatterjee, Heath, Milberg, and France
(2000, p. 67) discovered that, when faced with price changes
presented in percentage terms, consumers do not convert

6 Thanks to an anonymous reviewer for steering the research in this

direction.

back to dollars. Therefore, Study 2 investigates whether

similar results will be obtained when relative (rather than
absolute) saving is provided. This tactic is also consistent
with how retailers advertise savings for low-to-moderately
priced products.
A major limitation of Study 1 is that it assessed the impact of a seemingly redundant ARP on a single dimension
of evaluation. Previous research has identified distinct components of value, for example, acquisition value (AV) and
transaction value (TV) that precede consumers intentions
to purchase an advertised product/brand (Grewal, Monroe,
& Krishnan, 1998; Thaler, 1985). However, Study 1 did not
study the effects of ARP on TV and AV separately because it
was not possible to separate out the dimensions of perceived
value (TV and AV). Combining measures corresponding to
theoretically different constructs is likely to have masked
certain patterns in consumers responses. Therefore, it is necessary to examine the influence of alternative presentation
format on each of these constructs separately. In addition,
Study 1 did not measure purchase intentions. Therefore, it
was not possible to examine the role of ARP in different
stages of the evaluation process. To facilitate such investigation, Study 2 incorporates a broader conceptual framework
and assesses each construct (TV, AV, and PI) using multiple measures. Specifically, this study adopts the conceptual
framework validated by Grewal et al. (1998).
Finally, in response to the suggestions of one reviewer, the
measures of involvement included in Study 1 were modified
to better represent the definition of the construct, that is,

R. Chandrashekaran / Journal of Retailing 80 (2004) 5366

overall interest and personal relevance of the product/brand.

As in Study 1, involvement was assessed using a three-item
scale.
Conceptual framework
The sections below define the key constructs of the conceptual model and describe the relationship between the constructs (for further details, see Grewal et al., 1998).
Transaction value
This is akin to an affective response that represents the
happiness/elation that consumers feel when they find a good
deal, and has operationalized as consumers perceptions of
how attractive the advertised deal is relative to some internal
standard (IRP). Determinants of TV include IRP and other
contextual factors (e.g., presence of an ARP).
Acquisition value
This construct refers to consumers assessments of the
perceived value of the benefits acquired relative to the perceived price. Perceptions of AV are influenced by the perceived quality (PQ) of the advertised item, and by TV. Furthermore, IRP and other contextual information (ARP and
Saving information) influence AV only indirectly via TV.
Purchase intentions
Willingness to purchase the advertised product is directly
related to perceptions of overall value (AV). However, TV
influences PI only indirectly via AV.
Hypotheses
Previous research (see Compeau, Grewal, &
Chandrashekaran, 2002; Grewal et al., 1998) has investigated advertisers attempts to influence TV by (i) lowering
SP and/or (ii) communicating the increased saving to consumers by providing a comparison price (ARP). This study
extends prior research by including several price presentation formats (SP Only, SP + ARP, SP + Saving and
SP + ARP + Saving). Such investigation will shed light on
how the two pieces of information (ARP and Saving) both
separately and together influence TV, AV and PI.
Role of ARP information
An ARP is intended to serve as an external anchor (reference point) for consumers, especially for those who may
not be confident of their knowledge of market prices. By
definition, this is likely to be true for consumers with low
levels of involvement. The assumption is that consumers
will assimilate at least a portion of the ARP into their existing IRPs (if one is easily accessible). If consumers do not
have rigid IRPs, or one is not easily accessible, then they
may simply use ARP as a reasonable substitute for IRP. Indeed, previous research (Mobley et al., 1988; Urbany et al.,
1988) has found that ARPs (even when they are exagger-

59

ated or ambiguous) influence IRP positively. Most recently,

Chandrashekaran and Grewal (2003) demonstrated that
involvement moderates the assimilation process. Specifically, the authors demonstrate that greater assimilation
of ARP information (evidenced by a change in IRP) occurs when involvement is low. As discussed earlier, IRP
is one of the key determinants of TV. Therefore, ARP
information is more likely to enhance perceptions of TV
when involvement is low. The results presented earlier
(see Study 1) are also consistent with the above argument.
Therefore:
H3. Consumers with low levels of involvement perceive the
offer to be more attractive (i.e., higher TV) in the presence
of comparative price information.
H4. Consumers with high levels of involvement are unaffected by the presence of comparative price information,
that is, these consumers perceptions of TV are the same regardless of whether or not comparative price information is
present.
The above expectations may also be explained by invoking the evaluability hypothesis, which outlines that individuals prefer joint (separate) evaluation when an attribute
is hard (easy) to evaluate (see Hsee, 1996). More recently,
Hsee and Leclerc (1998) used this theory to explain how
consumers evaluate attributes and sale prices of comparable brands. The same logic may be extended to the case of
comparative price advertising, where SP may be evaluated
separately or jointly, that is, in conjunction with ARP. Here,
the difficulty/ease of processing SP (and ARP) may be related to consumers knowledge of market prices and their
overall confidence in this knowledge. As discussed earlier,
consumers with low levels of involvement are less likely
to possess price knowledge, and, therefore, are likely to
find it hard to evaluate SP and/or ARP in isolation (i.e., in
separate evaluation mode). When the two stimuli are presented jointly (the preferred evaluation mode under low involvement), the perceived discount/saving (i.e., perception
of TV) looms larger than when SP is evaluated in separate mode (see Hsee & Leclerc, 1998, p. 176). In other
words, ARP information is essential to assess TV when involvement is low. Therefore, as an extension of H3, it is
expected that these consumers will perceive the two formats that provide ARP information (i.e., SP + ARP and
SP + ARP + Saving) to be significantly better than the two
formats that do not provide this information (SP Only and
SP + Saving). In sharp contrast, involved consumers, who
are likely to be confident of their own knowledge (IRP), are
less likely to rely on externally provided reference information (i.e., ARP), and are likely to prefer separate evaluation
mode.
Consistent with the conceptualization (see also Grewal
et al., 1998), key determinants of AV are perceived quality
(PQ) and TV, and contextual factors (e.g. ARP) dot not influ-

60

R. Chandrashekaran / Journal of Retailing 80 (2004) 5366

ence AV directly. Therefore, the presence/absence of ARP

is not expected to change consumers assessments of AV.
Similarly, ARP is not expected to have any direct influence
on consumers purchase intention (PI).
Role of saving information
When ARP information is absent and the ad contains
Saving information (i.e., SP + Saving format), consumers
must expend additional cognitive effort to estimate the implied ARP, then adjust their IRPs accordingly and finally
form perceptions of TV. By definition, consumers who are
not involved lack the motivation and/or the ability to carry
out the mental arithmetic that is required to estimate the
implied ARP. This is especially true when the saving is
presented in relative terms (as is the case in Study 2) because estimating the implied ARP from %-off information
requires fairly complex mathematical operations (implied
ARP = SP/(1 %Saving)). Prior research (Chatterjee
et al., 2000) suggests that consumers (especially those who
lack the need for cognition) are unlikely to convert relative (%) saving information back to dollars. Therefore,
when presented with this format, consumers with low levels of involvement are not likely to be willing or able to
estimate ARP from saving information. Therefore, the presence/absence of saving information is not likely to have a
significant impact on perceptions of TV and, consequently,
on AV.
However, in the absence of other information (that is
easier to process), it is expected that the presence of Saving information acts as a signal that nudges consumers into
action.7 As discussed earlier, this influence is expected only
when involvement is low. It follows that the influence of
saving information on PI is reduced in the presence of ARP,
which is also easier to process. In such situations (low involvement) consumers simply utilize ARP to estimate TV.
Therefore, the influence of saving information on PI is likely
to be moderated by the presence of ARP information. Following the arguments presented earlier, involved consumers
do not rely on any contextual information to assess the value
of the deal. In summary, it is expected that:
H5a. Consumers with low levels of involvement express a
higher willingness to purchase the advertised product in the
presence of (relative) saving information.
H5b. The above effect is moderated by the presence of ARP
information.
H6. Consumers with high levels of involvement express the
same level of intentions regardless of whether or not the ad
contains saving information.
7 Although not the focus of this study, in general, the extent of influence
is likely to be positively related to the posted saving. However, when
the saving is too large, the influence may be negative because consumers
may doubt the veracity of the claim and/or the quality of the item.

Experiment
Study 2 employed a 2 (Presence/Absence of ARP Information) 2 (Presence/Absence of Saving Information) design. Consistent with current practice (see discussion of content analysis), SP information was always made available.
These manipulations yielded the four conditions for Study
2(i) ARP absent-Saving absent (SP Only condition), (ii)
ARP present-Saving absent (SP+ARP condition), (iii) ARP
absent-Saving present (SP+Saving condition), and (iv) ARP
present-Saving present (SP+ARP+Saving condition). Consistent with the objectives of the second study, the analysis
focuses on how consumers with differing levels of involvement (high vs. low) evaluate an advertised (high) sale price
in the presence/absence of ARP and Savings information.
The procedure employed in Study 2 closely matches that
followed in Study 1. One hundred and sixty graduate students participated in the study. As with Study 1, subjects
were initially shown a picture of the product (without any
price information) and were asked to provide estimates of
IRP. In addition, subjects indicated their perceptions of the
quality of the product and extent of involvement.
Perceived quality
Subjects indicated their perceptions of the quality of
the advertised brand on three scale items (ranging from
1 = Strongly Disagree to 5 = Strongly Agree). These
items corresponded to perceived durability (The advertised product is likely to last for a reasonably long time),
comfort (It is unlikely that the advertised product will fit
me comfortablythis item was reverse coded) and overall
quality (Overall, I think the advertised jeans are of good
quality).
Involvement
This construct was operationalized as the mean of responses on three scale items corresponding to (i) overall interest in the product (I am particularly interested in the advertised product), (ii) perceived personal relevance (Given
my personal interests, this product is not very relevant to
me) and (iii) overall feeling of involvement (Overall, I am
quite involved when I am purchasing a pair of jeans for personal use).8 Each item was measured on a five-point scale
ranging from 1 = Strongly Disagree to 5 = Strongly Agree.
After a brief interlude, each subject was exposed to one
of four advertisements for a pair of jeans (the same product/brand used in Study 1). The four versions corresponded
8 In response to reviewers concerns that the involvement construct may
have been under-conceptualized, a posterior analysis of the scales used
in Studies 1 and 2 was conducted (N = 100) to compare them with
the more comprehensive 20-item PII scale developed by Zaichkowsky
(1985). This test confirmed that the involvement scales used here have
high correlations with the Zaichkowskys scale (.76 with Study 1 scale
and .92 with Study 2 scale). Therefore, it appears that the items used
in this research might not have compromised the assessment of subjects
involvement with the product.

R. Chandrashekaran / Journal of Retailing 80 (2004) 5366

Acquisition value
This construct was operationalized as the arithmetic mean
of three scale items corresponding to subjects perceptions
of overall offer value (e.g., The advertisement shows a good
quality product at a reasonably price).
Transaction value
This component of offer evaluation was operationalized as
the mean of two scale items to reflect subjects evaluations of
the attractiveness of the deal relative to IRP (e.g., Compared
to the price I would normally expect to pay, the sale price
represents a significant saving).
Purchase intention
Subjects intentions to purchase the advertised item at the
posted (or implied) sale price were assessed as the average
of their responses to three scale items (e.g., There is a good
chance that I will take advantage of the advertised sale).
Analysis and results
After confirming that the dependent and independent
measures load onto distinct factors and yield scales that
are highly reliable (see Table 2A and B),10 three separate
ANOVA procedures were performed to assess the roles of
amount/type of information (presence/absence of ARP and

9 The sale price for Study 2 was adjusted very slightly to bring the
saving close to 10% of the regular price. Note that the implied relative
saving in Study 1 was closer to 9.5% than to 10%. It is unlikely that this
degree of change will unduly influence the results.
10 Although this study used fewer measures to assess each construct (see
scales validated by Grewal et al., 1998), it is encouraging to note that the
results of the factor analysis are consistent with previous research and
support the categorization of the dependent measures into three distinct
components corresponding to AV, TV and PI.

5.0
4.5

Transaction Value (TV)

to SP Only, SP + ARP, SP + Saving and SP + ARP + Saving

formats, which collectively describe all the tactics currently
used by retailers. When present, the comparison price corresponded to the products regular, non-sale price (Regularly $41.95). The sale price was held constant at $37.75.9
This price level was selected because Study 2 intends to explore the interesting interaction obtained in Study 1 in the
high price condition. Recall that this was the only condition
in which there was a significant difference between high
and low involvement consumers. Subjects were instructed
to scrutinize and evaluate the advertisement contained in
their booklets. As described earlier, offer-evaluation was
assessed on three dimensions corresponding to acquisition
value (AV), transaction value (TV) and Purchase Intention
(PI). Items for each of these constructs were adapted from
Grewal et al. (1998) and are described below. Subjects indicated the extent to which they agreed with each statement
on a five point scale ranging from 1 = Strongly Disagree to
5 = Strongly Agree.

61

4.0
3.5
3.0
2.5
2.0

Involvement

1.5

Low
High

1.0
Absent

Present

ARP Information

Fig. 2. Effect of ARP on transaction value: the moderating role of involvement (Study 2).

Saving information) and Involvement on TV, AV and PI

(see Table 3AC).
Role of ARP information
A highly significant (p .01) ARP Involvement interaction (see Table 3A) supports the premise that involvement
moderates the impact of ARP on perceptions of TV. Fig.
2 displays the observed interaction graphically. Consistent
with H3, the presence of ARP information enhances evaluations significantly when involvement is low (Mean TV =
4.11 when ARP is present vs. 2.81 when ARP is not provided, t = 6.93, p .01). In contrast, and consistent with
H4, involved consumers are not affected by ARP information (Mean TV = 3.32 when ARP is present vs. 3.51 when
ARP is absent, t = .84, p .41). Furthermore, and consistent with the evaluability hypothesis, when ARP information is not provided, evaluations of TV are significantly
higher among involved consumers (Mean TV = 2.81 when
involvement is low vs. 3.51 when involvement is high, t =
3.52, p .01), whereas the reverse is true when ARP information is available (Mean TV = 4.11 when involvement is
low vs. 3.32 when involvement is high, t = 3.71, p < .01).
Consistent with theory, consumers evaluations of TV are
influenced (albeit only moderately) by IRP.11 In addition,
the presence/absence of ARP information does not influence
consumers perceptions of AV (see Table 3B). Consistent
with the conceptual framework, consumers perceptions of
quality (p .05) and transaction value (p .01) are the
key drivers of AV. Finally, consumers purchase intentions
11 The analysis for TV was repeated using each of the indicators of IRP
as covariates. Significant two-way interactions (ARP Involvement) were
obtained in all three cases, but it was discovered that only one of the IRPs
(i.e., highest price) has a significant impact (p = .01) on TV. Although
the key results of this study, that is, the interactive effects of presentation
format and involvement, remain unaffected, this finding may have some
implications for how IRP ought to be operationalized in future studies.

62

R. Chandrashekaran / Journal of Retailing 80 (2004) 5366

Table 3
Univariate analyses of variance (Study 2)
Source

Type III sum of squares

df

(A) Transaction value: tests of between-subjects effects (dependent variable: transaction value)
Corrected model
36.24a
8
Intercept
60.67
1
Covariate: IRP
2.26
1
Saving information
0.09
1
ARP information
11.27
1
Involvement
0.22
1
Saving ARP
0.53
1
Saving Involvement
0.29
1
ARP Involvement
19.26
1
Saving ARP Involvement
0.02
1
Error

98.58

131

Total

1815.00

140

134.82

139

Corrected total

(B) Acquisition value: tests of between-subjects effects (dependent variable: acquisition value)
Corrected model
15.76b
9
Intercept
15.76
1
Transaction value
6.85
1
Perceived quality
2.34
1
Saving information
0.15
1
ARP information
0.32
1
Involvement
0.50
1
Saving ARP
0.38
1
Saving Involvement
0.20
1
ARP Involvement
0.00
1
Saving ARP Involvement
0.03
1
Error

57.95

129

Total

1808.11

139

73.72

138

Corrected total

(C) Purchase intention (dependent variable: transaction value)

Corrected Model
59.44c
Intercept
10.64
Covariate: TV
0.04
Covariate: AV
10.37
Presence of ARP
4.17
Presence of saving
0.11
Involvement
17.77
ARP Saving
3.81
ARP Involvement
0.60
Saving Involvement
8.14
ARP Saving Involvement
8.20

a
b
c

Significance

4.53
60.67
2.26
0.09
11.27
0.22
0.53
0.29
19.26
0.02

6.02
80.62
3.00
0.12
14.98
0.29
0.70
0.39
25.59
0.03

.00
.00
.09
.73
.00
.59
.40
.53
.00
.87

3.90
39.45
15.25
5.21
0.33
0.70
1.11
0.84
0.43
0.01
0.06

.00
.00
.00
.02
.57
.40
.29
.36
.51
.92
.81

9.56
15.41
0.05
15.02
6.04
0.15
25.74
5.52
0.86
11.79
11.88

.00
.00
.82
.00
.02
.70
.00
.02
.35
.00
.00

0.75

1.75
17.72
6.85
2.34
0.15
0.32
0.50
0.38
0.20
0.00
0.03
0.45

9.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00

6.60
10.64
0.04
10.37
4.17
0.11
17.77
3.81
0.60
8.14
8.20
0.69

Error

88.38

128.00

Total

1407.89

138.00

147.82

137.00

Corrected total

Mean square

R squared = .269 (adjusted R squared = .224).

R squared = .214 (adjusted R squared = .159).
R squared = .402 (adjusted R squared = .360).

are influenced directly by AV, but TV and ARP do not influence it directly (see Table 3C).12 Overall the hypotheses
are strongly supported, and the results provide additional

12 The significant two- and three-way interactions in Table 3C will be

discussed in the next section.

evidence to support the conceptual framework validated by

Grewal et al. (1998).
Role of saving information
Table 3A and B do not reveal significant main effects of
Saving on TV or AV. In addition, in both cases, Saving
Involvement interactions are not significant. These results

R. Chandrashekaran / Journal of Retailing 80 (2004) 5366

63

(A) 5.0
4.5

Purchase Intention

4.0

3.5

3.0

2.5

2.0

1.5
1.0
ARP Absent

Saving Information
Absent
Present
ARP Present

(B) 5.0
4.5

Purchase Intention

4.0

3.5

3.0

2.5

2.0

1.5
1.0
ARP Absent

Saving Information
Absent
Present
ARP Present

Fig. 3. Effect of ARP, saving information and involvement on purchase intention (Study 2): (A) low involvement; (B) high involvement.

support the conclusion that, regardless of the level of involvement, consumers perceptions of TV and AV are not
influenced by the presence of saving information. However, Table 3C shows several significant two-way interactions that are qualified by the presence of a highly significant
three-way (ARP Saving Involvement) interaction. This
finding is consistent with the arguments set forth to develop
the hypotheses (see H5a, H5b and H6) and suggests that
the influence of Saving information on PI is probably being
moderated by level of involvement and by the presence of
ARP information.
Fig. 3A shows how consumers respond to the presence/absence of Saving information and ARP information when involvement is low. In the absence of ARP
information, purchase intentions are significantly higher

when Saving information is available (Mean PI = 4.35

vs. 2.89 when Saving is present and absent, respectively,
t = 5.03, p .01). However, the influence of Saving information on PI disappears when ARP information
is made available (Mean PI = 2.91 vs. 3.33, t = .15,
p > .40). When involvement is high, best results are obtained when both SP and Saving information are absent,
that is, when SP is evaluated in separate mode (Mean
PI = 2.95 is significantly higher than all other conditions, p .05). However, the purchase intentions elicited
by the other formats are not significantly different from
each other. Collectively, these results are consistent with
H5a, H5b and H6, and support the conclusion that both
involvement and ARP moderate the influence of Saving on
PI.

64

(A)

R. Chandrashekaran / Journal of Retailing 80 (2004) 5366

Table 4
Effects of information type and involvement

5.0
4.5

Group statistics

Transaction Value

4.0

SP Only

3.5

TV

3.0

AV

2.5

PI

2.0

Involvement

1.5

Low

1.0

High

SP + ARP

TV
AV

SP

SP

SP

SP

+A

+S

R
S
P+

g
in
av

y
nl
O

+A

PI
g
in
av

(B)

TV

5.0

AV

4.5

PI

4.0

Purchase Intention

SP + Saving

SP + ARP +
Saving

3.5

TV

AV

3.0

PI

2.5

Involvement

Mean

SD

|t-value| (p)

Low
High
Low
High
Low
High

18
27
18
28
18
28

2.67
3.48
3.44
3.51
2.94
2.95

0.89
0.92
0.93
0.88
0.99
0.80

2.94
(.005)
.25
(.81)
.03
(.98)

Low
High
Low
High
Low
High

17
13
17
13
17
13

4.12
3.38
3.92
3.38
3.43
2.33

0.84
1.04
0.45
0.68
0.90
1.01

2.13
(.04)
2.61
(.01)
3.15
(.004)

Low
High
Low
High
Low
High

18
14
18
12
18
14

2.94
3.57
3.56
3.58
3.35
2.33

0.82
0.87
0.65
0.71
0.55
0.80

2.09
(.05)
.11
(.91)
3.45
(.002)

Low

23

4.11

0.77

3.12

High
Low
High
Low
High

12
23
11
23
12

3.25
3.55
3.30
2.91
2.28

0.78
0.62
0.81
0.82
0.98

(.004)
.98
(.33)
2.03
(.05)

Involvement

2.0
1.5

Low

1.0

High
R
+A
SP

ng

ng
vi
Sa
P+

vi

a
+S
SP

y
nl
O

R
+A
SP

SP

Fig. 4. Effect of amount/type of information: (A) transaction value; (B)

purchase intention.

Putting it together
Fig. 4A and B summarize consumers responses (TV and
PI) to the four presentation formats. Consumers with low
levels of involvement perceive highest TV when ARP information is readily available (i.e., in the SP + ARP and
SP+ARP+Saving conditions). The mean responses to these
two formats in the low involvement group (Mean TVlow inv =
4.12 and 4.11 in the SP + ARP and SP + ARP + Saving
conditions, respectively) are significantly higher (p .01)
than the mean responses in the other two conditions (Mean
TVlow inv = 2.67 and 2.94 for SP Only and SP + Saving
formats, respectively). However, evaluations of TV made by
involved consumers are not significantly different across the
formats (p > .10).
The mean purchase intention among consumers with low
levels of involvement (Fig. 4B) is highest in the SP + Saving
condition, and is significantly higher (p .01) than purchase intentions evoked by the other three formats. In sharp

contrast, involved consumers express highest intentions (significantly different than other three formats) when presented
with SP information only. Again, these results are consistent
with expectations.
Finally, Table 4 compares the responses of the two involvement groups to each of the price presentation formats.
These results are consistent with the premise that consumers
with low levels of involvement find it difficult to evaluate the
deal in the absence of ARP information, whereas involved
consumers rely primarily on SP information (and on their
own internal standards).13
Discussion
Study 2 addressed many limitations present in Study 1
and intended to gain a better understanding of how ARP
and Saving information (separately and together) influence
each aspect of evaluation (TV, AV and PI). Results support
the conjecture that retailers price presentation tactics are
influential only in particular market segments, and only in
particular stages of the evaluation process. Theoretical and

13 Although this research did not trace subjects thoughts during the
evaluation process and did not explicitly test whether SP and IRP are
more influential when involvement is high, the results are consistent such
a premise.

R. Chandrashekaran / Journal of Retailing 80 (2004) 5366

practical relevance of the results, limitations and directions

for future research are discussed below.

Conclusion
The results reported here offer insights that are both new
and interesting. Study 1 questioned the use of ARP in situations when its presence appears redundant and sought to
investigate whether and under what conditions such redundancy may be justified. Consistent with well-established
theory elucidating the role of involvement in consumer
information processing, this study discovered that only
consumer with low levels of involvement are influenced
positively by redundant comparison prices. On a related
note, this research examined whether retailers need to implement different communication tactics in different market
segments, but this conclusion was not supported. Clearly,
this could be good news for retailers! However, this conclusion may be premature because of several limitations in
Study. Building on the first study, Study 2 investigated a
wider array of presentation formats not addressed in previous research and investigated the roles of ARP and Saving
information in different stages of the evaluation process
(TV, AV and PI). Again, results suggest that involvement
plays a moderating role in determining how consumers are
likely to respond to various price presentation formats.
The findings from Study 2 have crucial implications for
practice. An expanded conceptual framework and the inclusion of an exhaustive set of presentation formats helped
uncover crucial differences in the roles of ARP and Saving information among consumers with differing levels of
involvement. Results underscore the need for retailers to
consider implementing different communications tactics in
the two segments. For involved consumers, retailers may
not be able to enhance evaluations and purchase intentions
by including ARP and/or Saving information. Although
perceptions of TV are generally unaffected by inclusion of
additional/redundant information, these consumers express
significantly lower intentions to purchase the product when
any additional information is provided along with SP. Consistent with the evaluability hypothesis, these consumers prefer to evaluate SP in isolation (SP Only format). Therefore,
for involved consumers, retailers must consider presenting
information in SP Only format.14 In contrast, the presence
of ARP is crucial to communicate enhanced TV when involvement is low. For this purpose, retailers may utilize
either SP + ARP or SP + ARP + Saving formats. However,
if the objective is to encourage purchase, retailers should
consider emphasizing the (relative) saving without providing ARP information. In conjunction, these findings suggest
14 Of course, the success of such a tactic rests heavily on the ability of
the retailer to appropriately profile and distinguish consumers who are involved from those who may have low levels of involvement. Alternatively,
retailers may manipulate situational factors to elicit high/low involvement.

65

that, for consumers with low levels of involvement, retailers

need to include ARP information in store ads, newspaper
inserts (FSIs) and other sale announcements to enhance
perceptions of value and attract consumers into the store.
However, once these consumers are in the store, the signs
posted inside the store should emphasize (relative) saving
in conjunction with SP to encourage consumers to buy the
product. Similarly, store (or manufacturer) coupons should
emphasize saving and not ARP information. The results
obtained here suggest that including ARP inside the store
is likely to hurt evaluations leading to sub-optimal results.

Limitations and future research

This research examined one type of comparison price,
that is, regular price. It is unclear whether similar results
will be obtained with other types of reference prices (e.g.,
competitors prices). In both studies, ARP was held constant.
In addition, each study used a different saving presentation
format. Incorporating multiple levels of SP and ARP along
with different saving presentation formats ($-off and %-off)
will undoubtedly advance our understanding significantly.
Additional research is also needed to investigate whether the
results obtained here can be replicated under different conditions (e.g., differently priced products). Finally, this study
would have benefited from process measures that would have
provided insight into consumers thought processes.
Acknowledgements
Many thanks to the editors and three anonymous reviewers
for their invaluable insight and suggestions.
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