Sales offers could incur problems for businesses, and it has been argued in research that if consumers perceive the product to be available long-term at a discounted price and the company raises those prices to the original price, then sales could fall (Lattin & Bucklin, 2017). This is known as the “Sticker Shock Effect”, as now consumers feel they are getting a bad deal by the increase in cost (Lattin & Bucklin, 2017).
Critique points are that when a consumer becomes comfortable with the discounted price, the consumer has a perceptual expectancy of the cost, and when the price is increased to the usual selling price, the consumer perceives this as too high, and could possibly search for a different low cost brand (Lattin & Bucklin, 2017). Eventual results of the sticker shock effect are that sales offers give consumers a false impression of the real price long-term, therefore companies can lose the trust of consumers’ as they feel cheated after a price rise.
Numerous researchers produced evidence supporting the existence of sticker shock and have analysed its results on perceived value and the purchase possibility (Hernan, et al., 2012; Krishnamurthi, et al., 1992; Lattin & Bucklin, 2017; De Maeyer & Estelami, 2013; Winer, 1986).
Lattin, J. & Bucklin, R. E., 2017. Dynamics of Consumer Response to Price Discounts. [Online]
Available at: http://www.msi.org/reports/dynamics-of-consumer-response-to-price-discounts/
[Accessed 12 May 2017].
Hernan, B. A., Che, H. & Shantanu, D., 2012. Role of Reference Price on Price and Quantity: Insights from Business-to-Business Markets. .. Journal of Marketing Research (JMR), 49(5), pp. 640-654.
Krishnamurthi, L., Mazumdar, T. & Raj, S. P., 1992. Asymmetric Response to Price in Consumer Brand Choice and Purchase Quantity Decisions.. Journal of Consumer Research., 19(3), pp. 387-400.
De Maeyer, P. & Estelami, H., 2013. Applying the peak-end rule to reference prices.. Journal of Product & Brand Management, 22(3), pp. 260-265.
Winer, R. S., 1986. A reference price model of brand choice for frequently purchased products.. Journal of Consumer Research, 13(2), p. 250.
Author: Natascha McVeigh, Business & Marketing Consultant at SSS