Author(s): Praveen Sugathan
The effect of different forms of reference price-internal and external-has been well documented in the literature. In this study, I hypothesize and confirm the existence of two groups of customers, who differ in their use of reference price scheme. In the detergent category, it was shown that a fixed percentage of the consumer households use internal reference price for evaluating their brand choice, while the rest use external reference price. It can also be inferred that in categories such as detergents, majority of the customers use external reference prices. It was also confirmed that income levels positively moderate the influence of external reference price on probability of a brand choice.