It's Not All Relative: The Effects of Mental and Physical Positioning of Comparative Prices on Absolute versus Relative Discount Assessment

In the context of three experiments, the authors examine the manner in which consumers compare a sale price to an explicit reference value. They find that a comparison of sale price to regular price may be more likely to involve an absolute (dollar amount) assessment, whereas a comparison of sale price to a competitor's price may be more likely to involve a relative (percent) assessment. The authors also find that vertical (i.e., columnar) placement of prices may result in a greater tendency to estimate discounts in relative terms. Conversely, horizontal (i.e., side-by-side) placement may result in a greater tendency to compute absolute numerical difference. The results provide important implications for retail managers in terms of framing and communicating price discounts.

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► A comparison of a retailer's price to a competitor's price is more likely to involve a relative assessment than an absolute assessment.
► A comparison of a sale price to a regular price is more likely to involve an absolute assessment than a relative assessment.
► Vertical placement of comparative prices leads consumers to assess price discounts in relative terms than in absolute terms.
► Horizontal placement of comparative prices leads consumers to assess price discounts in absolute terms than in relative terms.