This study examines whether the effects of reference-price advertisements on consumers’ perceptions and behavioral intentions differ between online and offline price-based promotional offers. By using an experiment with a three-by-two factorial design, this study finds that the inclusion of an advertised reference price in a promotional offer results in a higher internal reference price, a lower price search intention, and a more favorable attitude toward the promotional offer in both online and offline retailing environments. When comparing these effects on the two types of retailing channels, they are greater for the online shopping channel. In addition, an exaggerated advertised reference price produces a greater effect on consumers’ perceptions than does a plausible advertised reference price in both shopping channels and, again, this effect is larger for shopping online than for shopping in offline (traditional) channels.

This study examines whether the effects of reference-price advertisements on consumers’ perceptions and behavioral intentions differ between online and offline price-based promotional offers. This study finds that an advertised reference price does lead to a higher internal reference price, a lower price-search intention, and a more positive attitude toward the offer for both online and offline price-based promotional offers. These effects of advertised reference prices are larger for online promotional offers than for offline ones. The finding suggests that while reference-price advertisement should be a prominent strategy for all retailers in designing their promotional offers, it should be of particular importance to the online retailers. The findings of this study also demonstrate that, for both online and offline price promotions, an exaggerated advertised reference price has a greater impact on all three dependent variables examined in this study than does a plausible reference price. These effects of an exaggerated advertised reference price also are larger for the online promotional offers than for the offline ones. Given the demonstrated impacts of an exaggerated advertised reference price, this “buy-in-the-first-store” online-shopping behavioral pattern highlights the crucial role that advertised reference prices can play in online consumers’ purchasing decisions. It also underlines the danger of possible deceptive usage of exaggerated advertised reference prices and should, therefore, be of considerable public policy concern. By the same token, online retailers should use discretion when attempting to capitalize on the effectiveness of exaggerated advertised reference prices in influencing consumers’ price perceptions and price evaluations.