The Effect of Advertisement on Price Sensitivity Considering Customer Mental Model as Mediating Variable

Two divergent theoretical viewpoints exist about the contradictory economic effects of advertising namely “market power” and “economics of information” view points. The aim of the present research was to determine if these perspectives on advertising could be a separate part of generalized theoretical framework by two different types of information provided. The research method was experimental. The research population consisted of the Faculty of Education and Psychology students in University of Isfahan. Statistical sample of the research were 128 graduate and postgraduate students in the faculty who were assigned to low and high advertisement frequency groups randomly. In this research, advertising and price sensitivity were independent and dependent variables respectively, while mediating variables were consideration set size and relative strength of preference. Two distinct forms of ads memory (explicit and implicit) were constructed plus a researcher made questionnaires for relative strength of preference. Price sensitivity was measured subjectively by a direct question from the participants about how much they pay. Advertisements were made for fictitious candy, chocolate, biscuits and nonalcoholic drinks. Low frequency advertising exposure was 1-3 and high frequency was 4-6 were. based on the Findings, the first, second and third hypotheses were confirmed and relative strength of preference and consideration set size were mediating and moderating variables between advertising and price sensitivity (P<0.01). Price sensitivity in the first route (the route of consideration set size) decreased and in the second route (the route of relative strength of preference) increased (P<0.01).