The Effect of Incidental Prices in Online Display Ads on Consumer Internal Reference Price

ABSTRACT The main objective of this research is to investigate how price information in online display advertisements affects the consumer’s internal reference price (IRP). The internet context differs from prior pricing research contexts in which consumers allocate all or none of their conscious attention to price stimuli. In this context, consumers allocate some of their attention to ads, but they do so incidentally. Across four studies, we show that these incidental exposures to price information in online ads influence the IRP. The results suggest that the price magnitude used in the online ad (either low or high) determines the price anchoring mechanism at play. The price magnitude in conjunction with ad repetition and ad type (price comparing ad vs. single price ad) also affect the consumer’s IRP. By uncovering these effects in online display advertising, this research contributes to pricing and online advertising research and provides specific insights for online marketers.