Unit prices on retail shelf labels: an assessment of information prominence

Unit Prices on Retail Shelf Labels: An Assessment of Information Prominence ANTHONY D. MIYAZAKI University of Miami

DAVID E. SPROTT Washington State University

KENNETH C. MANNING Colorado State University

Although unit prices have been provided to consumers for nearly 30 years, the format in which this information is presented has been largely ignored. An examination of major grocery retailers found considerable differences in how prominently unit prices are presented to shoppers on shelf labels. Two methodological approaches are then used to examine the prominence of unit prices in a grocery–shopping context. The results of a field study support expectations that, among consumers who are relatively low in price consciousness, the prominence of unit price information has a positive effect on awareness and usage of such information. In a second study, a controlled experiment shows that increasing the prominence of unit price information affects consumers’ shopping behaviors by shifting purchases toward lower unit priced items and ultimately reducing grocery expenditures. Suggestions for future research and implications for retailers and policymakers are discussed.

The provision of unit prices on retail shelf labels is standard practice for most grocery retailers and some traditionally nongrocery retailers (e.g., discount and drugstores). Although various regulatory requirements mandate that certain grocery chains provide unit prices, retail managers still have considerable freedom with respect to how they display this information. As a result, significant variation exists in many aspects of unit price presentation (positioning, size, color, font style, etc.) across retailers. This situation

Anthony D. Miyazaki is Assistant Professor of Marketing, School of Business Administration, University of Miami, Coral Gables, FL 33124-6554 (e-mail: [email protected]). David E. Sprott is Assistant Professor of Marketing, College of Business and Economics, Washington State University, Pullman, WA 99164. Kenneth C. Manning is Assistant Professor of Marketing, College of Business, Colorado State University, Fort Collins, CO 80532. Journal of Retailing, Volume 76(1) pp. 93–112, ISSN: 0022-4359 Copyright © 2000 by New York University. All rights of reproduction in any form reserved.

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may permit firms to realize competitive advantages or financial gains by presenting unit prices in a format that maximizes retailer objectives. Such a proposition creates unanswered questions regarding the effectiveness of various unit price display formats. Indeed, retail practices and strategies associated with the presentation of unit prices have developed over the past three decades with little guidance from theoretical or empirical research. Coupled with evidence of the potential applications of unit pricing for retail managers (Manning, Sprott, and Miyazaki, 1998), this suggests a need to explore the effects of unit price presentation. To address this issue, we provide evidence that today’s retailers differ considerably in their provision of unit price information on shelf labels, specifically in terms of the prominence of that information. Next, we report the results of a field study that examines how these prominence differences may affect awareness and usage of unit prices, and how these effects are contingent on a shopper’s motivation to seek out this information. We then conduct a controlled experiment that explores the effects of unit price prominence on consumer choice. First, we begin with a review of unit pricing that establishes the context for our empirical work.

THREE DECADES OF UNIT PRICING ON RETAIL SHELF LABELS

The initial call for the provision of unit prices by public policy officials, consumer interest groups, and academics coincided with the high inflation and the growing consumerism movement of the late 1960s and early 1970s. Proponents argued that unit pricing would provide a means of informing consumers about price– quantity relationships, thereby facilitating comparisons between different sizes of brands within the same product category (e.g., Consumer Reports, 1971). The importance of providing consumers with unit prices was supported by research at that time demonstrating that consumers found it difficult to select the most economical (i.e., lowest unit cost) package within a given product category when unit price information was not available (e.g., Friedman 1966; Houston 1972). Furthermore, government reports suggested that consumer use of unit pricing could reduce grocery–shopping expenditures by 3 to 10% (Massachusetts Consumer Council, 1971; U.S. General Accounting Office, 1975). Early diffusion of unit pricing was hastened by the promotion of unit price programs among several large grocery chains. These early programs were designed to create a competitive advantage by providing customers with price comparison information on shelf labels. These labels became more important with the adoption of UPC scanning technologies and the elimination of item prices on each package (Goodstein 1994). Without item prices affixed to individual packages, shoppers experienced difficulties in recalling product prices and in using various pricing schemas (Goodstein 1994). The end result of this series of events is the current shopping environment wherein shelf labels and unit pricing have become useful tools for consumers in their grocery choice decisions.

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Awareness and Usage of Unit Price Information The majority of the academic research exploring unit pricing is descriptive of business environments during the introductory years or shortly thereafter and describes the levels of consumer awareness and usage of unit price information (Friedman, 1971; Lamont, Rothe, and Slater, 1972; McCullough and Padberg, 1971). This research initially involved interviewing customers of stores that had recently introduced unit pricing in conjunction with extensive in-store awareness campaigns. Substantial differences exist between these studies in terms of the measures used. With this in mind, awareness of unit pricing ranged from 52 to 82% of respondents and reported usage ranged from 56 to 65% of those aware of unit pricing (see Carman, 1972–1973). Later research assessed unit pricing several years following its introduction, finding slightly higher awareness levels of 72 to 90% and more broadly ranging usage levels of 45 to 85% (Aaker and Ford, 1983; McElroy and Aaker, 1979; Price 1978). Initial descriptive research also explored demographic differences. Findings generally indicated that unit price awareness levels were relatively high among shoppers with higher education levels (McCullough and Padberg, 1971; McElroy and Aaker, 1979; Price 1978) and higher income or occupational status (Lamont et al., 1972; McCullough and Padberg, 1971; McElroy and Aaker, 1979). Research generally has shown unit price usage to be negatively related to age, positively related to household size, and more prevalent among suburban (vs. urban) shoppers (Aaker and Ford, 1983; Friedman, 1971; Lamont et al., 1972).

Effects of Unit Price Information Provision Several studies have sought to examine whether the provision of unit price information results in increased purchases of items with relatively low unit prices. The primary conclusion drawn from the earliest of these studies was that the availability of unit price information does not shift preferences and demand to low unit price items, suggesting that shoppers will not realize aggregate savings from the provision of such information (e.g., McCollough and Padberg, 1971). However, this conclusion was questioned by Isakson and Maurizi 1973, who reanalyzed the McCollough and Padberg 1971 data and showed that the presence of unit price information had in fact prompted a shift toward low unit price packages. Kilbourne 1974 extended this work by providing evidence that the availability of unit price information did not reduce expenditures for low income shoppers. Russo, Krieser, and Miyashita 1975 suggest that the mere presence of unit pricing is insufficient. They argue that previous null effects of unit price information on purchase behavior were due to how unit prices were displayed. Consistent with this perspective, they found that unit price lists (i.e., lists containing unit prices for all packages in a product category) resulted in significantly greater shifts in purchase behavior toward low unit price items than merely including the unit price on shelf tags (cf. Russo, 1977). Zeithaml 1982 found similar results for the presentation of a listing of unit prices, but found no effects across shelf labels with varying levels of legibility. Although Russo’s and Zeithaml’s

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work enabled the prescription of standards by which unit price information could be utilized more easily by shoppers, composite listings of unit price information are not commonly found in today’s marketplace.

The Provision of Unit Prices in Today’s Marketplace To understand unit price provision in a contemporary setting, we examined how unit price information is provided on shelf labels for 15 of the top 30 supermarket chains in North America as ranked by Supermarket News (Zwiebach, 1998). These 15 chains are market leaders with combined sales of $188 billion, representing 53.2% of North American supermarket sales for 1997 (Discount Merchandiser, 1998; Zwieback, 1998). Labels or label facsimiles were requested via actual store visits or telephone contacts, with only labels for regularly priced merchandise being considered. Although the shelf labels for all participating chains included unit price information, there were notable differences in how that information was presented. Figure 1 displays an assortment of shelf labels from participating retail chains, illustrating the diversity by which retailers present the unit price information. Differences include: (1) placement of the unit price information relative to the total price; (2) the presence or absence of the words “unit price”; (3) the size of the unit price information relative to the item’s total price; (4) indication of unit costs as symbols (e.g., “$” or “¢”) or full versus abbreviated words (e.g., “cents” or “cts”); (5) color scheme of unit price information relative to other information; (6) use of white space surrounding unit price information; and (7) the unit of measurement. A common factor underlying many of these formatting differences is the prominence of the unit price information. Information prominence is defined here as the information’s level of noticeability, ranging on a continuum from not noticeable to immediately noticeable. Information prominence has been regulated previously for packaged consumer commodities and has been recognized as a key marketing factor from both theoretical and substantive perspectives (USC § 1453 Fair Packaging and Labeling Program; cf. Gardner, 1983). Because the prominence of information has been shown to impact buyer awareness and usage of that information (e.g., Gardner, 1983), we focus on this subtle, yet important, factor. As such, the present endeavor is one of the first to answer Monroe and LaPlaca’s 1972 call for research to examine how unit price information is presented in the marketplace and the effects of that information presentation.

STUDY 1 Shoppers’ awareness and usage of unit pricing is contingent not only upon buyer characteristics, but upon marketer characteristics as well. Accordingly, it is proposed here that shoppers’ awareness and usage of unit prices is dependent upon the level of

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FIGURE 1 A Sampling of Grocery Shelf Labels The labels depicted in Figure 1 are essentially identical to the actual shelf labels, except that identifying characteristics have been removed to maintain the anonymity of participating retail establishments.

motivation shoppers have to process unit prices and how retailers present this information source (cf. Moorman, 1990).

Prominence and Awareness Levels Marketing and consumer behavior research has shown that marketer-controlled aspects of information, such as the format or presentation style, can affect consumer awareness of that information (Russo et al., 1986). The prominence of information is critical in today’s retail environment where shoppers confront vast amounts of information and are likely to

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attend only to information presented in a prominent fashion in an attempt to avoid information overload (Kahn and McAlister, 1996). With respect to unit pricing in particular, Monroe and LaPlaca 1972 suggest that differences in awareness and usage of such information may depend on how this information is displayed. Consistent with this perspective, Russo 1977 found that the format of unit price information impacted consumer spending. In contrast to his approach, we examine unit prices as they typically appear to consumers in the marketplace— on shelf labels that appear below each brand–size–variety combination (i.e., each stockkeeping unit). In addition, whereas prior research often has examined unit price awareness at a general level, we focus on the extent to which consumers are aware that their preferred grocery store has unit price information on shelf labels (i.e., unit price awareness at the store level). Following prior research and the above discussion, we expect that for retail chains that prominently display unit price information, shoppers will be more aware of the presence or absence of unit pricing in those chains than when prominence levels are relatively low. Thus, as the initial starting point in our conceptualization, we propose the following hypothesis: H1: Unit price information prominence has a positive effect on unit price awareness at the store level.

Price-Oriented Shopper Motivation Besides the format of information, reactions to market information are also dependent upon characteristics of the shoppers themselves. Motivation to process information has been shown to impact buyer responses to market information (Moorman, 1990). With respect to unit pricing, any motive stimulating a desire to consider unit prices should positively impact a shopper’s propensity to seek out unit prices, and thus increase one’s awareness of whether that information is available in a particular retail location. We contend that an established individual difference variable, price consciousness, is reflective of enduring motivation to consider unit price information. A key benefit of providing unit prices is to help shoppers know which package size or brand has the lowest price per unit. It follows that one segment of shoppers likely to become aware of (and eventually use) unit price information is the segment with high price consciousness, that is, consumers who focus primarily on paying low prices (Lichtenstein, Ridgway, and Netemeyer, 1993). Thus: H2: Price consciousness has a direct positive effect on unit price awareness at the store level. In addition to directly affecting unit price awareness, we also expect price consciousness to moderate the impact of information prominence on awareness. Individuals with relatively high enduring motivation to process information attend to that information

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regardless of how easily accessible it is. Conversely, individuals with relatively low motivation typically attend only to more easily accessible information due to the cognitive efforts involved in accessing information (Petty and Cacioppo, 1986). Accordingly, increasing the prominence of unit prices is expected to have a greater effect on low price conscious shoppers rather than high price conscious shoppers. This is consistent with Inman, McAlister, and Hoyer’s 1990 observation that price-vigilant consumers continued to search for price-related information regardless of the presence of more easily processable cues to lower prices. From a slightly different, yet commensurate, information search perspective, level of prominence could be viewed as a variable influencing the cost associated with unit price information search. Prior research demonstrates that higher search costs should lead to lower levels of seeking, acquisition, and usage of information (Urbany, 1986). For example, Urbany, Dickson, and Kalapurakal (1996) found that higher levels of perceived difficulty in making comparisons were associated with lower levels of price search. Thus, it would follow that unit prices presented in a low prominence format would have higher associated search costs than the same information presented in a high prominence format. Shoppers’ reactions to these search costs should vary by their motivation to process that information. When motivation to seek price-related information is low (i.e., low price consciousness), difficult search conditions should stifle information search, and thus information awareness. However, when motivation to seek price-related information is high (i.e., high price consciousness), search costs should have less impact. Thus: H3: The effect of unit price information prominence on unit price awareness at the store level is moderated by price consciousness; specifically, the prominence 3 awareness relationship is stronger among shoppers who are low rather than high in price consciousness.

Impact on Usage Levels Although retail managers are concerned about the awareness of purchase-related information, another key concern is whether that information is actually used by shoppers. In terms of the current research, this situation raises the question of whether differences in the prominence of unit price information affect shoppers’ use of this information. Prior research has shown that utilization of information relies on awareness of that information (e.g., McGuire, 1976); such utilization is, of course, also dependent on the degree of perceived diagnosticity of the information in a given setting (Russo 1977). Given this awareness– usage link and related research showing unit pricing to be a diagnostic source of consumer information, the effects of unit price prominence on the usage of that information should be mediated by the general awareness levels of unit prices in the shopping location. Considering that Hypothesis 3 proposes a moderating effect of price consciousness on the prominence–awareness relationship, the impact of prominence on usage is a case of moderated mediation. Specifically, when motivation to seek out and use unit pricing is relatively low (i.e., low levels of price consciousness), the

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prominence of unit price information is expected to have a positive effect on awareness, which then mediates the impact of prominence on the level of usage. Conversely, when motivation to process is already high, prominence levels should have less impact on awareness, and thus less impact on usage levels. H4: The effect of unit price information prominence on unit price usage is mediated by unit price awareness at the store level, and moderated by price consciousness; specifically, the prominence 3 awareness 3 usage relationship is stronger among shoppers who are low rather than high in price consciousness.

Study 1 Methodology Although various alternatives exist to test the proposed effects, we chose to use an actual market setting. As such, it was necessary to identify marketers with meaningful differences in the prominence of their unit price information. An examination of a particular U.S. market (population over one million) revealed that the two largest grocery chains in that area had notable differences in the presentation of their unit prices. The two focal retailers are ranked in the top 15 supermarkets in North America in terms of sales revenue for 1997 (Zwiebach, 1998), and claim over two-thirds market share in the local area. Accurate representations of their shelf labels are presented as Chain A and Chain B in Figure 1. As shown, Chain A presents unit price information more prominently than Chain B. Specifically, Chain A, as compared to Chain B, (1) places the unit price to the side of the item’s total price; (2) has a greater amount of white space surrounding the unit price; (3) includes the words “unit price” to emphasize the information; and (4) presents the unit price in a font size that is 25.0% (vs. only 11.8% for Chain B) of the total price font size (actual ratios of unit price font size to total price font size are, in millimeters, 3:12 for Chain A and 2:17 for Chain B). This marketplace situation (i.e., two grocers with different levels of unit price information prominence) permits a field study wherein patrons from each grocer can be compared regarding their awareness and usage of unit price information. Although this methodological approach lacks random assignment of subjects to study conditions and complete control over how stimuli are presented to subjects, the approach permits an ecologically valid exposure process to the unit price information as presented on the retail shelf label.

Pretests of Grocery Shelf Labels To provide confidence in the validity of the field study, we conducted two pretests to determine whether differences in the shelf labels of Chains A and B are perceived by consumers as reflecting, respectively, higher and lower prominence levels.

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Pretest One For the first pretest, 40 undergraduate business students were randomly assigned to one of two conditions in a between-subjects design. Under the guise that the study’s purpose was to test various questionnaire items, subjects examined a shelf label taken from a “local [unidentified] retail grocery store” (in actuality, an accurate representation of either the Chain A or Chain B shelf label) and responded to items assessing certain aspects of the label. Dependent variables were nine Likert-type items assessing unit price prominence. Specifically, the items assessed whether the unit price information in the label (1) “is clearly distinguishable from other information presented in the label,” (2) “is highly noticeable,” (3) “would be easy to overlook” (reverse coded), (4) “is easy to identify” relative to other grocery store shelf labels, (5) “is more prominent” relative to other grocery store shelf labels, (6) “stands out from the other information on the label,” (7) “is presented in a large font relative to other information on the label,” (8) “is clearly labeled,” and (9) “is shown in an uncluttered portion of the label.” All items employed seven-point response scales anchored with “strongly disagree” and “strongly agree.” Analysis showed that the majority of the sample shopped at least once every two weeks and reported purchasing an average of 63.5% of the household groceries. The nine items listed above were combined into one scale (␣ ⫽ .92),1 which was compared across conditions. Results show that the Chain A label was perceived as having more prominent unit price information (M ⫽ 4.36) than the Chain B label (M ⫽ 2.66; t38 ⫽ 3.67, p ⬍ .01).

Pretest Two For the second pretest, 90 undergraduate business students were randomly assigned to one of two between-subjects conditions. As an extension to Pretest One, subjects were presented with the appropriate shelf labels as part of a typical grocery store shelf and told that they should examine the shelf as they would in an actual grocery store. The scene included a color photo of two identical cereal boxes sitting atop a faux grocery store shelf with a shelf label varying only by the experimental manipulation. Subjects viewed the shelf for a maximum of 30 seconds, and then completed the dependent measures and various demographic items. Dependent variables included free and prompted recall measures and a confidence assessment of prompted recall. The free recall measure was based on a thought-listing task requesting subjects to “list all of the details that you can remember about the product shelf label shown previously.” Responses to this item were later coded in terms of “a reference to unit pricing” or “no reference to unit pricing.” The prompted recall measure was a fixed-choice item (“Did the shelf label shown include unit price information?”) coded as “⫺1” for “no” and “1” for “yes.” Confidence in the prompted recall was assessed with a nine-point semantic differential item. The prompted recall measure was multiplied by the confidence measure resulting in a scale ranging from ⫺9 for confident “no” responses to ⫹9 for confident “yes” responses.

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Analysis of the data supports the expected effect of information prominence on unit price recall. Specifically, for the thought-listing task, 32.6% of subjects (n ⫽ 15) in the high prominence condition mentioned unit price information, as compared to 13.6% of subjects (n ⫽ 6) in the low prominence condition (␹2df.⫽1 ⫽ 4.53, p ⬍ .05). Subjects in the high prominence condition were more confident that the shelf label did include unit price information (M ⫽ 6.83) than subjects in the low prominence condition (M ⫽ 4.49; t88 ⫽ 2.63, p ⬍ .05). Overall, the two pretests validate the observation that the Chain A shelf label presents unit price information in a more prominent manner than the Chain B shelf label. We now present the procedure for the field study conducted using actual patrons of Chains A and B.

Study 1 Procedure and Measures Data were collected from a broad sample of consumers in a nonretail setting, namely, on a widely– used public rail transit system that boarded passengers at numerous locations within the focal metropolitan area. After explaining the general purpose of the survey, two experienced interviewers instructed respondents to complete the survey by themselves, with assistance (when needed) from the interviewers. Respondents marked, from a fairly exhaustive list of retailers from the surrounding area, the store at which they do most of their grocery shopping. They were then provided with a definition and explanation of unit pricing. This was followed by a one-item measure assessing how aware respondents were of whether their primary shopping location had unit price information on shelf labels. For this measure, a five-point response scale was used with options ranging from definitely sure the store does not have unit pricing to definitely sure it does. The unit pricing usage measure then followed, which consisted of two Likert-type items asking whether respondents “look at” or “consider” unit pricing information when they shop; each item had a seven-point response scale anchored with “strongly disagree” (1) and “strongly agree” (7). Respondents then completed the fiveitem Lichtenstein et al. (1993) price consciousness scale (␣ ⫽ .80). Finally, demographic information was assessed.

Study 1 Results Of the 841 people approached by interviewers, a total of 684 usable questionnaires were collected, for an overall response rate of 81%. Over 94% of the respondents (n ⫽ 603) reported that they primarily shop at either the higher prominence Chain A (n ⫽ 463) or the lower prominence Chain B (n ⫽ 140).2 Because these retailers are the focus of our study, we report all subsequent analyses based only on their shoppers. The sample represented the diversity of the local area in which it was collected. Slightly over 60% of the sample were female, with respondent ages ranging from 17 to 75 years with a mean of 37.3 (median 36). Median household income was “$40,001 to 50,000,” whereas the

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median education level was two years of college. The mix of racial and ethnic backgrounds was similar to that of the area population.

Hypotheses 1, 2, and 3: Prominence, Motivation, and Awareness A marketplace difference in unit price information prominence and a consumer difference in the motivation to seek out unit price information were hypothesized to have direct positive main effects on consumer unit price awareness at the store level. Motivation (represented by price consciousness) was also hypothesized to interact with information prominence such that the effect of prominence on awareness would be stronger under conditions of low motivation as compared to conditions of high motivation. To test these hypotheses, an equal slope analysis of covariance model (using unique sums of squares) was analyzed. Unit price information prominence (measured at high and low levels) and the motivational factor (price consciousness split at the median) were analyzed as predictor variables, with unit price awareness as the dependent variable.3 In that the design did not provide random assignment of subjects to the prominence conditions, it is important to understand if and how these conditions (i.e., the two grocery chains) might vary by factors other than focal predictor variables. Results indicate no significant differences between the chains regarding age (p ⫽.15) or gender (p ⫽ .50) of respondents. However, Chain A shoppers were more highly educated (t ⫽ 2.88, p ⬍ .01) and had higher household incomes (t ⫽ 3.38, p ⬍ .01) than Chain B shoppers. To reduce error variance and control for demographic differences, education and income are included as covariates in all analyses since prior studies found that higher socioeconomic consumers were more likely to be aware of unit price information (Friedman, 1971; Lamont et al., 1972; McCollough and Padberg, 1971).4 Results of the ANCOVA (with unit price awareness as the dependent variable) supported the proposed main effects for unit price prominence (F1,469 ⫽ 6.49, p ⬍.05, ␩ ⫽ 0.12), price consciousness (F1,469 ⫽ 16.59, p ⬍ .01, ␩ ⫽ .19), and their interaction (F1,469 ⫽ 4.87, p ⬍ 0.05, ␩ ⫽ .10). To further examine the interaction effects, contrasts between prominence levels were tested separately within each level (high vs. low) of price consciousness (again, using education and income as covariates). As hypothesized, the findings (all figures are adjusted means; cf. Tabachnick and Fidell, 1989) show a strong effect of prominence on unit price awareness for lower price consciousness shoppers (Mlow ⫽ 3.50, Mhigh ⫽ 4.07; F1,230 ⫽ 9.70, p ⬍.01, ␩ ⫽ 0.20), but no effect for higher price consciousness shoppers (Mlow ⫽ 4.23, Mhigh ⫽ 4.24; F1,237 ⬍1, n.s., ␩ ⫽ .01). Overall, the results provide support for Hypotheses 1, 2, and 3.

Hypothesis 4: The Prominence—Awareness—Usage Link Hypothesis 4 posits that the mediating effect of unit price awareness on the relationship between unit price information prominence and unit price usage level is moderated by price consciousness. Specifically, under low levels of price consciousness, prominence has a direct positive effect on awareness, which in turn mediates the relationship between

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prominence and usage. However, under high levels of price consciousness, no such relationship is expected. To test for this moderated mediation, a series of regression equations was estimated within each price consciousness condition (i.e., for the low motivation group and for the high motivation group) while controlling for the effects of income and education. The results are presented in Table 1. For shoppers with low levels of price consciousness, unit price prominence is positively related to unit price awareness (Equation 1a). The anticipated positive relationship between the unit price awareness (the mediator) and unit price usage is also significant (Equation 2a). Although prominence of unit price information has a direct effect on usage (Equation 3a), this effect is reduced considerably when unit price awareness is included in the regression model (Equation 4a). This series of results demonstrates that among consumers who are relatively low in price consciousness, unit price awareness mediates the effect of prominence on unit price usage. As expected, for shoppers with high levels of price consciousness, awareness is related positively to usage (Equation 2b), but unit price prominence had no effects. Thus, Hypothesis 4 was supported.

STUDY 2 Although Study 1 provides insight into the conditions under which unit price prominence affects unit price awareness and usage, there are two limitations that must be addressed.

TABLE 1 Results of Regression Equations for Moderated Mediation Analysis Independent Variables Dependent Variable

Unit Price Prominence

Low Price Consciousness 1a. Awareness 2a. Usage 3a. Usage 4a. Usage 5a. Usage

.20a — .18a .12 —

High Price Consciousness 1b. Awareness .01 2b. Usage — 3b. Usage .01 4b. Usage .02 5b. Usage —

Notes: a. p ⬍ .01. b. p ⬍ .05. c. p ⬍ .10.

Store-Level Awareness

Education

Income

Model F-value

Adj. R2

— .41a — .39a —

.00 .12b .13 .11 .14a

.04 .00 .00 ⫺.01 .01

3.5b 17.2a 4.3a 13.9a 2.5c

.03 .18 .04 .19 .01

— .48a — .48a —

.10 .05 .11 .05 .11

.09 .00 .03 .00 .03

2.1c 24.2a 1.2 18.1a 1.8

.01 .23 .00 .23 .01

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First, Study 1 does not entirely control for extraneous factors that might limit the internal validity of the findings. Second, Study 1 did not directly assess the effects of unit price prominence on consumer choice. The importance of this issue is highlighted by the small to medium effect sizes (i.e., eta of less than .30; Cohen, 1977) found in Study 1. To address these concerns, Study 2 employs a true experimental design to test the effects of unit price prominence on consumer choice behavior. Finding an effect of prominence on consumer choice holds important implications for retail managers. By manipulating the prominence of unit price information on shelf labels, retail managers could shift purchases toward or away from lower unit price items. This possibility is supported by findings that the provision of unit prices increased purchases of low unit price items (Isakson and Maurizi, 1973; Kilbourne, 1974; Russo, 1977). Thus, an important extension of Study 1 is to examine the effects of prominence on such purchase behavior. Specifically, we hypothesize: H5: Unit price information prominence has a positive effect on the selection of products with low unit prices. Consumers often believe that purchasing larger-sized packages leads to lower per unit costs (Manning et al., 1998; Wansink, 1996). However, 16 to 34% of grocery brands available in multiple package sizes are not commensurate with such quantity discount pricing, and instead are priced as quantity surcharges wherein the unit price of a larger-sized package is higher than the unit price of one of its smaller-sized equivalents (see Manning et al., 1998 for a review). Clearly, unit price information can aid consumers in identifying quantity surcharges, but only if such information is processed by consumers. In that higher unit price prominence should lead to greater usage of unit prices, it follows that higher prominence also should lead to an avoidance of quantity surcharged items. H6: Unit price information prominence has a negative effect on the selection of products priced as a quantity surcharge.

Study 2 Design and Stimuli A simulated grocery–shopping environment was created via detailed photographs of 84 grocery items. Each of seven pages represented a separate product category and included 12 items (i.e., 12 different SKUs) positioned on three shelves. To retain consistency across studies, prominence was manipulated by placing either the Chain A or Chain B shelf label (shown in Figure 1) on the shelf directly below each item. These labels represented high and low prominence, respectively. To avoid having the labels seem drastically oversized on the pages, they were reduced to 55% of their normal size. The product categories, which were chosen based on their inclusion in the calculation of the U.S. Consumer Price Index (Bureau of Labor Statistics, 1998), were juices, peanut butter, canned vegetables, pasta, canned fruit, salad dressing, and breakfast cereal. For each product category, from six to nine brands were selected. Of the 53 brands, 31 were

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available in multiple package sizes. The prices assigned to the items were consistent with actual prices in the marketplace in which the data were collected. A small portion of the prices were adjusted in order to ensure that quantity surcharges existed for 29% of the brands available in multiple package sizes; this percentage is consistent with levels found in past field studies (cf. Manning et al., 1998). A line with the words “quantity desired” appeared next to each item for subjects to indicate the number of each item they wished to purchase.

Study 2 Procedure and Measures Sixty-six adult consumers (departing passengers at various terminals of a major metropolitan airport) participated in the study and were randomly assigned to the low (n ⫽ 32) and high (n ⫽ 34) prominence conditions. Instructions indicated that the research was educational in nature and being conducted to “see which grocery items people prefer when asked to select among a limited assortment.” It was explained that the study packet contained seven pages of grocery products and that, despite the limited product selection, subjects were to assume they were making a small grocery–shopping trip during which they planned to spend $20 to $30. An illustration was provided to show subjects how to indicate the quantity desired for selected items. Subjects were encouraged to select items that they would purchase if they were actually shopping. After completing the shopping task, subjects proceeded to a second section of the questionnaire to respond to the scales and demographic measures described below. Dependent measures were based on the selections that consumers made during the simulation. Central to Hypotheses 5 and 6, several indices were created to examine shopper behavior. Specifically, an index for the number of purchases at lowest costs was created by summing the quantity of selected items representing the lowest unit price for a particular brand. The quantity of surcharged items that each subject selected was summed to create an index of quantity surcharge purchases. Indices were also created to represent total expenditures, total number of items purchased, and total ounces purchased. A manipulation check asked subjects to indicate their agreement (on a seven-point scale) with the statement that “while looking at the pictures and selecting products, the unit price (indicating the price per ounce) was prominently displayed on the label.” This measure was disguised among other measures assessing the prominence of the item prices and of the product names appearing on the shelf labels. Finally, several measures of demographic information were included.

Study 2 Results The sample was somewhat national in scope, consisting of residents from 19 states. Slightly over 77% of the sample were female, and ages ranged from 18 to 79 years with a mean of 39.6 (median 39). Subjects reported shopping for an average of 73.3% of household groceries. The manipulation check showed that subjects perceived the promi-

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nence of the unit price information to be higher for the Chain A (high prominence) label (M ⫽ 4.67) than for the Chain B (low prominence) label (M ⫽ 3.66; t64 ⫽ 1.89, p ⬍ .05). (Perceived prominence of item prices and product names did not differ across conditions; both ts ⬍ 1.) In support of Hypothesis 5, subjects in the high unit price prominence condition made more purchases at lowest unit cost (M ⫽ 5.97) than subjects in the low prominence condition (M ⫽ 3.75; t64 ⫽ 2.48, p ⬍.01, ␩ ⫽ 0.30). In support of Hypothesis 6, subjects purchased fewer quantity-surcharged items in the high unit price prominence condition (M ⫽ .24) than in the low prominence condition (M ⫽ 1.47; t64 ⫽ 3.95, p ⬍ .01, ␩ ⫽ .44). Further analyses showed that the number of products purchased and number of total ounces purchased did not differ between the high (13.7 products; 294.2 ounces) and low (14.5 products; 304.7 ounces) prominence conditions (both ts⬍1, n.s.). Coupled with the findings for Hypotheses 5 and 6, this resulted in lower overall expenditures for the high prominence condition (M ⫽ $20.35 vs. M ⫽ $24.24 for the low condition; t64 ⫽ 2.53, p ⬍ .01, ␩ ⫽ 0.30), and a lower average per unit expenditure (M ⫽ 7.1¢ per ounce vs. M ⫽ 8.2¢ per ounce for the low condition; t64 ⫽ 3.43, p ⬍ .01, ␩ ⫽ .39).

DISCUSSION

Although unit price information has been provided to consumers in grocery chains since the late 1960s, the manner in which this information is provided varies considerably. Indeed, our examination of 15 major grocers finds large differences in how unit prices are presented to consumers on shelf labels. The present research endeavor focused on the most obvious difference in the presentation format, namely, the prominence of the unit price information. The results of the field study demonstrate that unit price information prominence is positively associated with consumer awareness of unit prices at the store level. This effect, however, was moderated by price consciousness such that the prominence of unit prices only had an effect on awareness for shoppers with relatively low price consciousness. Additionally, the study demonstrated that unit price prominence affected usage of unit pricing such that consumers used the information more when it was presented in a prominent manner. This effect was mediated by awareness and again was demonstrated only when price consciousness was at lower levels. Although effect sizes were not large, the field study provided obvious ecological validity and a relatively high level of generalizability for the findings. The results of the experimental study provided additional evidence regarding the importance of unit price prominence by focusing on consumer choice behavior. In particular, the study demonstrated that more prominent unit price information resulted in shoppers selecting items with lower unit prices and without quantity surcharge pricing, thus spending less money for essentially the same quantity of goods.

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Retailing and Public Policy Implications Unit pricing represents an external flow of market information that is provided by most firms in the grocery industry. Although Moorman 1998 demonstrates that market information can be used as a tool by firms in a particular industry, unit pricing is one form of information that has been largely overlooked by marketers. As evidenced by the current research, retailers can influence consumers’ awareness and usage of unit price information by manipulating the prominence of this information on the shelf label. For example, Study 2 showed that prominence differences resulted in a shift in demand toward lower-unitpriced items. If such an effect holds in an actual retail setting, managers may be able to shift demand toward private brands that typically have relatively low unit prices, attractive retail margins, and slower turnover. On the other hand, the prominent display of unit prices may also shift purchases to high turnover national brands, which are assigned relatively low prices (and hence have low unit prices and low profit margins) in order to create a favorable store price image. Certainly, additional research is needed to fully understand the effects and associated implications of displaying unit prices in a more or less prominent manner. Varying legal requirements from state to state have allowed an environment that varies with respect to seller provision of unit price information, as well as the form in which the information is presented. This regulatory environment, in tandem with our results, leads to implications for public policy. One issue is related to consumers who shop at stores providing low prominence unit price information on shelf labels. This situation constitutes, as termed by Moorman and Price 1989, an isolated market. In such a situation, the benefits of unit pricing are greatly reduced, particularly for consumers with low levels of price consciousness. The importance of this situation is highlighted by what Moorman and Price 1989 suggest is an opportunity for sellers to discriminate among consumers by providing differential prices, products, services, or information when such isolated markets exist. Sellers providing unit pricing in a low prominence manner thus have the ability to price discriminate or price segment at the unit price level, raising the likelihood that some consumers will purchase quantity surcharged or otherwise highly priced items. Indeed, the results of Study 2 show that shoppers are more likely to avoid quantity surcharges when unit price information is prominently displayed. More generally, the potential for price discrimination coupled with the findings of our second study—that consumers pay less for the same quantity of goods when unit prices are presented in a prominent manner—suggest that some form of regulatory intervention may be appropriate. Although the costs and benefits of such information regulation need to be considered before any policy initiatives, it seems that consumer well being may best be served by requiring retailers to provide unit prices in a relatively prominent manner. Although no comprehensive review of unit price regulations is available, at least one state has taken this issue into consideration. In particular, Massachusetts requires grocery chains to present unit prices in a prominent manner (cf. Wax, 1974).

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Limitations and Future Directions The limitations of our studies provide direction for future research. First, there were differences in effect sizes across the two studies such that the first study had smaller effects than the second study. These differences are likely due to the nature of the methodology employed in each study, but raises questions regarding the overall impact of unit price prominence in actual retail settings. To address this issue, additional research needs to replicate Study 2 in more natural setting. For example, a grocery chain could alter unit price information such that half of the chain’s stores present unit price in a prominent manner, whereas the remaining stores could present the information in a less prominent manner. Actual purchase behavior could be monitored to further explore the behavioral effects of prominence. Another issue related to the external validity of the present research is the consideration of additional moderators. For example, evidence suggests that consumer motivation to process unit price information differs across product categories (e.g., Russo, 1977). As such, an extension to the current research could entail examining the effects of information prominence across product categories. Specifically, there may be more motivation for shoppers to achieve low unit costs for higher priced and more frequently purchased items. Our understanding of unit pricing may also benefit from exploring a variety of additional consumer characteristics that may be associated with unit price awareness and usage. Many factors affecting information search, such as the situational constraints of time or the cost of purchase, are likely to affect the usage of unit price information. In addition, pricing-related constructs, such as the existence of strong internal reference prices, may also affect unit price usage. For example, when consumers have a clear expectation regarding the price of a product or particular package size, unit price may be a less salient attribute than when consumers are less certain about the price of a product. Another avenue for future research is to examine the effects of unit price formats (other than prominence) on consumers’ awareness and usage of unit prices. For example, changes in how unit prices are calculated may augment or attenuate perceived differences between two unit prices. In some instances, unit prices may be presented as dollars (e.g., $0.053), in others, as cents (e.g., 5.3¢). Although both inform consumers of the unit price, the two formats differentially emphasize changes in unit prices. The cents format may result in consumers perceiving more significant unit price differences between items than the dollar format. Similar format effects are obtained by changing the unit of measurement upon which the unit price is calculated (cf. Monroe and LaPlaca, 1972). For example, a 48-ounce bottle of juice priced at $3.78 can have considerably different unit prices if calculated with ounces ($0.079), quarts ($2.52) or gallons ($10.08). Consumers may perceive larger differences between items when unit price information is presenting in larger units (i.e., gallons) as compared to smaller units (i.e., ounces) (cf. Wax, 1974). As such, the presentation of unit prices using large units of measurement (across a set of comparable products) may be more likely to result in a shift in purchase behavior toward items with relatively low unit prices than the presentation of unit prices using small units of measurement. A final issue of consideration surrounds the significant changes that have occurred in grocery retailing since the initial introduction and study of unit pricing. When unit pricing

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was a relatively new practice, most grocers still placed product price labels directly on goods. Shopping patterns and practices have clearly changed since that time due to factors such as the introduction of shelf labels and scanner technology, the growth of warehouse outlets (e.g., Costco, Price Club, Sam’s Club), the introduction of grocery products into some traditionally nongrocery discount stores (e.g., KMart, Wal-Mart), and the advent of new shopping venues such as the Internet. Consider, for example, Internet grocery retailers like Peapod and NetGrocer that provide a rich information environment for their buyers such that interested parties can sort and display products by a variety of informational inputs including total price, brand name, size, or unit price. An even greater change is the use of electronic shelf labeling, which involves the replacement of current paper or plastic shelf labels with electronic displays of price information in order to eliminate retail costs of manually changing shelf labels (Reese, 1998), and to reduce discrepancies between shelf prices and those charged by UPC scanner systems (Goodstein 1994; Goodstein and Escalas, 1995). Considering the substantial capital outlay required by such systems, it is critical that their treatment of unit price prominence be satisfactorily addressed before electronic shelf labeling permeates the marketplace. In that unit pricing has clear advantages in a number of specific purchase scenarios, it is likely that shoppers will continue to rely on this information. Therefore, it is vital that retailers continue to investigate managerial implications of unit price information. Indeed, according to the present research, the current marketplace situation mandates that the competitive advantage of unit pricing is not necessarily in offering it to consumers, but in how it is offered. Acknowledgment: The authors thank Colette Miyazaki and Ana Fernandez for assistance in data collection and processing, and the editor and anonymous reviewers for their constructive comments on earlier versions of this manuscript.

NOTES 1. A principal components analysis indicated only one factor with an eigenvalue greater than one (explaining 62% of total variance), with all loadings higher than .60. 2. Analysis of covariance is employed to test differences in unit price awareness between these two retailers. Potential concerns regarding the homogeneity of variance assumption of ANCOVA are unwarranted in this case, as the variance in unit price awareness does not differ significantly between the two prominence levels. In addition, the ratio for sample sizes and variance between the smallest and largest cell conditions are well within traditionally accepted parameters (cf. Tabachnick and Fidell, 1989). 3. Price consciousness was split at the median score (4.20), with the resulting “low” condition having a significantly lower average score (M ⫽ 2.87) than the corresponding “high” condition (M ⫽ 5.50; t ⫽ 35.60, p ⬍ .01). 4. In addition, shoppers at the two stores differed in terms of price consciousness. However, these differences are the opposite of the unit pricing prominence factor (t550 ⫽ 3.15, p ⬍ .01). In other words, the Chain with less prominent unit price information (Chain B) has shoppers with higher price consciousness, and the Chain with more prominent unit pricing (Chain A) has shoppers

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with lower price consciousness. This situation actually operates against the hypotheses, thus creating a more conservative test of the proposed effects.

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