CONSUMER RESPONSE TO PRICE DISCOUNTS AS A FUNCTION OF BRAND NAME AND STORE TYPE: AN INFORMATION PROCESSING EXPLANATION (INFORMATION CHUNK)

This study examined the effects of three product information cues on the consumer's choice of a given brand of men's dress shirt. Independent variables were: (1) the magnitude of the price discount varied over three levels (75%, 30%, and 5%); (2) the brand name associated with the product (an established national brand versus a new brand); and (3) the name of the store promoting the product (a department store versus a discount store). The dependent variable measured the proportion of subjects selecting the discounted brand as their first choice. The study featured a 3 x 2 x 2 full factorial ANOVA design. Subjects were 228 full-time working adult MBA students who were each exposed to a 5" x 7" photograph displaying four different brands of long sleeve white dress shirts. Subjects were asked to indicate on the questionnaire, the brand which represented their first, second, third and fourth choice.; Overall, significant main effects were observed for the price discount, brand name and store name factors, respectively. The price discount x brand name interaction was the only significant interaction effect produced by the data. Nevertheless, this result revealed that (1) social judgment theory (Sherif & Hovland 1961) was capable of predicting choice behavior in response to varied levels of price discounts only when the discounted brand was new and unfamiliar to the buyer; (2) the established national brand name was used by respondents as a convenient device for evoking a much wider configuration (an information chunk) of brand related information stored in memory; and (3) the individual's cognitive process of 'chunking' information related to well-known brand names mediated the hypothesized effects of assimilation and contrast as predicted by social judgment theory.; From a managerial perspective, the findings suggested that (1) marketing managers should avoid exceptionally large discounts on new or unknown brands as a strategy of competing against well-established national brands of clothing merchandise; and (2) discount stores which attempt to compete outside their competitive domain by offering high quality brand name dresswear merchandise may encounter greater consumer resistance to the product offer than would other competing department stores.