A Taxonomy of Price Behaviour
Björn Ivens
Professor in Marketing
HEC Faculty of Business and Economics,
University of Lausanne, Switzerland
Phone: +41-21-692 3461
Bjoern.Ivens@unil.ch
Brigitte Müller
Assistant Professor in Marketing
HEC Faculty of Business and Economics,
University of Lausanne, Switzerland
Phone: +41-21-692 3373
Brigitte.Muller@unil.ch
Katharina Güse
PhD student and research assistant
HEC Faculty of Business and Economics,
University of Lausanne, Switzerland
Katharina.Guse@unil.ch
Phone: +41-21-692 3465
Abstract:
Many of the classical retail chains attempt to counter discounters’ aggressive expansion
strategy by introducing low-priced private label product assortments. In this paper, we
analyze the relationship between consumers’ price behavior and their reactions toward the
classical retailers’ low price products. Based on survey data we first develop a taxonomy of
customers’ price behavior. This taxonomy is built from several dimensions of consumers’
price behavior. We then analyze if the price behavior cluster consumers’ belong to has an
impact on their response to classical retailers’ low-price products. The paper closes with a
discussion of the results and directions for future research.
A Taxonomy of Price Behavior
Over the past years, the international expansion of hard-discounters such as Aldi or
Lidl has led to a shift in the European retail landscape. The relative market share of this type
of retail format has constantly grown (Denstadli et al. 2005; Business Insights 2006).
Traditional retail chains have long had difficulties finding an appropriate strategic reply. The
most important move for many retailers has consisted in introducing an assortment of lowpriced products which are sold at prices comparable to those of the hard-discounters products.
For example, in Switzerland two major players dominate the retail market, i.e. Coop and
Migros. Together they hold approximately 72% of the national retail market and traditionally
both have been selling their products at average to upper price points (Von Ungern-Sternberg
and Jametti 2007). When German hard-discounters Aldi and Lidl have entered the Swiss
market, both Swiss retail chains have established discount price product ranges. The strategic
function of these new product assortments in both cases is to retain price sensitive customers
and prevent them from switching to the new competitors. An important question in this
context is whether these products attract all types of customers or whether specific customer
groups are more likely to buy them. The purpose of this paper is to provide elements to
answer this question.
Consumer’s price behaviour
In a broad stream of research, different constructs describing customers' price behavior
have been conceptualized (e.g. Lichtenstein et al. 1990; Vanhuele and Drèze 2002) and their
impact on purchasing decisions has been demonstrated (e.g. Ailawadi et al. 2001; Estelami
and Lehmann 2001).
Lichtenstein et al. (1993) distinguish several constructs describing different aspects of
customers’ price behavior. Four constructs reflect the negative role of price: (1) Price
consciousness; (2) Value consciousness; (3) Sale proneness; (4) Price mavenism. Two
constructs reflect the positive role: (5) Price-quality scheme; (6) Prestige sensitivity.
The extent to which a consumer is price conscious or a price maven varies between
individuals. These concepts describe the personality of each consumer. While scholars have
analyzed the relationship between various aspects of consumers' price behavior and outcome
variables, little is known about the extent to which typical patterns of price behavior exist.
From a managerial vantage point, however, the existence of price behavior clusters or
segments would be of high relevance. To the best of our knowledge, the constructs described
above have not yet been used in order to segment customers.
Research methodology and results
A total number of 471 questionnaires were collected from consumers. The structure of
respondents corresponds to the one in the relevant regional population with regard to gender
and age. The scales included in the questionnaire are mostly drawn based upon the ones
developed by Lichtenstein et al. (1993): Value consciousness (4 items, α=.692), Price
consciousness (3 items, α=.869), Sale proneness (3 items, α=.703), Price mavenism (4 items,
α=.780), Price quality scheme (3 items, α=.746) and Prestige sensitivity (3 items, α=.729).
In our analysis, we proceeded in two steps. First, we used cluster analysis in order to
uncover a potential segment structure in consumers’ price behavior. Analysis of variance
shows that the three identified clusters differ significantly along five of the six active cluster
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variables. Only for prestige sensitivity we observe no significant differences. Analysis of
discriminance shows that the probability that objects in the data base are correctly allocated to
the clusters is 92.5%:
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Cluster 1 (value-oriented shoppers) is characterized by high value and low price
consciousness. Sale proneness is also lower as for the other two clusters. Consumers
see themselves as price mavens and score the highest on price-quality scheme.
Cluster 2 (price-oriented shoppers) is composed of consumers who show low value
but high price consciousness as well as relatively high sale proneness. On price
mavenism and prestige sensitivity they have average scores.
Cluster 3 (sale-driven shoppers) is composed of sale prone consumers who score low
on both price and value consciousness, on price mavenism and on price quality
scheme.
The second step aims at identifying the buyers of discount-price products. Using analysis
of variance, we also analyzed whether significant differences exist in the three groups’
response to low price product assortments at classical retailers. We included three
independent variables in the analysis, i.e. consumer attitude towards discount-priced products,
consumer attitude towards that specific retail brand and consumers frequency of buying the
specific retail brand. For all three independent variables there are significant differences (p <
0.05) between the three shopper clusters. Value-oriented and price-oriented shoppers buy
more frequently low price products than those driven by sales. A similar pattern is observed
concerning cluster 3. Sale-driven consumers have the least favorable attitude toward discountpriced assortments and the specific assortment brand and also buy less frequently the brand.
On the contrary, we can observe that value and price-oriented consumers evaluate these types
of products more favorably and buy them more frequently.
Implications and future research
By elaborating this taxonomy, we shed light on the link between key constructs in
behavioral pricing and consumer response to discount concepts. For managerial practice, our
results imply that the managers of retail brands should adapt the positioning of their discountprice brand(s). In particular, strategies need to be designed to communicate precisely with the
price segment who responds positively to the discount-priced brands as compared to the
segment of sale prone shoppers which is mainly focusing upon price promotions for national
brands.
Future research is undertaken in order to focus not only focus upon respondents’
reactions toward the classical retailers’ discount-priced assortments but also compare
consumers’ attitudes towards the discount retailers (Aldi and Lidl) with attitudes toward
discount-priced assortments. This would allow identifying potential motivational gaps in
buying one or the other offering.
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