The Influence of Outcome Messages and Involvement on Participant Reference Price

Authors

  • Gerard T. Kyle
  • Deborah L. Kerstetter
  • Frank B. Guadagnolo

Keywords:

Reference Price, Involvement, Prospect Theory

Abstract

Public leisure and recreation service managers have become increasingly accountable for their service's fiscal independence. As a consequence, their reliance on user fees as a method of generating sustainable revenue has emerged as a highly contentious issue over the past two decades. Annually, service managers are required to recommend price changes for services offered the following year in order to maintain existing service quality. Despite the emergent role of price, reactions of consumers to price changes for publicly funded leisure and recreation services is not well understood. The primary purpose of this study was to investigate ways in which participants' expected or internal reference price for a lOK road race might be altered. A secondary purpose was to examine the relationship between level of involvement and internal reference price. Four hundred sixty-eight subjects were systematically assigned to one of six treatment groups. Each subject received a message communicating potential outcomes associated with paying an entrance fee for a lOK road race. Subsequent changes in subjects' internal reference price were monitored. The results indicated that cost of service information was the most effective treatment message in encouraging significantly higher internal reference prices. The lowest internal reference prices were reported by those who received only basic service information (the control group). In addition, subjects' level of involvement with running also influenced internal reference price. As their level of social psychological involvement within the Attraction dimension increased, so too did their internal reference price. However, as past participation in the event (i.e., behavioral involvement) increased, their internal reference price decreased. These findings indicate that managers of public leisure services do have the ability to manipulate consumers' price expectations for the services they provide. Limited support also is offered for the notion that price expectations are fluid and dependent upon contextual variables. References by merchants to specific service elements (e.g., cost of service provision) can alter the context in which price acceptability is evaluated, thereby gaining participant approval of higher prices for such things as premium services. Finally, these results illustrate the complex manner in which involvement moderates information processing and subsequent price expectations. Managers of public leisure services considering the introduction of new fees or the inflation of existing fees must have an understanding of how their different market segments will react to these pricing decisions. Understanding their clientele's involvement profiles will assist them in mal<ing informed decisions about the pricing of their leisure services.

Published

1999-07-18

Issue

Section

Regular Papers