relationships among the concepts of price, perceived Objective quality versus perceived quality. Sev- and weights to measure objective quality; researchers. consumers; and (2) Objective estimates of the actual PQ association of the same products, the actual relationship between price and quality was typically not. The Relationship Between Perceived and. Objective Price-Quality. One of the topics of greatest interest in pricing re- search is the effect of price on quality.
Respondents were asked to assume that there were 10 brand alternatives in each product class, five of which were high priced and five of which were low priced. For the five high-priced alternatives, respondents were asked how many were of high quality and how many were of low quality. Then, the respondents were asked for the five low-priced alternatives how many were of high quality and how many were of low quality.
A small pretest indicated that this procedure could be easily understood by respondents. These responses were used as cells in a 2 X 2 contingency table i.
Defining and Relating Price, Perceived Quality, and Perceived Value
The formula used to calculate the phi correlations was: Although this measure has some limitations which are addressed in the Limitations section of this paperit was quite different from the one used to assess price-quality perceptions in the four studies reported by Lichtenstein and Burton.
In those studies perceived price-quality was operationalized by respondents' level of agreement with the following statement: This measure, which was also used in a previous study on price-quality perceptions Peterson and Wilsonhas the advantage of being quite direct.
However, it may under-represent this complex construct as well as introduce random measurement error for any single response Churchill Measure of Objective Price-Quality. Measures of the relationships between price and objective quality were calculated from Consumer Reports data. Arguments have been stated both for and against the use of Consumer Reports' ratings as a basis for measures of objective price-quality relationships.
An overview of these arguments concerning objective price-quality measures is offered in the Limitations section of this manuscript. Spearman rank-order correlations were used to test hypotheses.
Given the use of rank-order correlations, positive objective price-quality correlations were recoded to a 3, correlations near zero were recoded to a 2, and negative correlations were recoded to a 1. This recoding scheme was used because many of the product categories have very similar objective price-quality correlations, and small correlational differences would be accentuated given the use of rank-order correlations.
Thus, tests using these recoded values were considered the more conservative and appropriate approach. Description of the Sample Respondents in the study were junior and senior undergraduate business majors at a major state university. Sample size for this study was All data were collected in a classroom setting. This sample and data collection method are consistent with that used by Lichtenstein and Burton in Study 3 where respondents were also junior and senior undergraduate students and questionnaires were completed in a classroom environment.
RESULTS Table 1 shows the mean phi correlations calculated from responses to the questions concerning perceived price-quality in this study. As shown in Table 1, the mean phi correlation for the durable products. This difference is consistent with results reported in previous perceived price-quality research which has shown that consumers expect stronger price-quality relationships for durable products Leavitt ; Monroe and Krishnan ; Peterson and Wilson Results are also consistent with those offered by Lichtenstein and Burton, where across all studies respondents perceived stronger relationships for durables than for nondurables.
One advantage of this measure demonstrated in Table 1 is that it permits a direct assessment of the specific price-quality correlations as perceived by respondents. For example, relatively few respondents expected negative price-quality relationships for any of the product classes examined. However, for some product classes there were rather large differences concerning positive correlations ranging from.
For instance, for the product classes of stereo speakers and ten speed bicycles, two-thirds of the respondents thought that price-quality correlations exceeded. Results showing how findings using this measure compare to those using the single-item measures of perceived price-quality employed by Lichtenstein and Burton are presented in Table 2.
The last three columns in Table 2 are of principal interest. The third column shows the average objective price-quality correlations calculated from the two most recent ratings for these product classes in Consumer Reports, and the coding of these correlations as positive 3near zero 2or negative 1 ; the fourth column shows the mean price-quality ratings using the single item price-quality measure as reported in Study 3 of Lichtenstein and Burton ; and the fifth column shows the mean phi correlations for the perceived price-quality measures employed in this study.
A quick comparison between the mean phi correlations column 5 and the mean ratings for the single item measure of perceived price-quality column 4 reveals a positive relationship between the two measures. In fact, the Pearson correlation between the mean perceived price-quality ratings and the mean phi correlations is. Thus, across these two samples, the price-quality ratings and correlational measures appear to tap into the same underlying construct. This high correlation between these two measures bodes well for assessing the consistency of results of hypotheses involving this phi correlational measure and the price-objective correlations column 3 and previous findings of Lichtenstein and Burton using the single-item perceived price-quality measures.
A comparison of results pertaining to these tests of hypotheses are shown at the bottom of Table 2.
The Relationship Between Perceived and Objective Price-Quality
The first hypothesis offered by Lichtenstein and Burton postulated a positive correlation between perceived and objective price quality relationships. Thus, results across the two measures of perceived price-quality are relatively consistent and provide general support for H1.
A second hypothesis of Lichtenstein and Burton concerned the moderating role of product type on the accuracy of price-quality perceptions; it was hypothesized that the correlation between perceived and objective price-quality would be greater for nondurable than for durable products. It is hypothesized that product category factors, individual factors, and informational factors affect the use of price as a quality indicator.
Perceived value may be generally defined as the consumer's overall assessment of the utility of a product based on what is received and what is given. However, this definition embraces many highly personal and idiosyncratic notions of value. In addition to quality, the "get" components may include concrete product attributes as well as other high level abstractions e.
In value judgments, little active weighing of benefits and costs may take place, and consumers may depend on cues to form impressions of value. Value perceptions appear to be situational and to depend on the frame of reference in which the consumer is making an evaluation. Implications of these ideas for measurement systems include the need to account for the hierarchical nature of perceived quality and value and to find techniques to link attributes.
Also, various aspects of sacrifice should be examined. Researcher Comments Author Valarie A.
The Relationship Between Perceived and Objective Price-Quality
One of the major obstacles has been that researchers and executives all have differing views about the nature of quality and value. The Packaged Goods steering group felt that a necessary first step in researching the subject was defining and relating the key variables involved.
This exploratory study was such a step. Previous researchers have cited methodological problems and unclear conceptualizations as reasons for the inconsistent findings. One major objective of this paper was to review past research in a new framework to set the stage for viewing the price-perceived quality relationship in a different way. Related links Customer Perceptions of Product Quality: Golder,  Examines the relationship between objective and perceived quality—and the role of brand reputation—for 46 product categories over 12 years.
Service Quality Valarie A. Parasuraman,  Offers overview of service quality: Discusses evidence of links between service quality, customer loyalty, and profitability, and challenge of delivering service quality on the Internet. Zeithaml, and Leonard L. Berry,  Proposes model, research propositions, and preliminary measures for research on quality in service businesses.
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