Constructing an internal reference price for product innovations

The internal reference price is the decisive standard against which observed prices are compared to evaluate whether a product offering is a good deal or not. If no reference price has been established for a product category, such as for product innovations, is it uncertain against which standard the price can be compared. Despite extensive research on the use of reference prices, little is known how an internal reference price is constructed for an unfamiliar product category. We conduct two experiments to support our two suggested mechanisms. Reference prices for an unfamiliar product category can either be constructed through repeated exposure to incidental price information or through transfer of price information from a familiar, similar product category to an unfamiliar product category, but only if the product value and price are correlated; a condition often not considered in product innovation testing