An Assessment of Low Price Guarantee Signals: A Process Model of Consumer Evaluations

Abstract

This article reports the findings of a study that examines the effects of low price guarantees (LPG) in retail advertisements within the frameworks of signaling theory (Spence 1974) and economics of information (Stigler 1961, Urbany 1986). A low price guarantee may be defined as a policy where a retailer offers the lowest possible price for a product or a group of products and promises to match or better any lower price found in the local market. The promise normally includes a provision to refund the difference between the seller’s offer price and the lower price. The guarantee may also include a self-imposed penalty for not having the lowest price.