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In this paper, consumers' price sensitivity is studied in the context of supermarket grocery shopping using a survey of supermarket shoppers. One of the objectives is to investigate empirically the various price laws, such as Weber's law and the Weber-Fechner law, (e.g. Monroe, 1979) where it is hypothesized that the price (stimulus) of a given product is the main factor which determines the magnitude of the response. However, it may also be argued that individuals perceive the same price differently and their responses to prices may depend on such factors as their demographic, shopping behavior, and price knowledge characteristics. In what follows, after a literature review on price sensitivity, the price laws are studied empirically and then various other factors are examined in order to identify specific shopper profiles on the basis of price sensitivity.
LITERATURE REVIEW
One notes from the literature that there are at least four major price concepts; price awareness, price sensitivity, price thresholds, and the impact of contextual infiuences on price perceptions. While price sensitivity denotes the degree of reaction provoked in an individual by price differentials, price awareness refers to the ability of the buyer to remember prices. The first term can be more simply characterized as "concern" and the second as "recall". The relationship between these two price concepts is noted by Gabor and Granger (1961) that it cannot be assumed that "having some recollection of the price paid can be taken as evidence of being consciously concerned with it." However, they do assert that "the converse is certainh) true: if a housewife cannot remember the price paid for a recent purchase, she could not have paid much attention to it at the time." Studies (e.g. Dickson and Sawyer, 1985 and Zeithaml, 1982) indicate that consumers do not always know or recall actual prices of products. In fact, they encode and categorize prices according to their own internal reference systems, thus giving rise to perceived price of the product which is distinguished from the objective or the actual price of the product. In addition, Zeithaml and Berry (1987) show that price awareness differs among various demographic groups. On the other hand, while McGoldrick and Marks (1987) indicate that, in general, socioeconomic variables are not strong predictors of price awareness,...