Probing permanent price reduction strategy of manufacturer brands: pre- and post-purchase perceptions

Recognizing the widespread practice of permanent price reduction (PPR) strategies of manufacturer brands in high-tech consumer products industry, this research aims to investigate the appropriate conditions for this practice. The research conceptualized timing and extent of price reduction by addressing consumer pre- and post-purchase perceptions. Two experiments were conducted to study the effect of PPR on consumer pre- and post-purchase perceptions. In the first experiment, the moderation effect of brand credibility and elapsed time since launch (ETSL) on the relationship between magnitude of price reduction (MPR) from launch price and purchase intentions was investigated. The second experiment explored the moderation effect of trust violations and elapsed time since purchase (ETSP) on the relationship between MPR from past purchase price and repurchase intentions. The result of first experiment supports the moderation effect of brand credibility and ETSL and the second experiment confirms the moderation effect of trust violations and ETSP. The paper extends the previous research in two streams that are consumer pre- and post-purchase perceptions towards marketer’s pricing decisions. The research highlights the significance of elapsed time and extent of price reduction in pricing theory. The findings derive implications for manufacturer brands in high-tech consumer products industry in identifying conditions of price reductions in terms of timing and extent of price reduction that would affect short-term sales and long-term brand equity.