Understanding Reference-Price Shoppers: A Within- and Cross-Category Analysis

Abstract

The authors attempt to draw profiles of reference-price shoppers. Specifically, the authors study how selected factors that affect brand choice are correlated with consumer sensitivity to gains and losses with respect to internal reference prices. They also study the interaction between sociodemographics and gain and loss sensitivity. Furthermore, the authors analyze cross-category correlations in gain and loss sensitivity to shed light on their individual- and category-specific characters. In three categories, the results show significant heterogeneity in loss sensitivity among consumers and indicate that loss sensitivity is greater and more heterogeneous than gain sensitivity. Across categories, the results show that loss-sensitive shoppers are less influenced by past brand use and that both loss- and gain-sensitive shoppers more sensitive to price, display, and feature than the average consumer. Loss-sensitive households tend to be larger, and their heads are less likely to be fully employed, whereas gain-sensitive households have no clear demographic profile. The authors also discuss the limitations of latent-class models in profiling consumer segments and show how these problems are overcome using models with continuous, correlated multivariate distributions.