Categorization and willingness to pay for new products: the role of category cues as value anchors

This study focuses on textual category cues and their influence on consumers' willingness to pay for new products. It examines whether an anchoring effect occurs when consumers are provided with textual category cues that refer consumers toward a particular product category. This article argues that consumers' willingness to pay for a product under consideration will tend toward the average price of products in the category in which it is positioned. This average price acts as a reference point that influences consumers' willingness to pay. We hypothesize that the more innovative the product is, the less certain the consumer is about its properties. Therefore, the proposed anchoring mechanism will influence consumers' willingness to pay strongly when the product is radically innovative, while the willingness to pay for an incrementally innovative product will not be affected by the proposed anchoring mechanism. Our hypotheses are tested by means of four experiments using online auctions in which consumers actually pay when they win an auction. The findings provide support for the role of category cues as "semantic anchors." More specifically, giving the cues of categories in which the products had higher average monetary value compared to cues of categories in which the average monetary value was lower, resulted in an increased consumers' willingness to pay for radically new products. As expected, this effect was not found in the case of incrementally new products. The article concludes with theoretical and managerial implications.