產品線廣告對於消費者參考價格與購買行為之影響

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(1)國立中山大學企業管理學系碩士班碩士論文. 產品線廣告對消費者參考價格與購買行為之影響 The Impact of Product Line Advertisement on Consumer Reference Price and Purchase Behavior. 研究生：周靜宜撰指導教授：吳基逞. 中華民國九十六年六月.

(2) ABSTRACT Product line extension is considered a low-cost, low-risk strategy of introducing products under the same category. Under product line extension strategy, however, manufactures and retailers usually advertise merely one product during a certain period, rather than advertising all products within the product line at the same time. Taking example of Coke Cola, it keeps extending its product line horizontally in the past years. There are Classic, Diet and Zero Coke belonging to the main product line. As we observed, Coke Cola seldom advertised for three products simultaneously. On the contrary, to highly impress consumers, only one product would be strongly promoted in a certain period. What is interesting is whether the advertisement of Zero Coke lowers the price that Classic Coke buyers are prepared to pay toward Classic Coke while zero calorie is highly emphasized in ads. It would be interesting to investigate the impact of product line advertisement on consumers to see whether the product line advertisement always brings positive influence on reference price toward consumers with different purchase purposes. This research addressed the question of how product-line advertisement influences consumer’s reference price within vertical and horizontal product line. It combined the research of product line extension and the concept of reference price to give advice for marketing. The category of product used in experiment is durable that was suggested in prior study. To examine the relationship between product-line advertisement and reference price, experimental method was performed here to test different kind of product line advertisement toward consumers with different purpose purposes, buying high-end product, low-end product or one certain product belonging to the horizontal product line. The results indicated that within the vertical product line, the brand advertisement with low-end product decreases the reference price toward high-end product buyers whereas the informational advertisement with low-end product increases the reference price toward high-end product buyers. Besides, within the horizontal product line, both of the brand and informational advertisement with one certain product in horizontal product line decreases the reference price toward the buyer who would like to buy another product belonging to the same product line.. Keyword: Product line, Product Line Advertisement, Reference Price, Purchase Behavior, Vertical product line, Horizontal product line. II.

(3) 中文摘要當廠商策劃在同一個品類下進行新產品引進時，產品線延伸被視為一種低成本，低風險的產品策略。然而，即便廠商同時銷售產品線中多個產品，但往往只針對其中一項重點商品做強力的促銷或廣告的放送。以可口可樂為例，他們持續進行水平的產品線延伸，發展出古典可口可樂(Classic Coke)，健怡可樂(Diet Coke)，和零卡可樂(Zero Coke)三種產品。從實際的觀察中可以發現，可口可樂鮮少同時進行三種產品的促銷和廣告，相反地，他們在每一季促銷中，都會設定某一種口味的產品作為主打。本研究認為，在這樣的產品線廣告策略下，不同產品的購買族群會因為察覺到廠商主打同一產品線中其他產品的產品理念、特色、優點，更容易產生參考價格與購買行為的變化。換句話說，當可口可樂強調零卡可樂的零熱量時，原來的古典可口可樂購買族群可能因此改變對古典可口可樂的購買行為。本研究結合產品現與參考價格的概念進行實驗。本研究發現，在垂直產品線中，以低階產品作為品牌廣告中的主打產品，會降低高階產品購買者的參考價格；相對的，若以低階產品作為資訊廣告中的主打產品、在廣告中提供低階產品性能的相關資訊，則會提升高階產品購買者的參考價格。然而，在水平產品線中，若僅在品牌廣告或資訊廣告中強調其中一個產品，都有可能降低另一個相關產品購買者心中的參考價格。中文關鍵字：產品線，產品線廣告，參考價格，購買行為，垂直產品線，水平產品線. III.

(4) Content 1. INTRODUCTION…………………………………………………………………. 1 2. Conceptual Model and Hypotheses………………………………………………... 3 3. Method…………………………………………………………………………….. 8 4. Discussion…………………………………………………………………………16 5. Reference…………………………………………………………………………..20. II.

(5) 1. INTRODUCTION Product line extension refers to introducing products under the same category. It is considered a low-cost, low-risk strategy of introducing additional products to meet more consumers’ demands or touch more consumers. In previous literature, product line extension was divided into two categories: vertical and horizontal product line. Researchers referred to variation in quality levels of products within a category as “vertical product line extension”, whereas variation in the function or category of the products is referred to “horizontal product line extension”(Taylor, Karl, David 1998). The examples of vertical and horizontal product line extensions are common in real market. In Nokia N-series, high-end product (N95) equips better function of GPS and PDA that low-end product (N93) does not even have, so that Nokia is considered a company developing vertical product line. On the other hand, Coke Cola has three products with different flavors: Classic, Diet and Zero Coke. These three products are differentiated by flavor rather than quality and price. Hence, the product line of Coke Cola is defined as horizontal product line. Since product line extension is a popular marketing practice, some interesting situations are addressed in this research. Under the product line extension strategy, the marketing practice which provides individual advertisement merely for one product within the product line is easily observed. This kind of marketing practice is frequently used based on the reason of highlighting the distinctive features of specific product. Taking example of Coke Cola, it keeps extending its product line horizontally in the past years. There are Classic, Diet and Zero Coke belonging to the main product line. As we observed, Coke Cola seldom advertised for three products simultaneously. On the contrary, to highly impress consumers, only one product would be strongly promoted in a certain period. What is interesting is whether the advertisement of Zero Coke lowers the price that Classic Coke buyers are prepared to pay toward Classic Coke while zero calorie is highly emphasized in ads. The interactive impacts may be more obvious in the vertical product line since consumers can easily compare the difference of quality among products. Referring to product line extension, previous research had different opinions on interaction among products within the product line. Some study of line extension addressed product line extension may lower brand loyalty, disturb trade relations, and even ruin the profitability of the corporation (Quelch and Kenny 1994). But some researchers argued that the reciprocity effects may exist in product line as the identical feature owned by every product in line (Jun, Sung, Mazumdar, Raj 1999). Besides, recent research of product line extension not merely focused on the “silent outcome” of product line extension, “the dynamic interaction process” was also noticed in 1.

(6) recent research. An empirical research showed that for the lower-quality products in the market, brand equity increases with the quality of the lowest-quality products in the brand’s product line; relatively for the higher-quality products in the market, brand equity increases with the quality of the highest-quality products in the product line (Taylor, Karl, Daivd 1998). Subsequently, Kilsun and Dilip (2001) showed using identical feature levels increases the perceived similarity between original and extension products, meanwhile, it results in valuation premium and discount for the original low-end and high-end product respectively. Consequently, prior study presented that the use of product line extension strategy not purely bring positive results. It is inconsistent with what manufactures and retailers usually believe in. On the other side, plenty of recent research concerned about price effects modeled by reference price on consumers’ purchase behavior. Reference prices are standards for consumers against the purchase price of a product that is judged (Monroe 1973). Two types of reference price had been identified in previous literature: internal and external reference prices. Internal reference prices are stored in memory forming by previous purchase prices whereas external reference prices are provided by observed stimuli in the purchase environment (Mayhew and Winer 1992). In previous research, there were two fairly independent streams defined (Tridib and Indrajit 2005). The first stream of research refers to assessing the effects of external stimuli on consumers’ internal reference price, price judgments, and evaluations. Another stream of research tries to model reference price formulations and tests their effects from the statistical fit of models calibrated on consumer panel data. Since the research of effects of external stimuli on consumers’ reference prices may offer some marketing advice on contextual environment constructing for manufactures or retailers. It is worth investigating whether the contextual environment formed by product line advertisement influence consumers’ reference prices. This study combining the field of product line advertisement and reference price may make up previous literature and offer some numeral evidence and advice for industry. This research addressed the question of how product-line advertisement influences consumer’s reference price within vertical and horizontal product line. It extended the research of product line extension and combines the concept of reference price. To examine the relationship between product-line advertisement and reference price, experimental method was performed here to test different product-line advertisement toward consumers with different purpose purposes, buying high-end product, low-end product or one certain product belonging to the horizontal product line. The results indicated:. 2.

(7) 1. Within the vertical product line, the brand advertisement with low-end product decreases the reference price toward high-end product buyers whereas the informational advertisement with low-end product increases the reference price toward high-end product buyers. 2. Within the horizontal product line, both of the brand and informational advertisement with one certain product in horizontal product line decreases the reference price toward the buyer who would like to buy another product belonging to the same product line. In the following sections, this article is arranged to describe the conceptual model and hypotheses in chapter 2, the research method in chapter 3, and the final discussion in chapter4.. 2. CONCEPTUAL MODEL AND HYPOTHESES As mentioned in prior introduction, this research investigated the impact of product-line advertisement on reference price. Considering different kinds of advertisements would bring varied effects, it is better to classify advertisements and compare their impact on reference price. Researchers subdivided advertising into thinking/feeling ads (Cohen and Archi 1991; Friestad and Thorson 1993) or informational/ transformational ads (Puto and Wells 1984). Basically, they defined thinking/informational ads as an advertisement giving consumers information about benefits to tell them the reasons of purchase. Comparatively, feeling/transformational advertisement is defined as an advertisement let consumers perceive the image after they use the product. Brand Advertisement The subject of Product line Advertisement Vertical Product line. Horizontal Product line. Informational Advertisement. Reference Price toward specific buyer. High-end Product. Low-end Product. Low-end Product. High-end Product. Product A. Product B. The subject of Product line Advertisement Vertical Product line. Horizontal Product line. High-end Product. Low-end Product. Low-end Product. High-end Product. Product A. Product B. FIGURE 1. Conceptual Framework. 3. Reference Price toward specific buyer.

(8) Distinguishing each advertisement into informational or transformational type is not easy while nowadays advertisements often include both elements. In this research, the advertisement which mainly describes the product functions was used to represent the informational advertisement and the brand advertisement which emphasizes brand personality and image was used to represented transformational advertisement. Hypotheses and conceptual model were developed toward brand advertisement and informational advertisement relatively. 2.1 Brand Advertisement and reference price Brand image is defined as “the set of beliefs held about a particular brand,” (Kotler 1988) and Keller (1993) described when customers react more favorably to marketing activities the same with other competitors, it is said to have positive customer-based brand equity. It is attributed to a fictitiously named or unnamed version of the product or service. When brand equity enhances, it may result in at least three forms: price premium, increased market share, and less costs of introducing new products (Aaker 1991). Therefore, this research argued that if price premium which causes by brand equity manifests, it may increase the consumers’ evaluation of product and result in the increase of reference price.. Brand Ads. Brand Equity. Perceived Value. Reference Price. FIGURE 2. Conceptual Model of the Impact of Brand Advertisement on Reference Price. Figure 2 shows the conception of the impact of brand advertisement on reference price. Brand advertisement is usually designed to deepen audiences’ impressions on brand and convey a specific image. Sucessful brand advertisement may let consumer have (more) positive affections and brand images. Through an brand advertisement, the positive evulation of brand could be usually built and spread to those products underlying the same brnad name. Sequentially, the perceived vaule of products is enhanced. Since there were rich studying discussing brand (product) extensions and their brand associations(Aaker and Keller 1990, Loken and Roedder 1993), the strong association between brand equity and perceived value of products is especially expected within internal the product line. Besides, reference price is constructed by prior purchase experience and may be moderated by current purchase environment or context (Thaler 1985); we predicted reference price may increase while perceived value is created through brand advertisement within both vertical and horizontal 4.

(9) product line. As discussed, the presence of a brand advertisement may give rise to positive brand equity, be spread to other product through their relationship of product line, and then result in the increase of reference price. On the basis of this model, following hypotheses regarding the main impact of brand advertisement on reference price are offered. H1a：Within vertical product line, brand advertisement with high-end product (low-end product) will result in higher reference price toward low-end (high-end) product buyer. H1b：Within horizontal product line, brand advertisement with one certain product will result in higher reference price toward the buyers who would like to buy another product belonging to the same product line. Despite the reason of brand association supporting that a brand advertisement may raise the reference price of product within product line simultaneously, some moderating factors still should be concerned. First, Yovovich (1988) pointed out the introduction of the low-end Cadillac diminished whole Cadillac brand equity. Some studies also found that consumers perceive less brand equality when a low-end product is put into the product line (Loken and Roedder 1993, Sullivan 1990). On the other hand, high-end product is usually thought as a signal of the quality of whole product line or high brand equity. Considering some mutual effects between high-end and low-end product, this research assumed the influence of the brand advertisement with high-end or with low-end on reference price should be different. Prior research revealed that brand price premium is significantly positively correlated with the quality of the “lowest-quality product” in the product line of lower quality segments, and correlated with the quality of the “highest-quality product” in the product line of upper quality segments. However, the positive relationship would be moderated if the products in product line are greatly different in quality (Taylor, Karl and David 1998). Therefore, this research indicated the impact of brand advertisement with low-end product will result in less increase of reference price than the ads with high-end product. In other words, the high-end product buyer who sees the brand advertisement with “low-end” product may increase his reference price, but the range of increase of reference will be relatively less than that of the low-end product buyer who sees the brand advertisement with “high-end” product. The second hypothesis is that:. 5.

(10) H2：The impact of brand advertisement with low-end product will result in less increase of reference price than the ads with high-end product. 2.2 Informational Advertisement and reference price Informational advertisement mainly provides the information about product attributes and benefits in relatively rational way while transformational advertisement offers a personality, an image and tries to reflect consumers’ needs. Attitude theory was applied in this research to investigate the relationship between informational product-line advertisement and reference price. Attitude theory Fishbein and Ajzen (1975) defined a person’s attitude as a function of his salient beliefs at a given point of time and given situation. Salient beliefs were mainly concerned as attributes of a brand or a product for marketing researchers. In Fishbein’s attitude model, overall evaluation or attitude of a concept/product/brand is described as the sum of a set of evaluation of salient beliefs with individual weight. n. ∑b e i. i. = Ao. i =1. where : bi = the strength of the association between the attitude concept, o, and the i th salient concept, ei = the evaluation of the i th salient concept, Ao = the overall evaluation of, or attitude toward, concept o, and n = the number of salient beliefs.. However, the set of salient beliefs Fishbein’s attitude model is not always the same, even for the specific concept (Fishbein and Ajzen 1975). The construct of salient beliefs or the strength of a salient belief may modify and change the whole evaluation. Beliefs can be modified in three ways: altering the evaluation of belief (ei), changing the strength of a salient belief (bi), or creating a new or delete an original salient belief.. Informational Ads. Salient Beliefs. Perceived. of Product. Evaluation. Reference Price. FIGURE 3. Conceptual Model of the Impact of Informational Advertisement on Reference Price. 6.

(11) Since informational advertisement emphasizes some specific product attributes toward consumers, it may influence the construct of salient beliefs, according to the view of attitude theory. In other words, if an advertisement strongly promotes the internet function of cellular phone, the part of audience, who identify themselves with ads, will add the internet function as their new salient belief(s) or enhance the strength of their original salient belief in internet function. Figure3 shows the relationship between informational ads and reference price. Therefore, when a low-end product buyer sees the informational advertisement of high-end product within the same product line, he may be influenced to add more salient beliefs or increase the weight of salient beliefs, which is emphasized in high-end product ads, into his own attitude/evaluation model. This research suggested that the final evaluation of low-end product may decrease in the new attitude model, because the strength of some salient beliefs may increase, but the evaluation of salient belief may apparently decrease or become negative after comparing with high-end product. The same situation was also predicted in horizontal product line. On the contrary, the informational advertisement of low-end product will raise the high-end product buyers’ appreciation of high-end product, due to the increase of evaluation of salient beliefs in the model caused by compared the conditions with low-end product in ads. As the change of product evaluation will reflect on reference price, there hypotheses are summarized as follows: H3a：The informational advertisement with low-end product increases the reference price toward high-end product buyers. H3b： The informational advertisement with high-end product decreases the reference price toward low-end product buyers. H3c：The informational advertisement with one certain product in horizontal product line decreases the reference price toward consumers who would like to buy another product belonging to the same product line. Evaluability of Attribute Hess (1996) classified the product attribute into two types. One type of product attribute is hard to evaluate the performance of quality for consumers when they do not have comparable information, called “hard-to-evaluate attribute”; another type is easy to evaluate the performance of quality even when consumers evaluate without related comparable information, called “easy-to-evaluate attribute”. Hess(1996) explained the effect of preference reversal with evaluability hypothesis and suggested that if the target product owns a better hard-to-evaluate attribute than others, letting consumers compare target product with other products may highlight the advantage of 7.

(12) target product and let consumers notice it. On the contrary, if the target product equips a better easy-to-evaluate attribute, the better way of exploring the information of product attribute is letting consumers judge the product attribute singly, rather than giving them comparable information. It is common to use hard-to-evaluate and easy-to-evaluate attribute in informational product line advertisement. By the literature of evaluability hypothesis, this research proposed the type of product attribute may a moderator of relationship between informational advertisement and reference price. H4：Informational advertisement with hard-to-evaluate product attributes results in more change of reference price than that with easy-to-evaluate product attributes, no matter within vertical or horizontal product line.. 3. METHOD Since the impact of product-line advertisement on reference price is central to this research, two experiments were enforced to test the hypothesized relationships. The first experiment focused the effect of brand advertisement while the purpose of the second experiment is to examine the influence of informational advertisement on reference price toward buyers with different target purchase. Both of two experiments manipulated the goods that subjects who need to buy and the materials of advertisement, including high-end, low-end and one certain horizontal product, meanwhile, measured the change of reference price. Since the response of reference price toward subjects is primarily based on their perception of product line and advertisement, the establishment of vertical/horizontal product line and the design of advertisement are particularly critical. Products Three criteria were used for selecting the product to show in the advertisement. First, durable is the first category for product selecting in this research. Since Tridib and Insrajit (2005) suggested further study can do more research in durable category to investigate the anchoring effects of a default option, owing to low extent research of reference price in durables in the past. Second, the product had to be the one that most subjects were familiar with and may had purchased or used it, so that they could have enough knowledge to respond to the advertisement. Last, the product must have a set of attributes. On the basis of three criteria, digital camera is selected for experiments. 8.

(13) The design or product line and advertisement Two pretests were performed ahead of product line design. Usually digital camera is described with a number of features. Considering the intensity of advertisement stimuli, the mainly concerned attributes of digital camera for most consumers were picked in the first pretest. Based on the results of the first pretest, the content of product line was designed. Each of vertical and horizontal product line was composed of two products. Vertical product line contained one high-end product and one low-end product distinguished by their function difference. Moreover, horizontal product line included two products with the same price and part of identical functions but different emphasized feature. The description of product line was listed in Table 1 and Table2. Table 1 The Design of G series Product Line (Vertical) Attribute. High-end. Low-end (G-X100). Price Megapixels Optical Zoom Digital Zoom ISO Equivalencies. 12,800 12 million 5X 7X 1600. 5,680 6 million 3X 4X 400. Anti-Shake. User Interface. (G-A1) Specification of Easy-to-evaluate Attribute. Hard-to-evaluate Attribute Emphasis. Table 2 The Design of P-Shot Product Line (Horizontal). Specification of Easy-to-evaluate Attribute. Attribute. Product 1 (P-Shot I). Product 2 (P-Shot II). Price Megapixels Optical Zoom. 9,800 10 million 4.6 X Digital Zoom. 9,800 10 million 4.6 X 6X 6X. [Specific Feature]. Focal Length. ISO. User Interface. Anti-Shake. Hard-to-evaluate Attribute Emphasis. 9.

(14) The product-line advertisement was for sure designed according to the characteristic of each product mention antecedently. It was divided into transformational and informational advertisement on the basis of previous advertising research (Puto and Wells 1984). The transformational advertisement in this research was represented by brand advertisement, which intends to evoke identification toward consumers with an amount of description of brand image and aspiration. Comparatively, the informational advertisement contained rich objective illustration of product specification. Both of brand advertisement and informational advertisement were designed for high-end, low-end and two products toward horizontal product line respectively, and used as the advertisement stimuli in experiments. The magnitude of advertisement stimuli had been tested in the second pretest. Measures Both of two formal experiments involved in the measurement of reference price. While prior literature had recognized the formulation of reference price includes both internal and external conceptualization, various definitions of reference price could be found (Oded 2002). Broadly, the concepts of reference price could be defined with retailer/advertised price, past experience and marginal utility/perception base. Tow criteria helped us select the measurement of reference price. First, since the change of reference price influenced by advertisement is the most important thing to observe in this research, it was more reasonable to measure the reference price on the basic of marginal utility rather than advertised price or previous experience. Second, the question in experiments is necessary to help subjects reflect their overall change of reference price. Therefore, “Reservation Price”, the maximum that individual would pay, was used to ask the initial reference price and the altered reference price formed after product-line advertisement stimuli toward subjects. The effect of other advertised prices or past experience was controlled or ignored temporarily. Table 3 Definition of Reference Price Definition Retailer/Advertised Price The range of prices normally charged by retailer when the product is Base not on special (Emory 1970). Average price of similar products (Emory 1970; Gabor 1997).. 10.

(15) Highest market price (Monoroe 1990); The average retail price (Klein and Oglethorpe 1987); Average market price (Sampson 1964) Advertised seller’s price; Other store’s price (Biswas and Blair 1991) Past Experience Base. Last price paid (Gabor 1977). Price most frequently charged (Olander 1970); Price of most frequently purchased brand (Gabor and Granger 1961). Historical price: the price that consumer usually pay (Klein and Oglethorpe 1987).. Marginal Utility/Perception Base. Reservation price: the maximum the individual would pay (Thaler 1985). Fair price: the price reflecting consumers’ beliefs on how much a product should cost (Thaler 1985). Good buy price: the price consumers would considered as a good buy (Klein and Oglethorpe 1987). Just price: the price or below it that consumers are prepared to pay (Winer 1988). Expected future price: The expected price to be charged on the next purchasing occasion (Jacobson and Obermiller 1990).. Subjects The 574 subjects participating in the experiments were recruited on the internet or from college of business randomly. Subjects were approximately composed of hale male and hale female and roughly range from 16 to 35 years old. There was 94.8 percent of subjects owned experience of reading digital camera ads and 70.4 percent had ever bought at least one digital camera, fitting our request for the structure of subjects. Each volunteered subject was randomly assigned in different experiments and given several specific simulated purchase situations to respond. 3.1 Experiment I (Brand Advertisement) The purpose of the first experiment was operated to investigate whether a transformational advertisement (brand advertisement) will increase the reference price significantly no matter within the vertical or horizontal product line. Besides the overall impact of brand advertisement on reference price was discussed, this 11.

(16) experiment further compared the impact of brand advertisement with high/low-end product toward low/high-end product buyers respectively. Procedures Subjects were divided into four groups and given a stimulated purchase situation first. They were appointed to buy one product within vertical or horizontal product line. While they got their individual task, subjects were requested to read the information of vertical or horizontal product line to know the advertised price and basic specification of the digital cameras. After reading the information of product line, subjects required to write down the maximum price they would like to pay. This was done to ensure their original reference price before advertisement stimulus. For example, a subject appointed to buy a low-end product was asked to read the description of vertical product line first, including the advertised price and functions of high-end and low-end product. The subject’s original reference price was expected to be formed during the process of reading product line description. The advertisement stimulus was manipulated sequentially. The advertisement was assigned for each subject according to the product that the subject was appointed to buy. The high-end buyer was exposed to the brand advertisement with low-end product, whereas the low-end buyer was exposed to the brand advertisement with high-end product. The same criterion was used in the experiment of horizontal product line. Table4 The Design of Experiment 1 Vertical Product Line 1-1 1-2. Horizontal Product Line 1-3 1-4. Step of Experiment Appointed. High-end. Low-end. Product 1. Product 2. Purchase. G-X100. G-A1. P-Shot I. P-Shot II. Subject of Brand. Low-end. High-end. Product 2. Product 1. G-X100. P-Shot II. P-Shot I. Advertisement Stimuli G-A1. Results The purpose of experiment 1 focused on the impact of brand advertisement on reference price. To evaluate the change of reference price, a repeated measure of pair/independent t-test was used to analyze. In the analysis, the difference of the mean of original reference price (R1) and altered reference price (R2) is measured by pair t-test directly. However, considering the impact shown on R2 may be offset by 12.

(17) increase and decrease simultaneously due to the inconsistency of subsets’ responds, the dependent t-test may be further used to compare reference price remaining group with reference price increasing or decreasing group to distinguish the effect on reference. The results of experiment 1 for vertical product line are summarized in Table5. In the pair T-test, the brand advertisement does not show significant impact on reference (t = -1.001, p=0.317), however, with detailed analysis we find the outcomes of reference price increasing and decreasing may both significant exist (t = 4.211, p=0.000; t=-2.689, p=0.007). Besides, the range of reference price increasing is apparently wider than that of reference price decreasing. However, the expected result does not appear in horizontal product line section. The impact of brand advertisement on reference price is significant (t = 5.073, p<0.000), but it results in the decrease of reference price rather than increase, not supporting H1b. Table 5 Summarized Result of Pair / Independent T-test (vertical product line) Statistic Mean. t-value. p-value. Pair ( R1-R2 ). -266.06. -1.001. 0.317. R2 ( 1 , 3 ). 5440.14. 4.211. 0.000***. R2 ( 2 , 3 ). -1078.24. -2.689. 0.007**. ABS ( 1 , 2 ). 5416.61. 2.402. 0.01*. p.s. Choice “1”,”2”,”3” represent reference price increasing, decreasing and remaining. p.s. ABS means absolute value of (R1-R2). With hypothesis constructed by prior literature, the quality perception of product was expected to mediate the impact of brand advertisement on reference price. Hence, subjects were divided into two groups to investigate: brand advertisement with low-end product and high-end product. The outcome of experiment represented brand advertisement with low-end product cause the reference price significantly decrease (t = 4.937, p<0.000) , whereas the brand advertisement with high-end product cause the reference price increase (t = 5.073, p<0.000). Besides, the impact of the advertisement with low-end product is obviously stronger than that with high-end product, explicitly supporting H2.. 13.

(18) Table 6 Summarized Result of Pair / Independent T-test (vertical product line) Statistic Mean. t-value. p-value. 5.073. 0.000***. With low-end product Pair ( R1-R2 ). 280.92. with high-end product Pair ( R1-R2 ). -881.96. -1.576. 0.116. R2 ( 1 , 3 ). 10051.78. 4.937. 0.000***. R2 ( 2 , 3 ). -186.46. -0.822. 0.412. p.s. Choice “1”,”2”,”3” represent reference price increasing, decreasing and remaining.. 3.2 Experiment 2 (Informational Advertisement) The second experiment was manipulated to investigate whether informational advertisement of different types of product, high-end, low-end or certain horizontal product, will bring varied impact on buyers with their individual purchase mission. To test the H3, subjects were arranged to have their targeted purchase and hypothesized advertisement. The change of reference price, after a high-end buyer saw the informational advertisement of low-end product, a low-end buyer sees the informational advertisement of high-end product, and a certain product buyer sees the informational advertisement of another product within the same horizontal product line, were expected to be observed. In addition, the product attributes emphasized in the informational advertisement were further divided into easy-to-evaluate and hard-to-evaluate type to understand the mediating effect of concreteness of product attributes. Procedures In experiment 2, subjects were divided into eight groups. Similar with experiment 1, subjects of each group were arranged a stimulated situation and appointed purchase. According to the stimulated purchase task, subjects were asked to read the description of vertical or horizontal product line with advertised price and basic specifications. And then, the first question asked them to write down the maximum price they would like to pay as their initial reference price. The informational advertisements in this experiments consisted of a head-line, a (simulated) brand name, a picture of product and a body of text and photo describing the features of product. After exposing to the assigned advertisement, subjects were requested to fill in their second reference price no matter it changed or not. In the end 14.

(19) of experiment, two reference prices for each participant were collected to measure the impact of informational advertisement. Table7 The Design of Experiment 2 Group. Appointed Purchase. Subject of Informational Advertisement Stimulus. 2-1. High-end. Low-end with lower megapixels. 2-2. High-end. Low-end with user interface. 2-3. Low-end. High-end with higher megapixels. 2-4. Low-end. High-end with anti-shake function. Horizontal 2-5 Product 2-6 Line 2-7. Product I. Product II with ISO value. Product I. Product II with anti-shake function. Product II. Product I with focal length function. 2-7. Product II. Product I with user interface function. Vertical Product Line. Results Experiment 2 concentrated on the impact of informational advertisement for examinating H3. There are two sections discussed in H3. The first section investigates the impact of informational advertisement on reference price within the vertical product line; meanwhile, examines whether informational advertisements with low-end and high-end product bring different effects on high-end and low-end product buyers. The results indicated that the informational advertisement with low-end product significantly increase reference price toward the high-end buyers(t= 2.992, p=0.003), supporting H3a. On the other hand, two significant effects were found in the informational advertisement with high-end product. In the beginning pair t-test for H3b, the outcome did not show any evident influence of informational advertisement with high-end product. However, considering the increase and decrease of reference price may offset to each other, some specific analyses were enforced. Consequently, the test results showed that there are two significant impacts of informational advertisement with high-end product (t=6.697, p=0.000; t=-2.845, p=0.005). In other words, the informational advertisement with high-end product may let low-low product buyer increase or decrease his reference prices. These two effects on buyers are considerably equal.. 15.

(20) Table 8 Summarized Result of Pair / Independent T-test (vertical product line) Statistic Mean. t-value. p-value. with low-end product Pair ( R1-R2 ). 59.16. 0.303. 0.762. R2 ( 1 , 3 ). 3265.13. 2.992. 0.003**. R2 ( 2 , 3 ). -186.46. 0.822. 0.412. With high-end product Pair ( R1-R2 ). -4.03. -0.024. 0.981. R2 ( 1 , 3 ). 2015.61. 6.697. 0.000***. R2 ( 2 , 3 ). -816.25. -2.845. 0.005**. p.s. Choice “1”,”2”,”3” represent reference price increasing, decreasing and remaining. The second section of H3 tests the impact of informational advertisement on reference price within the horizontal product line. This experiment indicated the informational advertisement with certain product of horizontal product line may let the buyer, who would like to buy another product within the same product line, decrease his initial reference price (t=-1.951, p=0.05), supporting H3c. But the impact of ads within horizontal product line is much smaller than the impact occurring in vertical product line. In the end of the experiment, product attributes were separated into two types, easy-to-evaluate and hard-to-evaluate, to test H4. But the results did not suggest there is significant difference existing between informational advertisement with easy-to-evaluate and hard-to-evaluate attributes. H4 did not be supported.. 4. Discussion This research addressed some actual marketing practices of product-line advertisement, and discussed some possible interaction between ads and reference price further. Overall, the impact of advertisement on reference price is not always positive. The analyses list as follow and the implications of these findings will be discussed in later sections: 1. The brand advertisement with low-end product decreases the reference price toward the high-end product buyers. On the contrary, the brand advertisement with high-end product increases the reference price toward the low-end 16.

(21) product buyers. 2. The brand advertisement with one certain product in horizontal product line decreases the reference price toward the buyers who is going to buy another product within the same product line. 3. The informational advertisement with low-end product increases the reference price toward the high-end product buyers. On the contrary, the brand advertisement with high-end product may not consistently increase the reference price toward the low-end product buyers. 4. The informational advertisement with one certain product in horizontal product line decreases the reference price toward the buyers who is going to buy another product within the same product line.. The Impact of Brand Advertisement The results of this experiment can be summarized as follows. First, as predicted by Hypothesis 1a, the brand advertisement resulted in the increase of reference price, however, this research found there is another significant effect of brand ads resulted in the decrease of reference price. Obviously, one factor existed to mediate the impact of advertisement here. The outcome of Hypothesis 2 may offer one explanation for this inconsistent impact. The test of H2 showed the brand advertisement with low-end product may cause less increase of reference price than that with high-end product, supporting H2. Besides, it indicated more truth than what this research expected originally. The outcome represented the brand advertisement with low-end products not only caused “less increase” of reference price, but “decreased” it apparently. The strong impact resulting in the decrease of reference price may conform to prior study. Loken and Roedder (1993) and Sullivan (1990) both indicated when a low-end is introduced into product line, consumers perceive less brand equality. Since the low-end products in vertical product line are gradually considered as low-end products, it may account for the results of brand advertisement with low-end product resulting lower brand equity and decreasing reference price. Second, the brand advertisement with one certain horizontal product line products significantly decreased the reference price toward the consumer who would like to buy “another” product within the same product line, not supporting Hypothesis 1b. Much previous research focused the relationship between horizontal product line and brand association (Aaker and Keller 1990, Boush and Loken 1991). Some study had proved that when a brand attempts to extend its goods into similar categories, brand associations carry over to the extension (Rangaswamy, Burkem and Loiva 1993). 17.

(22) Table 9 The Results of Experiments toward Hypotheses Ads. Brand Ads. Advertisement Stimuli. Subjects. Reference Price. H1 a. Brand ads with vertical product line product. All vertical product line buyers. both increase and decrease significantly. H1 b. Brand ads with horizontal product line product. All horizontal product line buyers. Decrease (not supporting H1b). H2. Brand ads with low-end product. High-end Decrease product buyers. Brand ads with high-end product. Low-end Increase product buyers (Supporting H2). It seems strong brand association exists in horizontal extension, but had not proved that it also existed in advertisement stimuli or product compare. The failure of H2 indicated brand advertisement not always brings the positive impact on reference price. When manufacture merely deliver the brand advertisement with one product in horizontal product line, the buyer who decide to buy another product within the same horizontal product line, may consider his target purchase is not the main product and decrease his willingness of purchase. The impact of informational advertisement This research applied the concept of attitude theory (Fishbein and Ajzen 1975) into the impact of informational advertisement. As a result of experiment 2, it demonstrated the concrete interactions among product-line advertisement and consumers. First, the results showed the informational advertisement associated with low-end product increases reference price toward high-end product buyers. It conformed the inference mentioned based on attitude theory. That is to say since the high-end product buyer sees the ads with low-end product and know its specification; he may increase the evaluation of salient beliefs toward high-end product. High-end product buyers would find out how good quality of planned purchase after comparing with low-end product. However, informational advertisement with high-end product displayed the inconsistent impact that this research did not expect originally. The results showed the informational advertisement with high-end product lets low-end product buyers increase or decrease their reference price. Two kinds of outcomes may both occur 18.

(23) after advertisement stimuli possibly. As mentioned in literature review, the decrease of reference price can be proved upon attitude theory. It is considered that the low-end product buyers may decrease their evaluation of their planned purchase as they see the ads associated with high-end product, because they lower their value of certain product attribute or add more product functions considered into their attitude model after compare. Besides, the impact of informational advertisement with high-end product causing the increase of reference price is ignored before the experiments. Since experiment 1 had found the high-end product may display the positive impact on brand image, plus in the past literature, high-end product was strongly associated with good quality and high brand value for consumers, this unexpected increase can be explained in this way. In other words, although the informational advertisement used in this research was not designed with brand association on purpose, for some subjects, they may be easily conscious of high-end product representing high quality or high brand prestige and transferred it on their target purchase, the low-end product. Thus, they increased their original reference price. Table 10 The Results of Experiments toward Hypotheses Ads. Informa -tional. Advertisement Stimuli. Subjects. Reference Price. H3 a. Informational ads with low-end product. High-end Increase product buyers (supporting H3a). H3 b. Informational ads with high-end product. Low-end both increase and product buyers decrease significantly. H3 c. Brand ads with one certain horizontal product line product. Another product (within the same product line) buyers. Decrease (supporting H3c). H4. Brand ads with easy-to-evaluate and hard-to-evaluate attributes. All buyers. -(not supporting H4). Ads. Conclusion Several important findings can give suggestions for future marketing practice. First, the used of product-line advertisement with one product may hurt evaluation of another product. This unexpected outcome should be concerned before ads delivery. Secondly, regarding the brand advertisement, it is better to associate high-end product 19.

(24) with brand image since low-end product easily decreases the reference price toward high-end product buyer. It may let manufactures lose the important customers who are willing buy the high-price products and result in more serious loss. Third, for high-end product buyers, seeing the informational advertisement with low-end product can let them increase their reference price. On the other side, the impact of the informational advertisement with high-end product is inconsistent. Some consumers would decrease their evaluation of low-end product because the high-end product ads emphasize the advantages that low-end product does not have. To avoid decreasing the willingness of purchase toward low-end product buyers, manufactures are suggested to show the high-end products in brand advertisement rather than in ads with lots of detailed specification, according the results of experiments.. 5. REFERENCE Aaker (1991), “Measuring Brand Rquity Across Products and Markets,” California Management Rev, (Spring), 102-120 Chung-Chau, Kai-Wun, Shin-Shin (2004), “The Effects of Product Attributes, Reference Points, and Valuation Modes on Consumers' Evaluation of Product,” Journal of Business Administration, (63), P67-93 Fishbein, Martin (1963), “An Investigation of the Relationships Between Beliefs About an Object and the Attitude Toward the Object,” Human Relations, 16, 223-240 Jun, Sung Youl, Mazumdar T, Raj SP (1999), “Effects of technological hierarchy on brand extension evaluations,” Journal of Business Research 46(1) 31-43. Keller,K. (1993), “Conceptualizing, Measuring, and Managing Customer-based Brand Equity,” Journal of Marketing (57) 1-22 Kilsun, Dilip (2001), “An Experimental Investigation of Valuation Change Due to Commonality in Vertical Product Line Extension,” The Journal of Product Innovation Management 18, 219-230 Loken and Roedder (1993), “Diluting brand beliefs: When do brand extensions have a negative impact,” Journal of Marketing (July), 71-84 Mayhew, Glenn E. and Russell S. Winer (1992), “An Empirical Analysis of Internal and External Reference Prices Using Scanner Data,” Journal of Consumer Research, 19 (June): 62-70. Monroe, Kent B. (1973), Buyers’ Subjective Perceptions of Price, Journal of Marketing Research, 10 (February), 70–80 Oded (2002), “Reference Price Conceptualisations: An Integrative Framework of Analysis ”, Journal of Marketing Management, 18, 145-171 Puto, C.P. and Wells, W.D. (1984), “Informational and Transformational Advertising: the. 20.

(25) Differential Effect of Time,” Kinnear, T.C. (Ed.), Advances in Consumer Research XI, Association for Consumer Research, Provo, UT. Quelch JA, Kenny D. (1994), “Extend Profits, not Product Lines,” Havard Business Review (Spetember-October 1994) 153-160. Reddy SK, Holak SL, Bhat S. (1994), “To Extend or not to Extend: Success Determinants of Line Extension,” Journal of Marketing Research 31(May) 243-62. Taylor Randall, Karl Ulrich, Daivd Reibstein (1998), “Brand Equity and Vertical Product Line Extent” Journal of Marketing Science 17(4) 356-79. Tridib and Indrajit. (2005), “Reference Price Research: Review and Propositions” Journal of Marketing 69(October 2005), 84-102 Tversky A. (1997), ”Features of Similarity,” Psychological Review 84(4) 327-52.. 21.

(26) APPENDIX A A. Basic information of vertical product line. B. Basic information of horizontal product line. 22.

(27) C. Brand advertisement with high-end product. D. Brand advertisement with how-end product. 23.

(28) E. Brand advertisement with Product A. F. Brand advertisement with Product B. 24.

(29) G. Informational ads with high-end product (hard-to-evaluate attribute). H. Informational ads with high-end product (easy-to-evaluate attribute). 25.

(30) I. Informational ads with low-end product (hard-to-evaluate attribute). J. Informational advertisement with low-end product (easy-to-evaluate attribute). 26.

(31) K. Informational advertisement with Product A (easy-to-evaluate attribute). L. Informational advertisement with Product A (hard-to-evaluate attribute). 27.

(32) M. Informational advertisement with Product B (easy-to-evaluate attribute). N. Informational advertisement with Product B (hard-to-evaluate attribute). 28.

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