This paper aims to study how price and sales level information influence consumer product perceptions and choices in online settings. It, in particular, tests whether displaying sales level information increases consumer price sensitivity, which is a potential strategic risk to retailers.
Study 1 uses eBay data to investigate whether the interaction effects between price and sales level can be observed in an existing market. Study 2 involves online experiments across three product categories. Participants choose from product pairs that are shown with either the same or different prices and with no, the same or different sales levels.
Study 1 shows strong effects of a product’s displayed sales and price level on its daily sales but finds no interaction effect. Study 2 shows strong effects of price and sales levels on product choice but similarly finds no evidence that sales level information influences consumer price sensitivity, although it reveals an effect on quality perceptions. The results show how perceptions of quality, sacrifice and popularity mediate the effects of price and sales level information on product choice.
Study 1 has limited control over prices and sales levels. Study 2 involves only hypothetical choices.
These findings indicate that businesses can use sales level information to manage consumer product quality perceptions and choices without having to be concerned that this will make consumers more price-sensitive.
To the best of the authors’ knowledge, this paper is the first to investigate how sales level information affects consumer responses to price differences in online contexts.
