RESEARCH NOTE

The Effects of Extrinsic Product

Cues on Consumers' Perceptions
of Quality, Sacrifice, and Value
R. Kenneth Teas
Sanjeev Agarwal
Iowa State University

The authors report the results of two experiments designed

to test the effects of extrinsic cues--price, brand name,
store name, and country of origin--on consumers'perceptions of quality, sacrifice, and value. The results of the experiments support hypothesized linkages between (a) each
of thefour experimentally manipulated extrinsic cues and
perceived quality, (b) price and perceived sacrifice, (c)
perceived quality and perceived value, and (d) perceived
sacrifice and perceived value. The results also indicate
that the linkages between the extrinsic cues and perceived
value are mediated by perceived quality and sacrifice.

Several researchers have developed and/or tested models of buyers' perceptions of value with particular emphasis on buyers' use of extrinsic cues (such as price and brand
name) as indicators of quality and value ~awar and
Parker 1996; Dodds and Monroe 1985; Erickson and
Johansson 1985; Monroe and Chapman 1987; Monroe and
Krishnan 1985; Stokes 1985; Zeitham11988). On the basis
of a meta-analysis of the results of empirical tests of the
effects of extrinsic cues on consumers' perceptions of
product quality (Rao and Monroe 1989), Dodds, Monroe,
and Grewal (1991) specified a model in which perceived
quality and perceived sacrifice mediate linkages between
(a) brand name, store name, and price and (b) perceived
value. The model is based on two premises. First, conJournal of the Academy of Marketing Science.
Volume 28, No. 2, pages 278-290.
Copyright 9 2000 by Academy of Marketing Science.

sumers' perceptions of value are based on a trade-off

between product benefits (e.g., product quality) and monetary sacrifice. Second, consumers' perceptions of product
quality and monetary sacrifice can be based, at least in
part, on extrinsic cues. Test results reported by Dodds et al.
(1991) suggest that three extrinsic cues (price, brand
name, and store name) are associated with quality and
value perceptions.
This study extends the Dodds et al. (1991) study by
examining linkages specified but not tested in the Dodds et
al. (1991) study (i.e., linkages involving perceived sacrifice) and by examining the degree to which perceived
quality and sacrifice mediate the relationships between the
extrinsic cues and perceived value. In addition, this study
extends the Dodds et al. (1991) model via an additional
extrinsic cue---country of origin. Although the literature
suggests consumers may be influenced by several extrinsic cues beyond those specified by Dodds et al. (1991),
such as warranty (Bearden and Shimp 1982), packaging
(Stokes 1985), and advertising (Milgrom and Roberts
1986), a particularly important extrinsic cue is country of
origin (Chao 1993; Darling and Arnold 1988; Hart and
Terpstra 1988; Hastak and Hong 1991; Johansson, Douglas, and Nonaka 1985; Thorelli, Lim, and Ye 1989; Tse and
Gorn 1993; Wall, Liefeld, and Heslop 1991). Furthermore,
the literature suggests that country of origin may moderate
quality perceptions generated by extrinsic cues (Chao
1993; Erickson, Johansson, and Chao 1984; Hart and Terpstra 1988; Wall et al. 1991). In the following two sections,
the model is developed and the hypotheses are specified.
The third section contains a description of the research
method. The fourth section reports the results of mani-

Teas, Agarwal/ EFFECTS OF EXTRINSIC CUES 279

FIGURE 1
A Conceptual Model of Extrinsic-Cue Effects on
Perceived Quality, Perceived Sacrifice, and Perceived Value

[cor I
Brand
Name

Store

Name

Price

a. Hypothesis6 predictsthat countryof origin willhavea positiveeffecton perceivedquality,and Hypotheses7a-cpredictthat countryof origin willnegatively moderatethe linkages betweenthe other three extrinsic cues (i.e., brand name, store name, and price) and perceivedquality.

pulation checks, measurement validity tests, and tests of

the hypotheses. The fifth section contains discussions of
the findings.

THE CONCEPTUAL MODEL

The conceptual model examined in this study, which is
diagrammed in Figure 1, suggests that quality and sacrifice
perceptions mediate linkages between (a) antecedents of
consumers' quality and sacrifice perceptions (e.g., brand,
store, and price) and (b) consumers' perceptions of value.
Country of origin is specified as an extrinsic quality cue
and as a moderator variable.

The Impact of Price on Consumers'

Perceptions of Quality and Sacrifice
Considerable theoretical and empirical evidence suggests that price is often used by consumers as an extrinsic
product-quality cue (Bearden and Shimp 1982; Dodds and
Monroe 1985; Dodds et al. 1991; Erickson and Johansson
1985; Lichtenstein, Block, and Black 1988; Lichtenstein,
Ridgway, and Netemeyer 1993; Monroe and Krishnan 1985;
Rao and Monroe 1989; Zeithaml 1988). Theoretical rationales underlying an expected positive price-quality linkage
can be based on expected market forces--high-quality
products often cost more to produce than low-quality

products and competitive pressures limit firms' opportunities to charge high prices for low-quality products (Curry
and Riesz 1988; Erickson and Johansson 1985; Lichtenstein et al. 1993). Complicating the extrinsic cue effect of
price is that price also is an indicator of sacrifice (Dodds et
al. 1991; Erickson and Johansson 1985; Grewal, Monroe,
and Krishnan 1998; Lichtenstein et al. 1993; Zeithaml
1988).

The Impact of Brand and Store on

Consumers' Perceptions of Quality
Research evidence indicates that brand names (Dodds
and Monroe 1985; Stokes 1985) and store names (Wheatley and Chiu 1977) are extrinsic quality cues. Researchers
have viewed brand name as a "summary" construct (Hart
1989; Johansson 1989) or a "shorthand" cue (Zeithaml
1988) for quality because consumers can make product
quality inferences based on brand name. The process can
be explained via the "affect-referral" process discussed by
Wright (1975), which suggests consumers do not examine
brand attributes every time they make brand choice decisions; they simplify their decision-making process by basing their judgments on brand attitudes (summary information) rather than on product attribute information.
Empirical test results reported by Dodds et al. (1991) indicated significant brand and store treatment effects on consumers' perceptions of product quality.

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Country of Origin as an
Additional Extrinsic Quality Cue
The results of several published studies (see Bilkey and
Nes 1982 and Han 1989 for reviews) suggest that country
of origin may directly affect consumer perceptions of
quality and/or may moderate the effects of other product
quality cues.

Main effects. Research results reported by Erickson et al.

(1984) and Johansson et al. (1985) indicate positive relationships between country-of-origin image favorability
and respondents' ratings of automobiles on specific features. Research results reported by Hastak and Hong
(1991) indicate that the impact of country of origin on
quality perceptions can be comparable with that of price,
and research results reported by Darling and Arnold
(1988) suggest that country of origin can be more important than brand name as an influencer of quality perceptions. Thorelli et al. (1989) conducted an experiment to
examine the impact of country-of-origin cue (in conjunction with product warranty and retail-store cues) on perceived quality, overall attitude, and purchase intention.
The results suggest that consumers' perceptions of country
of origin affect their perceptions of quality, attitude, and
purchase intention. Wall et al. (1991) examined the impact
of country-of-origin, price, and brand cues on perceived
product quality, perceived risk associated with purchasing
the product, perceived value, and likelihood of purchasing.
All three cues were found to be significantly related to perceived product quality. Experimental research results by
Tse and Gorn (1993) indicated that country of origin,
brand name, and consumers' experience with the product
resulted in significant main effects on respondents' perceived product quality. Experimental research results reported by Chat (1993) indicated that price, country of
design, and country of assembly were statistically significant predictors of respondents' quality perceptions. Han
and Terpstra (1988) also reported significant main effects
of country of origin and brand name on overall evaluation
of automobiles.
Moderator variable effects. On the basis of the concept
of country-of-origin halo effects (Erickson et al. 1984;
Han 1989; Hanssens and Johansson 1991), Chat (1993)
argues that the effects of extrinsic quality cues such as
price may be different across different countries' products.
He argues that when consumers have high (low) confidence in a country's ability to produce high-quality products, they may perceive that the products produced in the
country will be generally high-quality (low-quality) products; consequently, consumers may be less (more) likely to
use price as an indicator of quality. Empirical findings reported by Chat (1993) suggested that for television sets
manufactured in a high-quality-image country (Japan),
price differentials were not translated into quality image

SPRING2000
differentials. However, for television sets designed in
countries with the lower-quality image (e.g., Taiwan),
higher prices were associated with significantly higherquality ratings. Research also suggests that country of origin may moderate brand name--perceived quality and store
name-perceived quality linkages. Han and Terpstra
(1988) report findings that indicated United States' brands
that were manufactured in the United States were perceived to be of much higher quality than the United States'
brands manufactured in Korea--the country of origin for
the brand moderated the impact of the brand on perceived
quality ratings. Wall et al. (1991) reported similar
country-by-brandinteraction effects in predictions of consumer quality perceptions. In addition, Thorelli et al. (1989)
argue that a high (low)country-of-origin image may enhance (reduce) the impact that store image has on the perceived quality.

Antecedents of Perceived Value

Consumer perceptions of value are posited by Dodds et
al. (1991) to involve a trade-off between perceived quality
and perceived sacrifice that results in a positive linkage
between perceived quality and perceived value and a negative linkage between perceived sacrifice and perceived
value. This conceptualization of value is similar to conceptualizations posited by Hauser and Urban (1986) and
Zeithaml (1988) and suggests (a) perceived quality mediates the linkages between extrinsic cues and perceived
value and (b) perceived sacrifice mediates the linkage
between price and perceived value. Empirical findings
reported by Dodds et al. (1991) indicated strong support
for their hypothesized positive linkage between perceived
quality and perceived value, their hypothesized positive
linkages between two extrinsic cues (i.e., brand and store
name) and perceived value, and their hypothesized negative linkage between price and perceived value.

Hypotheses
This study extends the Dodds et al. (1991) study by examining the role of an additional extrinsic cue---country of
origin--and by testing the degree to which perceived quality and perceived sacrifice mediate the effects of the extrinsic cues on consumers' perceptions of value. It is important
to note that the mediating role of perceived sacrifice was
hypothesized but not tested by Dodds et al. (1991). Furthermore, although the model proposed by Dodds et al.
(1991) implies that the impact of the extrinsic cues on perceived value is mediated via perceived quality and sacrifice, they did not specify formal hypotheses or tests for
mediation they examined relationships between the extrinsic cues and perceived value independent of the impact
of the perceived quality and perceived sacrifice mediating
variables. Our research extends the Dodds et al. (1991)

Teas,Agarwal/ EFFECTSOFEXTRINSICCUES 281

study by examining the impact of the extrinsic cues on perceived value after controlling for perceived quality and
sacrifice. On the basis of the Dodds et al. (1991) model, the
following direct-effect hypotheses are specified:

Hypothesis la: Price level is positively related to perceived quality.

Hypothesis lb: Price level is positively related to perceived sacrifice.

Hypothesis 2: Favorability of the brand name is positively related to perceived quality.

Hypothesis 3: Favorability of the store name is positively

related to perceived quality.

Hypothesis 4: Perceived quality is positively related to

perceived value.

Hypothesis 5: Perceived sacrifice is negatively related to

image favorability and (b) realistic price ranges. The pretest led to the selection of two products (handheld business
calculators and wristwatches), four brand names (Hew,lea
Packard and Royal for calculators and Seiko and Precis for
wristwatches), four retail outlets (Campus Bookstore and
K-Mart for calculators and Belden Jewelers and K-Mart
for wristwatches), four countries of origin (Japan and
Mexico for calculators and Switzerland and Mexico for
wristwatches), and six price levels ($15, $32, and $50 for
calculators and $50, $175, and $300 for wristwatches).
Handheld business calculators (with Hewlett Packard and
Royal brand treatments) were used by Dodds et al. (1991),
thus providing us the opportunity to replicate their study.
Wristwatches were used by MacKenzie and Lutz (1989) in
a study involving a similar participant population.

perceived value.

Sample
On the basis of the empirical evidence that country of origin may be an important extrinsic quality cue, the following hypothesis is specified:

Hypothesis 6: Favorability of the country-of-origin image is positively related to perceived quality.

Hypotheses 1-6 indicate that perceived quality and perceived sacrifice mediate the linkages between the extrinsic
cues and perceived value.
On the basis of the previously cited empirical evidence,
country of origin is also hypothesized to moderate the effects of other extrinsic cues (Chao 1993); hence, the hypotheses are the following:

Hypothesis 7a: Country of origin moderates the pricequality relationship hypothesized in Hypothesis la.

Hypothesis 7b: Country of origin moderates the brand

name--quality relationship hypothesized in Hypothesis 2.
Hypothesis 7c: Country of origin moderates the store
name--quality relationship hypothesized in Hypothesis 3.

THE EXPERIMENT
Experimental Design
The hypotheses were tested via experiments based on a
2 x 2 x 2 x 3 between-subjects full-factorial design. The
experimental manipulations involved two brand-image
levels (high and low), two store-image levels (high and
low), two country-of-origin image levels (high and low),
and three price levels (high, medium, and low).
A pretest involving 70 university undergraduate students was used to determine (a) the type of products, brand
names, store names, and countries of origin recognizable
to the participants and distinguishable on the basis of

The participants in the experiment consisted of 5301

undergraduate students attending a major midwestern university. Similar to procedures used by Dodds et al. (1991),
students were randomly assigned to 24 treatment cells for
the calculator study. The cell assignments for the wristwatch experiment were also random and independent
from the experimental cell assignments for the calculator
experiment.

The Stimuli and Measures

Data were collected via two questionnaire surveys,
separated by 1 week, that were administered to the same
sample of students. The time lag between the surveys was
planned to reduce carryover effects (note that Dodds et al.
1991 obtained responses for two separate stimuli at the
same time). The product represented in the stimulus advertisement was handheld business calculators in one survey
and wristwatches in the other. The advertisement, which
displayed a black-and-white picture of the product,
remained unchanged across the treatments. The experimentally manipulated brand name, store name, country of
origin, and price information were displayed beside the
picture.
The questionnaires contained measures for the endogenous variables followed by manipulation check measures.
Perceived quality and perceived value were assessed via
five-item scales developed by Dodds et al. (1991). Since
Dodds et al. ( 1991) did not measure perceived sacrifice, a
scale was constructed for this study based on published
discussions of perceived sacrifice (Dodds et al. 1991;
Monroe and Chapman 1987). The following two items
were used to measure perceived sacrifice (5-point
response scale where 1 = strongly disagree and 5 =
strongly agree): (I) If I purchased the (watch/calculator)
for the indicated price, I would not be able to purchase
some other products I would like to purchase now; and (2)

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JOURNAL OF THE ACADEMY OF MARKETING SCIENCE

If I purchased the (watch/calculator) for the indicated

price, I would have to reduce the amount of money I spend
on other things for a while.
Since students possess varying levels of financial
resources, they can be expected to have different perceptions of the degree to which a particular price represents a
sacrifice. Thus, we measured the concept of sacrifice from
a budget constraint perspective. This measure allows for
the possibility that the perception of sacrifice will vary
depending on an individual's financial situation. The same
price may involve a higher level of sacrifice for a financially constrained individual when compared with a financially endowed individual (Schmidt and Spreng 1996).
The manipulation check measures consisted of respondents' perceptions of the brand (7-point scale where 7 =
high quality and 1 = low quality), price (7-point scale
where 7 = very high and 1 = very low), store (three 7-point
scales measuring the likelihood that the store "sells highquality merchandise," "is a prestigious store:' and "is a
high-quality store"), and country of origin (six 5-point
agree~disagree scales involving expectations about the
product's quality, durability, prestige, reliability, workmanship, and dependability).

RESULTS
Preliminary Tests
Manipulation checks. One-way analyses of variance
(ANOVAs) were conducted to assess the impact of the
three price levels (calculators: F2. 527= 135.26, p < .000;
wristwatches: Fz 52~= 127.96, p < .000), the two brand levels (calculators: F1. s28= 592.65, p < .000; wristwatches:
F~.527= 274.78, p < .000), the two store names (calculators:
F~.52s= 118.73, p < .000; wristwatches: F L527= 342.74, p <
.000), and the two countries of origin (calculators: Fl.52s=
238.60, p < .000; wristwatches: F~. s27= 460.52, p < .000).
Each of the manipulation checks indicated that the four
extrinsic-cue experimental treatments were perceived by
the respondents as intended. For the calculators, Hewlett
Packard received more favorable brand-image ratings than
Royal; Campus Bookstore received more favorable storeimage ratings than K-Mart; Japan received more favorable
country-image ratings than Mexico; and $50, $32, and $15
were considered by the respondents to represent high, medium, and low prices, respectively. For the wristwatches,
Seiko received more favorable brand-image ratings than
Precis; Belden Jewelers received more favorable storeimage ratings than K-Mart; Switzerland received more favorable country-image ratings than Mexico; and $300,
$175, and $50 were considered by the respondents to be
high, medium, and low prices, respectively.

SPRING 2000

TABLE 1
Factor Analysis Results
Watch Data
Item

Factor Factor Factor Factor Factor Factor

1
2
3
1
2
3

Quality perception
Reliability
.85
Workmanship
.86
Quality
.90
Dependability
.90
Durability
.74
Value perception
Value for money
.42
Economical
.09
A good buy
.32
An acceptable price ,22
A bargain
.03
Sacrifice perception
. . . unable to purchase some other
products I would
like to purchase
now.
-. 11
. . . reduce the
amount of money
I spend on other
things for a while. -. 11
Eigenvalue
Percentage of
variance
explained

Calculator Data

.18
.12
.14
.19
.25

-.10
-.09
-.06
-.03
-.08

.91
.90
.93
.94
.85

.12
.18
.16
.13
.22

-.01
.02
.03
.02
.04

.69
.87
,86
.85
.79

.05
.18
.09
.19
.16

.39
.07
,33
,13
.06

.77
.88
.85
.91
.86

.06
-.24
-.I0
-.17
-.19

.18

.86

.04

-.21

-.91

.24

.87

.04

-.25

.90

5.57

3.06

1.17

5.84

3.09

1.19

46.40

25.50

9.80 48.60 25.80

9.90

Preliminary assessment of the measures. Following the

procedures used by Dodds et al. (1991), we assessed the
measures of perceived quality, value, and sacrifice via factor analysis by using varimax rotation, Cronbach's alpha,
and correlation analysis. The results of the factor analyses,
which are reported in Table 1, indicate three factors that
are consistent with the intended measures and that account
for more than 80 percent of the variance in the two sets of
data. 2 Coefficients alpha for the quality, sacrifice, and
value measures are .94, .89, and .93, respectively, for the
wristwatch data and .96, .85, and .94, respectively, for the
calculator data. Average interitem correlations for the
quality, sacrifice, and value measures are .75, .81, and .72,
respectively, for the wristwatch data and .81, .75, and .74,
respectively, for the calculator data.

Preliminary MANOVA Tests

Before examining specific hypothesized linkages, multivariate analysis of variance (MANOVA) was used to test
the hypothesized linkages between the set of treatment
variables and the set of endogenous variables. The results

Teas, Agarwal / EFFECTS OF EXTRINSIC CUES 283

TABLE 2
Analysis of Variance and Covariance (wristwatch data)
MANOVA
Treatment

Wilks

Brand (B)
Country (C)
Store (S)
Price (P)
Bx C
SxC
P C
Bx S
Bx P
Sx P

.933
.898
.928
.637
.989
.984
.988
.977
.980
.997

df
3; 512
3; 512
3; 512
6; 1024
3; 512
3; 512
6; 1024
3; 512
6; 1024
6; 1024

ANOVA

F Value

Quality
F Value

12.29"**
19.43"**
13.19"**
43.22***
1.85
2.81'
1.01
4.07**
1.74
.22

21.09"**
56.56***
20.57***
5.57**
1.04
.69
.17
5.70*
1.61
.01

Sacrifice
F Value

2.33
.04
.43
43.03***
.65
1.65
1.57
2.95
2.43
.40

ANCOVA
Value
F Value

26.53***
18.58"**
35.12'**
84.18"**
.98
7.76**
1.66
8.35**
2.00
.32

Covariates
Quality
Sacrifice
Mean square explained
Mean square residual
F

13.28
1.52
8.74***

8.69
1.17
7.43

29.28
1.50
19.52

Value
F Valuea

Value
F Valueb

Value
F Valuec

14.32"**
.64
16.87"**
85.19"**
3.63
5.78*
1.27
2.42
1.06
.27

11.63"**
1.11
18.37"**
125.54"**
2.55
7.29**
1.59
4.14"
.91
.42

30.20***
18.85"**
34.77***
56.54***
1.32
6.70**
1.45
6.83**
2.08
.23

148.27"**
37.58***

123.80"**

37.66
1.13
33.33

17.05"**
37.33
1.21
30.85

28.98
1.46
19.85

NOTE: MANOVA = multivariate analysis of variance; ANOVA= analysis of variance; ANCOVA= analysis of covariance.
a. Covariates = quality and sacrifice.
b. Covariate = quality.
c. Covariatc = sacrifice.
*Significant at .05. **Significant at .01. ***Significantat .001.
of the analyses of the wristwatch data, which are reported
in Table 2, indicate that each of the extrinsic-cue variables
is significantly related to the set of dependent variables.
These results indicate that testing specific hypothesized
linkages specified in Figure 1 is justified. In addition, the
store-by-country (S x C) and the brand-by-store (B x S)
interactions are significant. The results of the analyses of
the calculator data, which are reported in Table 3, indicate
that three of the four extrinsic cues are significantly related
to the set of endogenous variables. These results indicate
that testing specific hypothesized linkages specified in
Figure 1 is justified. However, none of the two-way interaction terms were significant at the .05 level.
The univariate homogeneity of variance across the 24
groups was assessed via the Bartlett-Box test. The results,
based on the wristwatch data, were nonsignificant for
quality (p = .488) and value (p = .116) but significant for
sacrifice (p = .002). The results, based on the calculator
data, were nonsignificant for quality (p = .206) and sacrifice (p = .639) but significant for value (p = .024). Multivariate tests of homogeneity of covariance matrices using
the wristwatch data and calculator data were statistically
significant (Box's M = 195.28, p = .01) and statistically
insignificant (Box's M = 173.85, p = .06), respectively. It is
important to note, however, that violation of the equality of
variance-covariance matrices assumption has minimal
impact if the groups are of approximately equal size (Hair,
Anderson, Tatham, and Black 1995:275).

Hypotheses Tests Involving the

Prediction of Perceived Quality
and Perceived Sacrifice
The hypotheses focusing on the prediction of perceived
quality and perceived sacrifice were tested via ANOVA
procedures.
Price. T h e results for the wristwatch experiment (Table 2)
indicate that the price-level manipulation_positively affected perceived quality (Xt, p~ = 4.47 vs. X . ~ , m ~ = 4.72
vs. Xh~r~ = 4.95; Fz52s= 5 . 5 7 , p < .01) and perceived sacrifice (X~o,p~ = 3.35 vs. Xm~i,~,~ = 4.18 vs. X ~ r ~ = 4.36;
/72. 52s = 43.03, p < .001). Similarly, the results for the experiment involving calculators (Table 3) indicate that the
price-level manipulation p__ositively affected p.e.rceived
quality (Xj, r ~ = 4.75 vs. Xm~i r ~ = 4.98 VS. ~ ~.~ =
5.10; F2.52__9= 3.24, p < .05) and_perceived sacrifice (Xk,,p,~ =
2.21 VS. X~d~mp,~ = 3.09 VS. Xh~jh~ = 3.58; F2.s29= 74.55,
p < .001). Thus, the relationships between price and perceived quality and sacrifice proposed in Hypothesis 1a and
Hypothesis lb are supported in both experiments.
B r a n d . T h e results for the wristwatch experiment (Table 2) indicate a significant effect of brand name on perceived quality, F(1, 528) = 21.09, p < .001. Since the
brand-by-store interaction 3 is statistically significant, the
brand effect is interpreted within store levels. The brand
effect is significant within the low-store condition but is

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JOURNALOF THE ACADEMYOF MARKETINGSCIENCE

SPRING 2000

TABLE 3
Analysis of Variance and Covariance (calculator data)
MANOVA
Treatment

Wilks

Brand (B)
Country (C)
Store (S)
Price (P)
Bx C
Sx C
Px C
BxS
Bx P
SxP

.897
.865
.996
.627
.991
.996
.977
.996
.984
.992

df
3; 513
3:513
3; 513
6; 1026
3; 513
3; 513
6; 1026
3; 513
6; 1026
6; 1026

ANOVA

F Value

Quality
F Value

19.74'**
26.76***
.77***
45.04***
1.54
.73
2.03
.65
1.36
.72

59.36***
76.96***
.43
3.24*
2.39
.05
1.94
1.60
1.08
.60

Sacrifice
F Value

.10
1.40
1.55
74.55***
1.70
.32
1.85
.28
2.88
.92

ANCOVA
Value
F Value

12.49'**
18.80"**
.19
74.34***
2.78
1.48
2.88
.15
.31
1.25

Covariates
Quality
Sacrifice
Mean square explained
Mean square residual
F

18.23
1.64
11.12

13.66
1.16
11.78

23.90
1.73
13.82

Value
F Valuea

Value
F Valueb

Value
F Valuec

.07
.93
.26
56.40***
.72
1.82
2.35
.00
.12
.66

.06
.36
.63
106.40'**
1.23
2.10
3.22*
.03
.44
.99

12.63"**
22.29***
.03
36.10'**
1.97
1.24
2.01
.27
.06
.93

115.76"**
28.98***

115.22'**
--

33.57
1.35
24.87

33.21
1.42
23.39

28.37***
25.42
1.65
15.41

NOTE: MANOVA= multivariate analysis of variance; ANOVA= analysis of variance; ANCOVA= analysis of covariance.
a. Covariates = quality and sacrifice.
b. Covariate = quality.
c. Covariate = sacrifice.
*Significant at .05. **Significantat .01. ***Significantat .001.

insignificant within the high-store condition (high store:

X~ow~,d._y3.75 vs. Xh~ ~,~d= 3.98; F~.~ = 2.40,p <. 123; low
store: X~o,b,~,d= 2.99 VS. X~ghb~,~d= 3.74; F~.563= 20.38, p <
.000). These findings indicate that the relationship between brand name and perceived quality hypothesized in
Hypothesis 2 is supported under the low-store condition
but is not supported under the high-store condition. The resuits for the calculator experiment (Table 3) indicate a significant effect of brand name on perceived quality (X~o~,,~ =
4.48 vs. X~h b,~d= 5.39; F1.559 -- 59.36, p < .001); therefore,
Hypothesis 2 is supported. Note that the brand name treatment has no significant effect on perceived sacrifice in either experiment as expected.
Store. The results for the wristwatch experiment (Table 2)
indicate a significant effect of store name on perceived
quality, F(1,528) = 20.57,p < .001. The store treatment effects were interpreted within brand treatment levels
(brand-by-store interaction is significant). The store treatment effect is significant within the low-brand condition
but is insignificant in the high-brand condition (high
brand: Xio,,to~ = 3.74 vs. Xhi~ ~ = 3.98; Fi. 5~ = 3.37, p <
.125; low brand: Xjow~ = 2.99 vs. Xh~gh~o~= 3.75; F~. 561=
21.04, p < .000). 4Therefore, Hypothesis 3 is supported under the low-brand condition but is not supported under the
high-brand condition. However, the results for the calcula-

tor experiment (Table 3) indicate that the store name treatment has no significant effect on consumers' perception of
quality; thus, Hypothesis 3 is not supported in the experiment involving calculators. Note that the store name treatment has no significant effect on perceived sacrifice in
either experiment as expected.
Country o f origin. The results for the experiment involving wristwatches (Table 2) indicateasignificant effect
o f country name on perceived quality (X,...... ~ = 4.31 vs.
Xh~h~n~ = 5.13 ; F1.558= 56.5 6, p <.001). In addition, the resuits for the experiment involving calculators (Table 3) indicate a significant e f f e c t o f country name on perceived
quality (X,o~m~ = 4.46 VS. X~'~con,~r= 5.41; F1.559= 76.96, p <
.001). Thus, Hypothesis 6 is supported in both experiments. Note that the country name treatment has no significant effect on perceived sacrifice in either experiment
as expected.
Moderating effects o f country o f origin. The results for
the experiments involving wristwatches (reported in Table 2) and calculators (reported in Table 3) indicate that
none of the second-order interaction terms involving
country of origin have a significant effect on perceived
quality. Thus, the results of both experiments do not support Hypotheses 7a-c.

Teas, Agarwal/ EFFECTSOF EXTRINSICCUES 285

Hypotheses Teats Involving the

Prediction of Perceived Value
The hypotheses involving the prediction of perceived
value, and the associated mediation effects, were tested via
ANOVA and analysis of covariance (ANCOVA) following
Baker, Grewal, and Parasuraman (1994) and Grewal et al.
(1998). Three conditions must be met to establish mediation: (1) the independent variables affect the mediator; (2)
the independent variables affect the dependent variable;
and (3) when the independent variables and the mediators
are regressed on the dependent variable, the mediators are
significant and the effects of the independent variables are
reduced (Grewal et al. 1998).
The ANOVA results presented in the previous section
satisfy the first condition, except for the insignificant store
effect in the calculator experiment. The second condition
was tested via ANOVA in which the dependent variable is
perceived value and the independent variables are the four
extrinsic cues. The results involving wristwatches (Table 2)
indicate that each of the extrinsic cues is significant (p <
.001). In addition, two interaction effects (S x C and B x S)
are significant (p < .01). The results of the calculator
experiment (Table 3) indicate that three of the four extrinsic cues--brand, country, and price--are significant. With
the exception of the insignificant store effect in the calculator experiment, these results satisfy the second condition
needed to establish a mediation effect.
ANCOVA was used to assess the third condition for
mediation. The results of the wristwatch experiment
(Table 2), which indicate that perceived quality and sacrifice are significant (F = 148.27, p < .001 and F = 37.58, p <
.001, respectively), support Hypotheses 4 and 5. In addition, price, brand, and store are significant (p < .001) and
the brand-by-store interaction is significant (p < .05). The
results of the calculator experiment (Table 3), which indicate that perceived quality and sacrifice are significant (F =
115.76, p < .001 and F = 28.98, p < .001, respectively),
support Hypotheses 4 and 5. Furthermore, price is a significant predictor in the estimate. Since the F values associated with the direct effects of the extrinsic cues on perceived value are generally smaller in the presence of the
covariates than in their absence, these findings largely satisfy the third condition for mediation.

DISCUSSION
Price as a Quality and Sacrifice Cue
Similar to the empirical results reported by Dodds et al.
(1991), the findings support the hypothesized positive
linkage between price and perceived quality. Also, the
findings extend the Dodds et al. (1991) empirical results
by testing the price-perceived sacrifice linkage hypothe-

sized but not empirically tested by Dodds et al. (1991 ) and

by demonstrating that price continues to be a significant
quality cue in the presence of other extrinsic quality cues,
including country of origin.

Brand, Store, and Country

of Origin as Quality Cues
Similar to the results reported by Dodds et al. (1991),
the findings indicate that the brand treatment is a statistically significant quality cue in the presence of a price cue
and that this effect continues to be significant in the presence of a store quality cue. In addition, the results indicate
that the effect of brand treatment is significant in the presence of the country-of-origin cue. This suggests that, when
the other quality cues are controlled or held constant,
brand can affect consumers' perceptions of product quality. It should be noted, however, that the brand treatment
administered in this study did not significantly affect
wristwatch quality perceptions in the context of a high
store image. Similarly, the findings involving wristwatches indicate the retail name treatment is a significant
quality cue in the context of a low brand image but is insignificant in the context of a high brand image. In general,
the pattern of results concerning the store-by-brand interaction effect indicates that the effect of one cue on wristwatch quality perceptions is stronger when the other cue is
weak, which suggests perceived quality and value can be
enhanced by improving brand image o r by distributing
through high-image stores. The findings indicate the retail
store is not a significant quality cue in the calculator
experiment.
The country-of-origin cue was found to have a significant main effect on the perceived quality for both of the
products examined. However, the findings do not support
the hypothesized effects of country of origin as a moderator variable. A possible explanation for this finding is that
the brands and stores used in this study have somewhat
unambiguous images; consequently, the brand and store
main effects are stable across situation (e.g., country-oforigin condition). The respondents may have perceived
that wristwatches and calculators are routinely manufactured in many different countries using standardized
manufacturing and quality control procedures. Moreover,
with the trend toward increased globalization of business,
Seiko watches made in Mexico may be perceived by consumers to be made by Seiko, or at least under the control or
supervision of Seiko, rather than by a Mexican manufacturer without the control or supervision of Seiko. Consequently, the brand effect on perceived quality is not moderated by country of origin. Furthermore, if these kinds of
products are perceived by consumers to be routinely
manufactured in different countries, the effects of price
and store as quality cues may be unaffected by country of
origin as suggested by our findings.

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JOURNALOF THE ACADEMYOF MARKETINGSCIENCE

Perceived Quality and Sacrifice

as Predictors of Perceived Value
The results support the hypothesized linkages between
the perceived quality and perceived value and between
perceived sacrifice and perceived value. These findings
extend the Dodds et al. (1991) findings in that perceived
sacrifice is found to be a significant predictor of perceived
value.
The results indicate that the effects of the extrinsic
product cues--price, brand, store, and country of origin---on perceived value are mediated by perceived quality and sacrifice. First, the findings of the wristwatch
experiment indicate that the extrinsic cues have significant
direct linkages with perceived quality, which, in turn, has a
significant positive linkage with perceived value. However, the findings indicate that three extrinsic cues-brand, store, and price--have significant direct linkages
with perceived value that are not completely mediated by
perceived quality and/or perceived sacrifice. Second, similar to the findings of the wristwatch experiment, the findings of the calculator experiment indicate a direct linkage
between price and perceived value in addition to indirect
linkages mediated by perceived quality and sacrifice.
These findings suggest the price-value relationship is
complex--price has positive linkages with perceived sacrifice and perceived quality, which, in turn, have negative
and positive relationships, respectively, with perceived
value. The ultimate effect of a price decision in a particular
situation is affected by the relative strengths of these sets
of linkages.

Effect Size
Table 4 contains a comparison of effect sizes reported
by Dodds et al. (1991) with effect sizes estimated in this
study.
Price. As indicated in Table 4, the effect size of price on
perceived quality is smaller in the current study under the
four-cue condition (rl 2= .015) than the effect size resulting
from the Dodds et al. (1991) three-cue condition (rl 2 =
.030). This supports the Dodds et al. (1991) findings that
the effect of price on perceived quality tends to be reduced
in the presence of additional extrinsic cues. However, a
comparison of our findings with Dodds et al. (1991) findings does not indicate that the effect of price on perceived
value is smaller under the four-cue condition than it is under the three-cue condition.
Brand. The effect sizes of brand on both perceived
quality (rl 2 = .065) and perceived value (rl 2 = .025) are
smaller in the current study under the four-cue condition
than the effect sizes resulting from the Dodds et al. (1991)
three-cue condition.

SPRING2000

TABLE 4
Average Main Effects of Independent Variables:
Dodds, Monroe, and Grewal (1991) Compared
With the Current Study
Combined Effect Size (1]2)
Independent
Perceived Perceived Perceived
Variable TreatmentConditiona Quality Sacrifice Value

Price

Withbrandand store
(DMG91)
Price
Withbrand,store,
and country(Coo)
Brand
Withpriceand store
(DMG91)
Brand
Withprice, store,and
country(Coo)
Store
Withprice and brand
(DMG91)
Store
Withprice,brand,and
country(C~176
Country Withprice,brand, and
store (C~176

.030

NA

.195

.015

.180

.210

.295

NAt

.090

.065

.005

.025

.015

NA

.010

.020

.000

.020

.105

.000

.030

NOTE:NA = not applicable.

a. DMG9~designatesfindingsfromDodds,Monroe,and Grewal(1991);
C~ designatesfindingsfromthe currentstudy.

Store. The effect sizes of store on perceived quality

(112= .020) and perceived value (rl 2= .020) are not smaller
in the current study under the four-cue condition than the
effect sizes resulting from the Dodds et al. (1991) threecue condition. It is important to note, however, that the effects of store in general are small.
Country. The estimated effect sizes of the country-oforigin treatment on perceived quality under multiple cue
conditions are larger than the effect sizes of price and store
reported by Dodds et al. (1991). This finding suggests that
country of origin is a potentially important extrinsic quality cue. However, our findings indicate that under multiple
extrinsic-cue conditions, the effect size of country of origin is small when compared with the effect size of price on
perceived value reported by Dodds et al. (1991) and found
in this study.

Product Differences
The results suggest that there may be product-related
variables that moderate the effects of the extrinsic quality
and sacrifice cues. In the wristwatch experiment, the store
treatment significantly affected perceived value both
directly and indirectly via the perceived quality mediator
variable. On the other hand, in the calculator experiment,
the store treatment had no significant direct or indirect
linkages with perceived value. One explanation for these
results is that, when compared to wristwatches, calculators
may be perceived by consumers to be more widely

Teas, Agarwal / Eb'FEL-'TSOF EXTRINSIC CUES

available across retail stores. Consequently, store name

may not be an important factor affecting the perceived
quality of calculators. However, the selection of wristwatches in a particular retail store is usually limited. Consequently, the retail stores through which the wristwatch is
marketed may be a factor that differentiates wristwatches.
The result may be that the retail store affects perceived
value of wristwatches through more complex processes.
Examples of these processes could be the effect of the
retail store on the perceived risk and the degree to which
the product is congruent with self-image.
There may be product differences that explain the brand
effect differences found in the two experiments. In the case
of calculators, brand name may function primarily as a
perceived quality cue. However, in the case of wristwatches, brand name may be a more complex cue. For
example, because of the personal-image implications of a
wristwatch, the image associated with a brand name may
be more likely to enhance the benefits associated with a
wristwatch than the benefits associated with a calculator.
Price differences across wristwatch brands may be
larger than price differences across the types of calculators
examined in this study. This may have caused the respondents to associate different acquisition and transaction values with the wristwatch than they associated with the calculator. Grewal et al. (1998) tested models involving the
effects of price comparisons on consumers' value perceptions and behavioral intentions. In contrast to our conceptualization of value, Grewal et al. (1998) specified perceived value in terms of two separate dimensions-acquisition value and transaction value. Acquisition value
is defined as "the buyers' net gain (or tradeoff) from
acquiring the product or service . . . which takes into
account both price and quality" (Grewal et al. 1998).
Transaction value is defined as "the perception of psychological satisfaction or pleasure obtained from taking
advantage of the financial terms of a price deal" (Grewal
et al. 1998). To the degree to which price differences
across wristwatches (calculators) are large (small),
acquisition value and transaction value may be more (less)
important mediator variables in the evaluation of wristwatches (calculators).

Implications for Future Research

The results support the findings reported by Dodds et
al. (1991) that indicate strong associations between extrinsic quality cues and perceived quality. Although the Dodds
et al. (1991) findings suggested that the role of price as a
quality cue may be diminished as additional cues are
added, our findings indicate that the respondents continued to rely on price as a quality cue in the presence of other
extrinsic cues. In addition, the results extend the Dodds et
al. (1991) findings by providing support for their hypothesized positive linkage between price and perceived

287

sacrifice and by indicating that both perceived quality and

perceived sacrifice mediate the relationships between the
extrinsic cues examined and perceived value.
The concept of perceived sacrifice was operationalized
as a measure of monetary sacrifice. However, according to
Zeithaml (1988), consumers may also incur nonmonetary
sacrifices such as time, effort, and search costs. If consumers assemble durable goods, prepare packaged foods, or
travel large distances to acquire products, they incur additional costs that might influence the assessment of product
value. Future research should incorporate these nonmonetary sacrifices in the model of perceived value by developing a formalized definition of perceived sacrifice and by
empirically testing the model using measures based on the
formalized definition. 5
The fact that the linkages between the extrinsic cues
and perceived value may not be completely mediated by
perceived quality and sacrifice suggests that there may be
additional variables that mediate the linkages. One variable that could be examined in future research is perceived
risk (Shimp and Bearden 1982). Wood and Scbeer (1996),
for example, suggest that consumers' evaluations of a
"deal" may be a function of perceived benefits, costs, and
risk. A possible explanation for the differences in the
results of the two experiments is that, for the students participating in the study, the effects of risk perceptions on
perceived value may be stronger for watches than for
calculators.
Given the nonsignificant findings concerning the
country-of-origin moderator variable effects, a question
for future research involves the degree to which the impact
of country of origin as a moderator of brand, store, and/or
price quality cue effects may be decreasing over time.
With the increasing globalization of business and the tendency of manufacturers to locate production facilities in
different countries to produce branded products, consumers may be increasingly likely to assume that the quality of
an established branded product will be about the same
regardless of production location. 6 On the other hand,
some products may be less likely to be routinely or effectively manufactured in different countries. For example,
the manufacturing of some complex, high-technology
products may be perceived by consumers to involve manufacturing processes that are difficult to manage or that
require a highly educated workforce. Consequently, the
effect of a strong brand name may be diminished if the
product is manufactured in a country characterized by
questionable manufacturing or workforce sophistication.
The possibility that country of origin effects are product specific has been examined by Kaynak and Cavusgil
(1983). In a study conducted in Canada, they found that
consumers ranked countries differently for different products. Japan, for instance, ranks high in electronic products
but low in food products. France, on the other hand, ranks
high on fashion merchandise but lower on other product

288

JOURNALOF THE ACADEMYOF MARKETINGSCIENCE

classes that were examined. Even in today's environment

where technologies and finns freely migrate across borders, consumers sometimes assess higher quality to a
product when they think that the country in which it is
made is capable o f producing a high-quality product
(Agarwal and Sikri 1996; C h a t 1993).
Grewal et al. (1998) specify and test models involving
the effects of price comparisons on consumers' value perceptions and behavioral intentions. In contrast to our conceptualization of value, Grewal et al. (1998) specified perceived value in terms of acquisition value and transaction
value. An issue that should be examined in future research
is the effects of quality and value cues on acquisition value
and transaction value. Grewal et al. (1998) argue that
acquisition value is related to both price and quality. Quality cues, therefore, can be expected to affect acquisition
value via their effect on the perceived quality. Furthermore, Grewal et al. (1998) argue that transaction value
involves satisfaction derived from the price deal and that
transaction value is a predictor of acquisition value. This
causal linkage between transaction value and acquisition
value suggests complex price-perceived value linkages.
First, the results of our study suggest price cues may positively a f f e c t a c q u i s i t i o n value i n d i r e c t l y via the
price---~perceived quality--~acquisition value route. Second, the Grewal et al. (1998) model (Figure 2, p. 49) suggests that the price cue may negatively affect acquisition
value via a negative direct effect on transaction value,
which, in turn, is positively related to acquisition value.
Third, the price cue may positively affect acquisition value
via a positive linkage with internal reference price, which,
in turn, Grewal et al. (1998) argue, has a positive linkage
with transaction value.

Limitations
Important limitations of this study involve the mediation analyses. The findings involving mediation are
exploratory and inconclusive and, therefore, should be
interpreted with caution. First, the model tested in this
study is incomplete and, therefore, underspecified (see
Zeitham11988 for an alternative model specification). The
findings of incomplete mediation, however, are consistent
with the Zeithaml (1988) model. Second, the constructs,
especially the perceived sacrifice construct, are not fully
developed conceptually. Perceived sacrifice is conceptualized to be a unidimensional construct measured via two
items. Research by Zeithaml (1988) indicates that perceived sacrifice may be multidimensional.
These measurement limitations represent a possible
explanation for our findings suggesting incomplete
mediation. Third, the use of summed scales for covariates
that are measured with error can lead to incorrect inferences with respect to the effect of a manipulation (Huitema
1980).

SPRING 2000

ACKNOWLEDGMENTS
The authors thank the three anonymous reviewers and
A. Parasuraman, the editor, for their numerous helpful
comments on previous drafts of this article. Both authors
contributed equally to this article.

NOTES
1. One respondent did not complete the questionnaire involving
wristwatches. As a result, the sample size for the wristwatch experiment
was 529.
2. Factor analysis of the wristwatch data indicated that the item
"value for the money,"althoughloadinghigh (.69) on the intended factor,
also loaded somewhathigh on another factor (.42). Thus, the analysis reported in the article was repeated by using a perceived-value summated
scale with this item omitted. This modificationdid not alter the findings
of the study.
3. We specify specifictwo-way interactions in our hypotheses;thus,
we focused our tests on these a priori specified interaction effects. We
note, however,that the experimental design allowedthe estimation of all
possible interaction effects and that the four-wayinteractionwas statistically significant. On the basis of Cohen and Cohen (1983), we do not attempt to interpret this four-wayinteraction--"Interaction IVs, like any
other kind, should only he included if there is serious reason to believe
that they ate real. Otherwise, the value of the conclusions from the research investigation.., is jeopardized" (Cohen and Cohen 1983:348).
4. As recommendedby a reviewer,two additional analysisof covariante (ANCOVA)tests were performed--one entering quality only as a
covariate and one entering sacrifice only as a covariate. The results involvingwristwatches, which are presented in Table2, indicate that, with
the exception of a significantbrand-by-storeinteraction (R < .05), entering only perceived quality as a covariateproduced results similar to the
two-covariatemodel. The results indicate entering only sacrifice as a covariate resulted in the countrymain effect and the brand-by-storeinteraction becoming significant (p < .01). The results involving calculators,
which are presented in Table 3, indicate that, with the exception of a significant price-by-countryinteraction (p < .05), entering only perceived
qualityas a covariateproducedresults similarto the two-covariatemodel.
However,the results indicatethat entering only sacrifice as a covafiateresuited in two additional significant main effects (/7 < .001)--brand (B)
and country(C). In general, these findings suggestthat perceivedquality
is a more important mediator variable than perceived sacrifice.
5. Researchinvolvingthe linkages between exogenouscues, quality,
sacrifice, and value is sufficientlymature to benefit from attempts to formalizethe definitions of the variables (see Teas and Palan 1997for procedures and examples of the theory formalizationprocess).
6. A recent editorial in The EconomistCMercedes Goes to Motown"
1998) supports this proposition in a discussion of the Daimler/Chrysler
merger by suggesting the following: "At a time when cars and components all resemble one another, a national identity has become a vital part
of the brand. Those who buy Mercedes are baying German engineering.., regardless of where the car is built" (p. 15).

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ABOUT THE AUTHORS

R. Kenneth Teas is a distinguished professor of business in the
Department of Marketing, College of Business, Iowa State University. He received his Ph.D. from the University of Oklahoma. His areas of research include consumer behavior and
decision processes, marketing research methods, services marketing, and sales force management. His articles have been published in numerous journals, including the Journal o f Marketing,
the Journal of Marketing Research, the Journal of Consumer Research, the Journal of the Academy of Marketing Science, the

American Journal of Agricultural Economics, the Journal o f Re-

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JOURNALOF THE ACADEMYOF MARKETINGSCIENCE

tailing, the Journal of Personal Selling and Sales Management,

SPRING 2000

ing Management.

search include multinational marketing strategies, modes of foreign

market entry, and sales force management. His articles have been
published in the Journal of ConsumerResearch, the Journal of

Sanjeev Agarwal is an associate professor in the Department of

Marketing, College of Business, Iowa State University. He received his Ph.D. from The Ohio State University. His areas of re-

International Marketing, International Marketing Review, Industrial Marketing Management, the Journal of International
Business Studies, the Journal of the Academy of Marketing Science, and the Journalof PersonalSelling and SalesManagement.

the Journal of Occupational Psychology, and Industrial Market-