A recent study by Reims Management School reveals the negative consequences
of deals that seem too good to be true
December 2012 – A study conducted by Reims Management School (RMS) reveals
that consumers are often put off by promises of lowest prices which are
coupled with high refund guarantees – contrary to the usual strategies of
many top retailers.
Conventional marketing practise is based the natural assumption that
consumers will choose the cheapest option when offered the same product at
different prices. It is therefore up to the seller to convince the consumer
that theirs is indeed the lowest price. Guarantees, coupled with a promise
of reimbursement of the price difference if a cheaper option is found
elsewhere, are an increasingly common method to deliver this impression.
The technique is also used to avoid show rooming; when consumers go in-store
to decide the product to buy but in the end use the internet make the final
purchase at the true ‘best price’.
New research from Reims Management School has found however that such
strategies can cause consumers to become suspicious of the offer and may
avoid making the purchase all together. The researchers conducted three
experiments consisting of 662 subjects, with the objective of better
understanding consumer behaviour, their perception and their attitude in
relation to these low price guarantees.
“This research has significant implications for retailers but also for
manufacturers,” said Adilson Borges, head of the Value & Persuasion Research
Center at RMS.
“If the offer seems too good to be true, the consumer may start to believe
that there is a catch, and become wary or suspicious of the details. This
bad image creates a negative effect. The offer must appear to be credible.
It must be truly beneficial and financially interesting for the consumer,”
Borges said.
A price guarantee which offers an automatic refund of the difference where
the retailer is constantly surveying competitors’ pricing works well and
gives a positive image of the seller to the consumers. However, an automatic
guarantee with a reimbursement which is too high such as five or ten times
the difference, engenders a caution from the consumer, and conveys a rather
negative image. Consumers were observed to reduce their purchase intention
when facing these types of deals.
“In fact, when we examine the retailers together, we observe that their
objective is to give the impression that they have the most competitive
offer in the market. From this point of view they have every interest in
offering a guarantee of the best price and reimbursing the difference,” said
Borges.
The study “Revisiting low price guarantees: does consumer versus retailer
governance matter?” was published in the review “Marketing Letters”, in
September 2012, Volume 23, pp. 777-791.
Press Contact: Andrew Baggaley at Noir sur Blanc
Tél. +33 (0)1 41 43 72 78 / E-mail: [email protected]
About Reims Management School (RMS)
Accredited by the AACSB (Association to Advance Collegiate Schools of
Business), EQUIS (the European Quality Improvement System) and AMBA (The
Association of MBAs), Reims Management School (RMS) is ranked among the Top
10 business schools in France and the Top 20 in Europe. In addition
to its Grande Ecole programme “Sup de Co Reims”, RMS also offers 3
post-degree business schools: Cesem, Sup’TG and Tema. These schools
also include 2 Masters of Science programmes, 6 specialized master’s
programmes accredited by the CGE (Conférence des Grandes Ecoles) and an
International full-time and part-time executive MBA. In 2009, the Paris
Executive Campus, a joint venture with Rouen Business School dedicated to
executive education, offered 3 part-time Masters programmes, an executive
MBA and a continuing education programme. Both Reims Management School
campuses educate over 4,000 students, of which 900 are
international. Reims Management School has a network of over 150 partner
universities in 40 countries and more than 23,000 alumni from around
the world, grouped within the RMS-Network Association (www.rms-network.com).
About the Value & Persuasion Research Center
The central themes of this research centre are value and persuasion. Through
research on the notion about the creation and perception of value, the
centre aims to better understand what creates value among the interested
parties (consumers, businesses and public authorities). The second theme,
persuasion, will seek to understand the art of convincing. How do we
convince consumers to eat healthily? How do we persuade citizens to
economise drinking water? How to convince a banker to invest in a green
enterprise? The central objective is to centralise the key factors of
persuasion and its impacts from one culture to another. Through diversified
training of its members and the depth of research, the Value & Persuasion
Research Center will answer the three scientific imperatives which are the
marks of contemporary research: interdisciplinary la complementary
methodologies and a comparative approach.
Directed by Adilson Borges, the center brings together an interdisciplinary
team of 11 permanent professors from RMS as well as international
professors.
Visit the corporate website (www.reims-ms.fr) and the information portal
(www.reimsms.info/)
