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Revisiting low price guarantees: Does consumer versus retailer governance matter?

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  • Adilson Borges
  • Barry Babin

Abstract

Retailers often use low price guarantees (LPG) as a signal to attract consumers and increase sales. Consumers interpret LPGs as a signal that a particular retailer is committed to low prices. However, if more and more retailers employ LPGs, their effectiveness as a price signal wears off. As a result, retailers adapt increasingly extreme guarantees to get an advantage over the competition. Retailers, for instance, are experimenting with taking on the responsibility of looking for lower prices and automatically refunding consumers when a competitor offers a lower price for the same product. This research shows that automatic price protection of this sort might backfire under certain conditions. Three studies show that LPGs alone are not enough to signal low prices and that retailers combining large refunds with a retailer-enforced LPG obtain less favorable reactions than those implementing other types of LPGs. Copyright Springer Science+Business Media, LLC 2012

Suggested Citation

  • Adilson Borges & Barry Babin, 2012. "Revisiting low price guarantees: Does consumer versus retailer governance matter?," Marketing Letters, Springer, vol. 23(3), pages 777-791, September.
    • Handle: RePEc:kap:mktlet:v:23:y:2012:i:3:p:777-791
    DOI: 10.1007/s11002-012-9178-1
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    References listed on IDEAS

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    Cited by:

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    3. Jeng, Shih-Ping & Lo, Min-Fang, 2019. "Lowest price guarantees on airline websites: Perceived believability, perceived value, and purchase intentions," Journal of Air Transport Management, Elsevier, vol. 75(C), pages 85-91.
    4. Babin, Barry J. & Borges, Adilson & James, Kevin, 2016. "The role of retail price image in a multi-country context: France and the USA," Journal of Business Research, Elsevier, vol. 69(3), pages 1074-1081.

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