Decoding price promotions: a moderated mediation model of fairness, trust, and deal proneness

Abstract

Store pricing policy helps consumers to form perceptions about the products as well as the store. We study two commonly used pricing policies, EDLP and HiLo from the customers’ point of view. We break down these policies based the amount of variability and the degree of predictability. Consumers form perceptions of price fairness and store trust based on these pricing policies and consequently decide their purchase intentions. We observe that price fairness perceptions mediate between variability of pricing and purchase intention. Different pricing policies are likely to attract different types of consumers. Some customers are likely to be driven by deals and discounts while others are not. We show that trust mediates between variability and predictability of pricing and purchase intention only for customers who are low on deal proneness. Our study contributes to the literature of pricing policy by viewing promotion policy from the perspective of its elements—variability and predictability.