Guest editorial

Citation

Estelami, H. and Maxwell, S. (2007), "Guest editorial", Journal of Product & Brand Management, Vol. 16 No. 7. https://doi.org/10.1108/jpbm.2007.09616gaa.001

Guest editorial

Hooman Estelami is an Associate Professor of Marketing and Co-director of the Pricing Center at Fordham University in New York. He received his PhD in Marketing from Columbia University. His research has been published in journals such as the Journal of Retailing, Journal of the Academy of Marketing Science, International Journal of Research in Marketing, Journal of Business Research, Journal of Product & Brand Management, Journal of Services Marketing, Journal of Service Research, Journal of Financial Services Marketing and elsewhere. He is also the author of the textbook Marketing Financial Services.

Sarah Maxwell, PhD, is Associate Professor of Marketing at Fordham University and Co-Director of the Fordham Pricing Center. She conducts pricing classes for both MBAs and industry. Her forthcoming book, The Price Is Wrong, deals with the social norms of unfair pricing. Dr Maxwell received her MBA in 1980 from the Wharton School and her doctorate in 1997 from Florida International University. Prior to her career in academia, she was the Managing Partner of a Philadelphia advertising agency and Director of Advertising and then Vice President of Marketing for various divisions of Aramark, an $11 billion international services management company.

The practice of pricing is undergoing constant change. The brand manager’s decision process on what price to charge has evolved over the years, and has become an increasingly complicated task. While pricing decisions were often guided by cost, the competitive nature of markets and the increasing complexity of consumer psychology have shifted pricing practice into an arena where factors other than cost determine optimal prices. Variables related to consumer cognitive processing of price information, emotional and social aspects of price, and the integration of web-based technologies in communicating and setting prices have found their way into the range of decision variables faced by brand managers across an array of goods and services categories. These pricing complexities are not only evident among highly commoditized consumer packaged goods categories, but can also be seen for complex industrial goods and services that are typically customized and highly valued.

In recent years, the recognition of the powerful effects of human psychology on consumers’ financial decisions has been reinforced by a continuous stream of research findings in the behavioral pricing literature. These findings challenge traditional views of price response held in the economics literature, for example by establishing that the demand function may not necessarily be a downward sloping phenomenon and that increasing price may at times result in higher consumer demand. This type of finding, and similar observations in behavioral pricing, have created new profit-generating opportunities for brand managers, and their recognition and use in the setting prices is essential for maximizing profitability.

The papers included in this Special Issue reflect the underlying theme that price setting practices by brand managers need to integrate the knowledge of consumers’ psychological responses to prices. Three general themes are evident in these papers. The first two papers included in this Special Issue focus on the strategic aspects of pricing. The second two papers relate to the theme of promotional pricing, by examining how specific promotional practices commonly utilized in the marketplace influence consumer responses. The final two papers focus on issues of information processing and how the human cognitive system can create biased responses to prices, with subsequent effects on intended or actual behavior. A summary of these papers is provided below.

The first two papers included in this Special Issue are reflective of the strategies of pricing adopted by organizations, and resulting optimal price decisions. The lead article by Ingenbleek provides an integrated review of the literature on organizational pricing practices. The paper summarizes the results of prior empirical studies and presents specific research propositions. The next paper by Martin-Consuegra, Molina and Esteban examines the intricate relationship that exists between price fairness, customer satisfaction, price perceptions and loyalty. The paper focuses on the specific context of services and establishes the relationship between price fairness, customer satisfaction and loyalty.

The second two papers focus on the effects of price promotions on consumers. The paper by Choi and Kim focuses on a specific category of promotions, referred to as “scratch and save” promotions. Utilizing two empirical studies the authors demonstrate that such promotions can have a significant effect on price perceptions and purchase intentions. The authors also demonstrate the effects to be moderated by the consumer’s level of price consciousness. The paper by Tsai and Lee examines the effects of targeted promotions – those that differentiate the prices charged for present and prospective customers. The authors examine the possible negative effects that may arise if customers in one group are made aware of lower prices offered to the other group. The results of an empirical study demonstrate that when facing such a situation, present customers have more negative responses than prospective customers. Subsequent effects on consumer emotions and purchase intentions are also observed.

The last two papers focus on the underlying psychology of price information processing. Heeler, Nguyen, and Buff examine the concept of inferred bundle savings – the bundle savings estimated to exist by consumers, when no explicit savings information is present. By replicating prior bundling studies the authors suggest that while providing a bundled price may not always result in the most positive consumer response, under specific circumstances price bundling may be more attractive to consumers – even in situations where no objective savings may be present. The paper by Coulter takes a closer look at the psychological process of price perception formation by examining the effects of digit-directionality, which reflects the left/right orientation of the numerals in a price. The author demonstrate that digit-direction can influence consumers’ eye movement, with subsequent effects on information processing intensity and price-truncation strategies.

The Associate Editors would like to take this opportunity to thank the Editorial Board of the Special Pricing Section of the Journal of Product & Brand Management. The Board has over the years provided invaluable services to the field of pricing and has been instrumental in moving the pricing section of the journal forward. The support of the following reviewers is therefore gratefully acknowledged:

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  Fabio Ancarani;

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  Sundar Balakrishnan;

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  Margaret Campbell;

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  Rajesh Chandrashekaran;

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  Amar Chema;

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  Richard Colombo;

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  Keith Coulter;

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  Devon DelVecchio;

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  Ellen Garbarino;

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  Eric Greenleaf;

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  David Hardesty;

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  Andreas Hintenhuber;

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  Kostis Indounas;

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  Sharan Jagpal;

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  Frédéric Jallat;

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  Biljana Juric;

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  Monika Kukar-Kinney;

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  Rob Lawson;

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  Dawn Lerman;

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  Joan Lindsey-Mullikin;

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  Rajesh Manchanda;

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  Ken Manning;

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  Pete Nye;

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  David Sprott;

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  Rajneesh Suri; and

• •

  Lan Xia.

We also gratefully acknowledge the continuing support of our advisory board:

• •

  William Bearden;

• •

  Dipankar Chakravarti;

• •

  Dhruv Grewal;

• •

  Sunil Gupta;

• •

  Donald Lehmann;

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  Kent Monroe;

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  Robert Schindler;

• •

  Joe Urbany; and

• •

  Russell Winer.

It is hoped that this Special Issue of JPBM will help further the examination of behavioral pricing effects and advance our knowledge in this fascinating and expanding branch of marketing.

Hooman Estelami and, Sarah Maxwell