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Study: Cheapest price may not always win over the consumer

Consumers care about price but they also care about the quality of a retailer.

February 9, 2016

Lower prices appeal to consumers but that doesn’t necessarily mean retailers offering the bottom price or a price-matching guarantee are going to close the sale. A new study reveals that shoppers not only consider price but also a retailer's ranking among customers, especially in the brick-and-mortar environment.

A retailer's rating and reliability are consumer interest points, along with pricing, reports a Wisconsin School of Business study.

"Obviously, consumers like low prices, but they also take into consideration which retailer is offering the deal," states Arora, marketing professor and director of the A.C. Nielsen Center for Marketing Research at the Wisconsin School of Business, in an announcement. "The retailer ratings on price comparison sites are another vital piece of information that lead shoppers to determine how attractive a price is. If they see poor retailer ratings associated with low prices, they may question the legitimacy of that price."

Arora along with H. Onur Bodur of Concordia University in Montreal and Noreen M. Klein of Virginia Tech, examined the impact of price comparison websites on how shoppers evaluate prices and the implications for brick-and-mortar retailers.

"Simply adopting price-matching guarantees may put brick-and-mortar retailers in a position where they are selling themselves short by underestimating the value of their brand reputation and trying to match a competitor's price that customers don't believe to be valid," stated Arora.

The study assessed results of a price comparison site search for a heart-rate monitor which was priced from $200 to $300 at a range of retailers that were rated high, mid and low in terms of consumer satisfaction.

When the $250 price is from a retailer with favorable ratings, shoppers may see it as the best option, states the research results.

"Consumers evaluate the trade-off between a low price and low retailer rating," said Arora. "While the first thing people look at is price, consumers then look at the retailer rating to decide whether it’s actually a good price."