The role of brand familiarity in internal reference price formation: An accessibility-diagnosticity perspective

Very little research focused on the process by which internal reference pri ces are formed and used by consumers making price judgments. The accessibil ity-diagnosticity model is proposed as a parsimonious theoretical framework that resolves some conflicts in prior research and provides a foundation f or future research on internal reference prices. This model is used to eval uate the role of brand familiarity and involvement on the formation and use of internal reference price standards. Empirical results show that (1) inv olvement is a better predictor of confidence in internal reference prices t han brand familiarity, and (2) in forming internal reference price estimate s, the offering price is discounted more for unfamiliar brands than familia r brands, but only when involvement is low. When involvement is high, the e ffect of brand familiarity on reference price estimates disappears. Implica tions for future research on internal reference price effects and for promo tion practice are discussed.