Consumers often use price information as a cue to infer the quality of products — it is a familiar phenomenon based on the belief that price and quality are positively correlated. Consider for instance  laptop computers: consumers may rely on price to predict the quality of a laptop model for which there is lack of information about attributes that determine its quality, or rather because they have a difficulty to understand the technical features and try to infer the laptop’s expected quality based on its (list) price. Wine is another excellent example for a product whose quality consumers try to assess based on its price. The perceived price-quality relation is not always well-substantiated, which may lead to some costly mistakes. Reliance on price to judge quality is contingent on individual, contextual (e.g., product type) and situational factors.

Consumers may rely on price as an informational cue for different purposes: (a) to reduce the risk of buying a product of an unacceptable low quality; (b) avoid or mitigate effort of evaluating complex product information; (c) anticipate differences in quality between product brands and models (but sometimes also their symbolic meanings associated with prestige and luxury). Price-quality judgements involve two essential steps: estimating the strength of a relationship between price and quality in a focal product category, and applying this judgement to predict the quality of a particular product item (e.g., a new product model). Consumers may differ in their proficiency both to assess the relationship and applying it in various every-day situations.

The magnitude of price-quality correlations varies between product categories, and most consumers are aware of it. However, their calibration of the price-quality relationship for particular product types is often flawed and consumers over-estimate the correlations. Consumers tend to follow a general belief about price-quality relation without properly testing it as a hypothesis in the product category under consideration for purchase; alternately they bias their judgement by considering only evidence consistent with the prior belief (e.g., as the load of information to process is larger and harder to grapple with, and when information is organised in a format that highlights price-quality correlation [1]). Consumers also differ in the first place in their propensity to hold a price-quality belief (i.e., how strongly are consumers price-quality schematic). Capturing the actual reliance on price as a quality cue may also turn to be elusive because applying such a rule depends on the amount and nature of product information available.

In a research recently published (2013) Lalwani and Shavitt study how consumer propensity to perceive a price-quality relationship is governed or moderated by thinking styles and modes of self-construal exerted from consumers’ relations with others in their groups of membership. They distinguish between (1) independents (individualists) who prefer to form their opinions and set personal goals on their own, in hope those will be accepted by their in-group peers but not to be censored by the latter, and (2) interdependents (collectivists) who are inclined to form opinions and set goals that are subordinated to those of the in-group to which they belong. They refer to cultural self-construal by acknowledging that independence has been associated more closely with Western nations or Caucasian societies and interdependence with South and East Asian nations or societies. The distinction is primarily relevant to the construction of price-quality judgements by its correspondence with analytic vs. holistic styles of thinking, respectively. The authors additionally examine specific conditions that may enhance or inhibit the use of price to infer quality.

Analytic thinking orientates to process and evaluate a single piece of information at a time — for example, examine a value for a product item on a specific attribute. The ‘analytic’ consumer may compare between a few models on a specific attribute but ignore any other attributes. In a pictorial image, analytic thinking implies that the individual would look at each object in the image separately rather than inspecting a collection of elements in a scene. Holistic thinking, on the other hand, orientates to observe and evaluate relations between attributes and objects. It is much less focused on single items of information in favour of considering collections of them and how they relate to each other. In a pictorial image, holistic thinking means that an individual more easily identifies combinations of elements and conceives inter-relations between them in the whole scene. The argument put forward, and tested, by Lalwani and Shavitt posits that interdependents (collectivists) who are reliant on their social connections, and who are more considerate of the needs and goals of others in their in-groups before their own, are more predisposed to apply holistic thinking; independents (individualists) who tend to focus on their single-self’s needs and goals before others are more inclined to adopt an analytic style of thinking. Holistic thinking that endorses relational processing is clearly essential for making judgements about a price-quality relationship. The authors are particularly concerned with the boundary conditions under which the advantage of holistic thinking in making price-quality judgements has an impact.

Lalwani and Shavitt take notice that independent and interdependent modes of self-construal are not exclusive of each other, that is, they may be exhibited simultaneously in the same person or within a particular society. Therefore, following previous research, the authors apply two scales, one to measure independence and the other for interdependence as opposed to treating these modes as polar ends of the same continuum. They find that a stronger tendency to perceive a price-quality relationship (a global belief) is predicted by greater inclination for interdependent self-construal. No similar relation is found with independent self-construal. This confirms that only interdependent self-construal may support consumer tendency to rely on a price-quality relationship. [2]

Asians and Hispanic (in the US), representing interdependent self-construals, have been found to utilise price to infer the quality of a “new” target product item (alarm clock) whereas Caucasians (independents) showed no significant sensitivity to differences in price for the target product. It is emphasised that the Asians/Hispanics participants not just considered price-quality information available on “base” items but also practically used price in its evaluation of quality for the target item.

The difference in type of self-construal does not clarify sufficiently how this should lead to differences in approach to the perceived price-quality relationship. That is where the difference between holistic and analytic thinking takes its role. If we look only at the distinction between American nationals and Indian nationals, it would be relatively difficult to understand why the Indians have been found to exhibit a stronger tendency to rely on price as a quality cue. This difference is partially explained (mediated) once the researchers account for a difference in tendency to think holistically — the Indians also have a stronger tendency for that type of thinking that better supports processing of relations between price and quality.

Even more convincing are the results from a study in which an exercise with a pictorial image was conducted to encourage (prime) analytic versus holistic thinking by participants (American Asians/Hispanic vs. Caucasians). As expected, holistic thinking facilitated reliance on price when evaluating the quality of a “new” target product item (calculator) for both Asians/Hispanic and Caucasians. That is, they evaluated the higher priced target brand to be of higher quality than a lower priced brand. Nonetheless, the Asian/Hispanic who are more likely to be ‘interdependent’ differentiated even more strongly the quality between higher- and lower-priced target brands — revealing their advantage for relational processing. In contrast, when both Asians/Hispanic and Caucasians are primed to think analytically, none of them seems to use price as a quality cue. This highlights the power of holistic thinking for making price-quality judgements; vice versa, “imposing” analytic thinking on those who have a stronger tendency for holistic thinking seems to over-ride their advantage in predicting quality based on price.

Lalwani and Shavitt point-out that an advantage for relational processing in using price as a quality cue takes effect in kind of intermediate conditions: when there is a logical basis and supportive evidence (e.g., market conditions, product information available) for relying on price to infer quality, yet neither when conditions are poor/prohibitive nor when evidence of a price-quality relationship is just obvious and applying it is fairly easy. This is demonstrated in two cases: (a) an advantage for relational processing with regard to non-symbolic, functional or practical products (e.g., paper towels) vs. symbolic products that are better able to express one’s identity (e.g., watches, bicycle) — the latter product type induces a price-quality tendency in both ‘independents’ and ‘interdependents’; (b) an advantage for relational processing when information is provided on (non-price) attributes of moderate bandwidth (e.g., quality, durability, reliability), not for broad, generalised evaluations/attitudes (everybody uses price) and not narrow, specific features (nobody uses price). When conditions are sufficient but not too permissive, only those who have the advantage will discriminate products on perceived quality according to price.

The distinction between independent and interdependent self-contrual is somewhat circumstantial with respect to the utilisation of price as a quality cue. It does not immediately make sense why the two behavioural phenomena should be related. References to national and ethnic origins may also be too liberal generalisations that do not contribute enough to our understanding except for exposing the relationship. At the bottom of a distinction between modes of self-construal regarding price-quality judgement underlies the important distinction between holistic and analytic thinking. Lalwani and Shavitt effectively suggest that the extent to which people think in terms of relations between objects or their attributes corresponds with their attitude towards relations with other people, and hence the latter’s connection with the relationship between price and perceived quality. The distinction between thinking styles therefore seems to shed more light on conditions that induce or limit reliance on price as a quality cue.

Yet, establishing a connection between self-construal. particularly represented by national or ethnic (sociocultural) origins, and reliance on price as a quality cue, can be most productive and helpful for segmentation — it facilitates the identification of and access to relevant segments for marketing initiatives associated with the price-perceived quality relationship. The implications may be in devising advertising messages or premium product offering that target consumers with expected greater tendency to make price-quality inferences.  Consequently those consumers would likely be more favourable towards and receptive of higher-priced products/brands. This research further contributes to previous knowledge in the field by suggesting conditions under which most consumers or only selective segments would be evoked to make price-quality judgements. Marketers may consider the breadth of attributes described (broader dimensions vs. features) in addition to the structure of information presented to consumers [e.g., rank-order products by quality vs. random order, [3]).

Source:

You Get What You Pay For? Self-Construal Influences Price-Quality Judgements; Ashok K. Lalwani and Sharon Shavitt, 2013; Journal of Consumer Research, 40 (August), pp. 255-267, DOI:
10.1086/670034

Notes:

[1] A Selective Hypothesis Testing Perspective on Price-Quality Inference and Inference-Based Choice; Maria L. Cronley, Steven S. Posavac, Tracy Meyer, Frank R. Kardes, & James J. Kellaris, 2005; Journal of Consumer Psychology, 15 (2), pp. 159-169

[2]  Statistical Note: The validity of the results of multiple regression analysis performed is contingent on the two scales of individualism-independence and collectivism-interdependence not being negatively correlated. Such evidence is not reported. Turning to the source (Oyserman, 1993) reveals, as logically expected, that some of the statements are in contradiction between the pair of scales. In this case, the version of scales adopted by the authors suggests less conflict and the correlation between them is near zero. On the one hand, it is a little surprising that not even a low negative correlation was found to indicate the contrast between these constructs. On the other hand, a strong negative correlation between the scales could mean that only the stronger predictor, ‘interdependence’, won over the other confounded predictor and thus came out as the single significant predictor.

[3] Ibid. 1.