The Effect of Brand Image and Product Knowledge on

Purchase Intention Moderated by Price Discount

Nan-Hong Lin, Assistant Professor, Graduate School of Business Management,
Tatung University, Taiwan
Bih-Shya Lin, EMBA, Graduate School of Business Management, Tatung University, Taiwan

ABSTRACT

Most of previous studies either take product knowledge as a moderator, or involve varying degree of
product knowledge on the consumers’ perceived evaluation as an influential factor. It is rare to come
across research that discusses how both brand image and product knowledge affect purchase intention.
Thus, this research has chosen both an intrinsic and an extrinsic product cue─brand image and product
knowledge─as independent variables while using price discount as a moderator and conducted research
on purchase intention.
Keywords: Brand Image, Product Knowledge, Purchase Intention, Price Discount

INTRODUCTION

Brand management has become increasingly important, given the rapid change of the global market
and elevation of competition. Effective brand management creates clear product differentiation, consumer
preference and loyalty, resulting in broadening market share. Aaker (1991) believes brand establishment
and management should be not only one of the operating focuses for major industries but viewed as a
source of competitiveness. For consumers, a brand provides a certain degree of product guarantee.
Shopping around can be time- and energy-consuming, and consumers do not always possess enough
product knowledge to ensure the best buy. Under such circumstances, consumers usually go by
well-known brands, which may result in higher costs but requires less research efforts. Thus, brand image
not only affects how consumers view a product but has the benefit of lowering purchase risks (Loudon
and Bitta, 1988).
Consumers usually go through confirmation of need, research prior to purchase, and product
evaluation to make a purchase decision, and the last is a particularly important factor. Due to the fact that
there are always risks within any purchase decision, consumers rely on product information or cues to
lower the risks. Olson and Jacoby (1972) categorize product characteristics into intrinsic and extrinsic
product cues. The former is related to the composition of a product, including product knowledge like
design and features. The latter is product-related components yet do not belong to the product itself, like
price and brand. Zeithaml (1988) agree that intrinsic (product knowledge) and extrinsic (brand image)
cues are the most important factors consumers consider when evaluating a product before purchasing.
Since intrinsic product cues, e.g. function or quality, are often not obtainable right away, extrinsic product
cues like brand image then become the sole premises consumers rely on.
Previous studies mostly focused on product origin as a single cue to consumer behavior, which may
be effective (Lim, Darley, and Summers, 1994) but may not truly reflect reality. Some researches reveal
that most researchers either take product knowledge as a moderating variable, or involve varying degree

Journal of International Management Studies * August 2007 121

product knowledge on the consumers’ perceived evaluation as an influencing factor. It is rare to come
across research that discusses how both brand image and product knowledge affect purchase intention.
Thus, we have chosen both intrinsic and extrinsic product cues─brand image and product knowledge─as
independent variables while using price discount as a moderator, and conducted research on the effect of
brand image and product knowledge on purchase intention moderated by price discount. The purposes of
this research are as follows:1. Discuss the effect of brand image on purchase intention. 2. Discuss the
effect of product knowledge on purchase intention. 3. Discuss whether price discount could moderate the
effect of brand image on purchase intention. 4. Discuss whether price discount could moderate the effect
of product knowledge on purchase intention.

LITERATURE REVIEW

Brand Image
How much is a brand worth? How does a brand represent the product? Kotler (2000) contends that
brand is a name, term, symbol, design or all the above, and is used to distinguish one’s products and
services from competitors. For example, Nike adopts a check mark as its brand image, which creates a
positive effect indicating approval. Keller (1993) defines a brand image as an association or perception
consumers make based on their memory toward a product. Thus, brand image does not exist in the
technology, features or the actual product itself, but is something brought out by promotions,
advertisements, or users.
Through brand image, consumers are able to recognize a product, evaluate the quality, lower
purchase risks, and obtain certain experience and satisfaction out of product differentiation. When it
comes to experiential product evaluation, a positive brand image may make up for an inferior image of
the origin country and raise the possibility of the product being selected (Thakor and Katsanis, 1997).
According to Grewal, Krishnan, Baker, and Borin (1998), the better a brand image is, the more
recognition consumers give to its product quality.
Consumers are usually limited in regards to the amount of time and product knowledge to make an
informed purchase decision when facing similar products to choose from. As a result, brand image is
often used as an extrinsic cue to make a purchase decision (Richardson, Dick and Jain, 1994). Akaah and
Korgaonkar (1988) conclude that consumers are more likely to purchase well-known brand products with
positive brand image as a way to lower purchase risks. This argument is also supported by Rao and
Monroe (1988) that a brand with a more positive image does have the effect of lowering consumers’
product perception risks and increasing positive feedback from consumers. Therefore, consumers
generally believe they can make a satisfying purchase by choosing well-known brands and also lower any
purchase risks by doing so.

Product Knowledge
When making a purchase, consumers often rely on personal memory or experience to make a
decision. Beatty and Smith (1987) define product knowledge as a perception consumers have towards
certain products, including previous experience of using the product. Brucks (1985) comes up with three
ways to measure product knowledge based on previous studies: 1) Subjective Knowledge or Perceived
Knowledge: the degree of consumers’ understanding of the product, the so-called self-assessed
knowledge (Park et al., 1992). 2) Objective knowledge: the degree and type of product knowledge

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actually stored in consumers’ memory, the so-called actual knowledge (Park et al. 1992). 3)
Experience-Based Knowledge: previous experience of purchasing or using the product.
Consumers develop various product knowledge structure based on various degrees of familiarity
toward a product (Park and Lessig, 1981). The degree of product knowledge also affects consumers’
purchase intention. In general, consumers with higher product knowledge have better memory,
recognition, analysis and logic abilities than those with lower product knowledge. As a result, those who
think they have higher product knowledge tend to rely on intrinsic cues instead of stereotype to make a
judgment on product quality because they are aware of the importance of product information. On the
other hand, those with lower product knowledge are inclined to use extrinsic cues, like price or brand, to
evaluate a produce since they do not know how to judge a product. To sum up, product knowledge indeed
affects what kind of cues consumers use when making a purchase decision.
Depending on what kind of product knowledge they possess, consumers can be divided into experts
or novices, and each has different ways of receiving or processing information. Experts do not need to do
much product research since they already possess deep understanding on various brands and product
knowledge. They can process information effectively and distinguish various brands and determine their
qualities (Anderson, Engledow, and Becker, 1980). Novices, however, tend to seek advice from others
about product knowledge due to a lack of presorted knowledge (Brucks, 1985).

Price Discount
To counter fierce competition, businesses often use promotions to stimulate purchase intention and
increase sales. Kotler (2000) considers that promotion is a combination of various incentives to stimulate
consumers or retailers to stir up immediate purchasing reaction toward a product or service within a short
period of time. McCarthy and Perreault (1984) think promotion is different from advertisement or public
report and eventually can stir up interest or intention among (potential) buyers to make a purchase. Thus,
promotion aims to create product exposure, stimulate desires, maintain consumer loyalty and raise sales
volume (Pride and Ferrell, 2000).
Consumers respond to the incentive of saving when they see products are being sold at a lower price,
and increase their purchase intention. Since consumers usually make an immediate purchase, when being
seduced by economic incentives, the greater the promotion is, the more response it generates. Dodson,
Tybout, and Sternthal (1978) have proven that when facing various brand products with similar functions
and qualities, promotional items usually end up selling better and even attract loyal consumers of other
brands. This indicates promotion has great incentive values. When consumers are presented with great
incentives, they are likely to choose promotional items.
Price discount may attract consumers to try out different brands; however, after the promotion is over
price discount may also lower the purchase intention as a result of associating price discount with lower
quality. To sum up, price discounts may attract consumers with economic incentives, but may expose
them to inferior products with lower quality, which in the end will write off the benefit of the sales
increase (Raghubir and Corfman, 1999).

Purchase Intention
Prior to purchasing, consumers begin by collecting product information based on personal experience
and external environment. When the amount of information reaches a certain level, consumers start the
assessment and evaluation process, and make a purchase decision after comparison and judgment.

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Therefore, purchase intention is often used to analyze consumer behavior in related studies. The so-called
purchase intention means a subjective inclination consumers have towards a certain product, and has been
proven to be a key factor to predict consumer behavior (Fishbein and Ajzen, 1975).
The EKB model, developed by Engel, Kollat and Blackwell (1984), is a process used to evaluate
consumers’ decision making. The model stresses that consumer behavior is a continuing process,
including recognition of a problem, information gathering, solution evaluation, and decision making. The
process is also affected by both internal and external factors like information input, information process,
general motives, environment, etc. Among these factors, information gathering and environmental
stimulation are two crucial influential factors in the final decision making.
According to Kotler (2000), consumer behavior occurs when consumers are stimulated by external
factors and come to a purchase decision based on their personal characteristics and decision making
process. These factors include choosing a product, brand, a retailer, timing, and quantity. This means
consumers’ purchasing behavior is affected by their choice of product and brand. Thus, we can examine
the following factors that may affect purchase intention: 1. Price discount (Alford and Biswas, 2002). 2.
Consumers’ increase of product familiarity (Johnson and Russo, 1984). 3. Product characteristics are
related to product knowledge (Sultan, 1999).

RESEARCH METHODOLOGY

Research Framework
This research is conducted in 2 (high and low brand image) × 2 (high and low product
knowledge) × 2 (high and low price discount) factorial designs. The research framework is shown in
Figure 1:

Figure 1: Research Framework.

Price discount
Brand Image
High
High
Low
Low

Purchase
Intention
Product Knowledge
High
Low

Research Hypothesis
Effect of Brand Image on Purchase Intention
Brand image is established when consumers develop ideas, feelings and expectations towards certain
brands as they learn, memorize and become accustomed to them (Keller, 1993). When consumers are
considering purchasing a product, their purchase intention will be determined based on the perception of
its value given by its brand. When consumers have a higher opinion on the quality of a certain brand

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product, they are likely to have higher perception of value (Monroe, 1990). Additionally, when consumers
benefit more from purchasing the brand product than the price paid, they are more likely to make the
purchase (Dickson and Sawyer, 1990). Aaker and Keller’s (1990) research discovers that a brand with
positive image improves consumer loyalty and trust and strengthens consumers’ purchase intention.
Brand image no doubt remains an important cue during the process of consumers’ purchase decision
making. Thus, the hypothesis H1 is proposed:
H1: The higher a brand image is, the more purchase intention there is.

Effect of Product Knowledge on Purchase Intention

Consumers usually adopt various methods to evaluate products. Those with higher product
knowledge tend not to use preconceived idea to judge product quality since they are aware of the
importance of product information. Wang and Hwang (2001) conclude that consumers with high product
knowledge will evaluate a product based on its quality because they are self-confident with their product
knowledge. Thus, they are likely to become aware of the value of the product and consequently develop
purchase intention. On the other hand, those with low product knowledge are more likely to become
influenced by environmental cues, e.g. a salesman’s persuasion, and change how they accept product
information. Therefore, the hypothesis H2 is introduced.
H2:The higher product knowledge consumers possess, the more purchase intention there is.

Effect of Brand Image and Product Knowledge on Purchase Intention Moderated by Price Discount
Price discounting is a common tool used to provide short-term sales increase by giving consumers
the incentive of savings. Since consumers can directly experience a real bargain, the larger the price
discount is, the more chances there are to consume (Bell, Ho, and Tang, 1998). Price discounting,
however, could signal negative product quality sometimes, and consequently affects consumers’ product
evaluation and purchase intention. Since consumers are drawn to purchase a product by economic
incentives instead of product quality, price discounting can only create temporary brand name shift.
Would price discounting interfere and lower consumers’ evaluation and purchase intention toward a
product? There have not been much conclusive study results to be able to answer this question. Yet, most
researchers seem to agree that price discounting has more positive than negative impact on purchase
intention. Della Bitta, Monroe and McGinnis (1981) proves that well-known brands help control and
stabilize consumers’ perception of product quality, and more purchase intention was increased, along with
the higher discount rates.
According to Raghubir and Corfman (1999), consumers usually do not lower their opinion on certain
product when it is on sale due to the consistency and distinctiveness of promotions, meaning as long as
the price discounting falls within the industry norm, consumers would not question the legitimacy of it or
start to question the quality of the product. In addition, Hung’s research (2001) concludes that product
evaluation can effective predict purchase intention–the higher the opinion consumers hold towards a
product, the more purchase intention there is.
Consumers with higher product knowledge tend to rely on product quality to make a purchase
evaluation, and are less influenced by pricing or price discounting. Their opinion are also less easily
influenced by price discounting because they are considering the product itself, with or without a price
discount. Those with lower product knowledge usually have lower understanding and confidence in
product quality. Consequently, they will rely on pricing to make a purchase decision, which may cause
them to have a negative reaction toward price discounting.

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 In addition, Pan’s research (2004) also confirms that product evaluation can effectively predict
purchase intention–the higher the opinion consumers hold towards a product, the more purchase intention
there is. Thus, this research is proposing the following hypotheses, H3, H3a, and H3b:
H3: Price discounts will affect consumers’ purchase intention in relation to their degree of brand
image and product knowledge.
H3a: Higher price discounting has greater influence on how brand image affects purchase intention
than lower price discounting does.
H3b: Higher price discounting has greater influence on how product knowledge affects purchase
intention than lower price discount does.

Research Design
The factorial design is used to measure two or more variables and to evaluate the main effect of each
individual variable and the interaction effect between them. As for experimental units, since students
share much more in common, and females are usually the primary users of cosmetic products, this research
targets female students at a private university in the metropolitan Taipei area as the experiment unit.
Wearing make-up has become a social courtesy. According to statistics, women with the ability to
consumption spend about NT$10,000 purchasing cosmetic products each year, and beauty products take
up almost half of the sales volume. The annual cosmetic sales also increase overall sales volume of
retailers. Thus, cosmetic beauty products have been chosen as the experimental product in the research to
see if brand image and product knowledge affect purchase intention and if price discount creates any
moderating effect.
This research includes two pre-tests and one formal test. Pre-test 1: Cosmetic beauty products can be
divided into three main parts: beauty products, cosmetics and perfume. Pre-test 1 aimed to determine
which type of product is the most commonly purchased and the overall impression consumers have
towards cosmetic beauty product brand image. Thirty questionnaire were sent out to female students
majored in business administration at the university. The results showed that Christian Dior received the
highest average score of 5.60, while Avon received the lowest score. The average score for the others was
4.30. Since there are significant paired test differences（t=5.281, p=0.000）between the highest and lowest
brand images, the two cosmetic beauty brand names, Christian Dior and Avon, were selected as two
experiential targets.
Pre-test 2: The focus of this part was to determine the high and low points of price discounting. The
results showed ten people chose 10% while 9 chose 60% as their highest and lowest price discount range.
In real business practice, price discounting of cosmetic beauty product rarely goes down to 70%, therefore,
this research has selected 10%-70% as the price discount range. Likewise, thirty female students from the
same major were chosen to be the survey target. Out of these thirty individuals, ten people selected the
lowest price discount (10%) while nine picked out the highest price discount (60%). Since there are
significant paired test differences（t=16.182, p=0.000）between the highest and lowest price discounts, this
research adopted 60%-10% as the range for price discounting.
The subject of this research covered female students from various departments at the private
university. Most of these university students have known for their strong self-image, sense of fashion, and
pursue of modern life. Under the influence of the media, this generation is widely informed. Therefore,
this research was not exclusive to students from certain academic background when it came to choosing
survey targets. There were four experimental settings in the beginning. However, the product knowledge
category was divided after the questionnaires were returned, resulting in 8 experiment settings.

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 DATA ANALYSIS AND DISCUSSION

Reliability and Validity of Questionnaire

There were 400 questionnaires distributed and 395 remained valid while 5 were left blank to be
invalid. All three variables – brand image, product knowledge and purchase intention – receive a
Cronbach’s α value of 0.8963, 0.9109, and 0.9697, respectively, meaning that the questionnaire has a
good reliability. Moreover, the questionnaire was examined on its content and construct validity. Content
validity represents the appropriateness of the content of the scale. This research is based on previous
literature and works as well as further validated by experts, thus it can be deemed to have an acceptable
level of content validity.
This research adopted the Pearson product-moment correlation to examine construct validity:
convergent and discriminant. For the three constructs, all of the p values between items attributed to same
construct are less than the significance level of 0.05, indicating the scale with high convergent validity.
Likewise, all of the p values between items attributed to different construct are large than the significance
level of 0.05, representing the scale with high discriminant validity.

Homogeneity of Variance Analysis

Analysis of variance (ANOVA) needs to be based on an assumption that homogeneity of variance can
be assured on each group sample. This research conducted Levene’s test, and the result, P =0.308（＞
0.05）, supports the null hypothesis of homogeneity of variance.

Hypothesis Test
The goal of this section is to examine the individual main effect and interactive effect of the
independent variables (product knowledge and brand image) and the moderating variable (price discount).
1. The effects of brand image, product knowledge and price discount on purchase intention: The results of
three-way analysis of variance can been reflected in Table 1:
a. There is no significant interaction among product knowledge, brand image and price discount
(F=0.001, P=0.971＞0.05).
b. There is no significant interaction among brand image and product knowledge (F=0.210, P=0.647＞
0.05); there is significant interaction between brand image and price discount (F=3.985, P=0.047＜
0.05), and it needs to be examined on its main effect test. There is no significant interaction between
product knowledge and price discount (F=0.625, P=0.430＞0.05).
c. In terms of two variance interaction, there is significant interaction between brand image and price
discount. As price discount is a moderator, the main effect of brand image on high and low of price
discount is conducted.

Table 1. Three-way ANOVA Interaction Test

Type Ⅲ Sum of
Source of Variation df Mean Square F Sig.
Squares
Corrected Model 251.870 7 35.981 19.881 .000*
Intercept 6093.942 1 6093.942 3367.067 .000*
Brand Image（A） 13.268 1 13.268 7.331 .007*
Product Knowledge（B） 47.432 1 47.432 26.207 .000*
Price Discount（C） 180.443 1 180.443 99.700 .000*

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 A× B .379 1 .379 .210 .647
A× C 7.212 1 7.212 3.985 .047*
B×C 1.130 1 1.130 .625 .430
A× B × C 2427E-03 1 2427E-03 .001 .971
Error 700.418 387 1.810
Total 7066.000 395
Corrected Total 952.289 394
*p-value＜0.05

2. The effect of brand image on purchase intention：

There is a significant difference in terms of the effects of brand image on purchase intention
(F=7.331, P=0.007＜0.05). On Table 2, consumers respond better with purchase intention toward a higher
brand image. Therefore, hypothesis 1 is supported: the higher the brand image is, the more purchase
intention there is.

Table 2. Effect of Brand Image on Purchase Intention

Brand Image Mean Std. Deviation
High 4.12 1.63
Low 3.74 1.46
3. The effect of product knowledge on purchase intention:
There is significant difference on the effect of high and low product knowledge on purchase intention
(F=26.207, P=0.000＜0.05). On Table 3, consumers with higher product knowledge have higher purchase
intention than those with lower product knowledge. Thus, hypothesis 2 is supported: the more product
knowledge consumers have, the more purchase intention they have.

Table 3. Effect of Product Knowledge on Purchase Intention

Product Knowledge Mean Std. Deviation
High 4.28 1.46
Low 3.58 1.57

4. The effect of price discount as moderating variable on brand image and purchase intention：
Based on the variance analysis, there is significant interaction between price discount and brand
image on purchase intention (F=3.985252, P=0.047＜0.05), so the main effect is examined.
a. On Table 4 and 5, high brand image has a significant influence on purchase intention moderated by
higher price discount.
b. According to Table 6 and 7, lower image with higher price discount has significant impact on
purchase intention.
c. This supports for hypothesis 3: Higher price discount has significant moderating effect on purchase
intention based on brand image.

Table 4. High Brand Image vs. Price Discount

Price Discount Mean Std. Deviation
High 4.93 1.37
Low 3.3 1.45

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 Table 5. The Effect of High Brand Image on Purchase Intention Moderated by Price Discount
Sum of Squares df Mean Square F Sig.
Between People 131.686 1 131.686 66.277 .000*
Within People 391.419 197 1.987
Total 523.106 198 1.45
*p-value＜0.05

Table 6. Low Brand Image vs. Price Discount

Price Discount Mean Std. Deviation
High 4.29 1.42
Low 3.20 1.29

Table 7. The Effect of Low Band Image on Purchase Intention Moderated by Price Discount
Sum of Squares df Mean Square F Sig.
Between People 5 1 57.327 31.072 .000*
Within People 357.918 194 1.845
Total 415.245 195
*p-value＜0.05

5. Effect of price discount on purchase discount based on product knowledge:

The variance analysis has proved no significant interaction between price discount and purchase
intention based on product knowledge (F=0.625, P=0.430 ＞ 0.05), which means that there is no
significant moderating effect of price discounting on product knowledge and purchase intention.
Therefore, the previously stated hypothesis that higher price discounting creates more purchase intention
based on product knowledge does not stand.

CONCLUSIONS AND SUGGESTIONS

Some conclusions have been drawn from the statistical outputs:

1. There are significant differences within correlations between brand image and purchase intention.
This conclusion indicates that consumers’ purchase intention does get influenced by brand image.
The higher the status of the brand image, the more purchase intention there is. Thakor and Katsanis (1997)
believe brand image is one of the cues in product quality evaluation, particularly when it comes to
experiential brand concept-image. Consumers tend to have higher perceived value, resulting in higher
purchase intention when facing a preferred brand. This result coincides with previous similar studies.
2. There are significant differences within correlations between product knowledge and purchase intention.
Obviously, consumers’ purchase intentions are influenced by the amount of product knowledge−the
higher the product knowledge consumers possess, the more purchase intention there is. Park and Lessig
(1981) believe consumers possess various degrees of product knowledge based on their similarity toward
the product, resulting in different degree of purchase intention. This belief concurs with our research
conclusion.
3. With price discount as a moderator, there are significant differences between brand image and purchase
intention.
Statistical results prove that price discount creates interference in the correlations between brand
image and purchase intention. When purchasing cosmetics, consumers respond better toward a higher

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price discount and have a higher purchase intention towards a high brand image product. Moore and
Olshavsky’s research in 1989 exhibits that well-known brands get selected more often with an increase of
price discount while less well-known brands may experience an increase then decrease. Products with
lower brand image trigger more purchase intention with higher price discount.
4. Price discounts contribute no interference to the correlation between product knowledge and purchase
intention.
This may be due to the fact that cosmetics are experiential products, and therefore the degree of
product knowledge does affect purchase intention, regardless of whether there is a price discount or not.
To those with higher product knowledge, there are more factors to consider other than price discount,
resulting in lower purchase intention than those with lower product knowledge. On the other hand, despite
being easily influenced by price discount as a result of having insufficient product knowledge to make a
judgment, consumers with lower product knowledge may still have lower purchase intention because of
doubt towards the motives behind price discount.

Managerial Implications
This research has discovered, through experiments, that a successful marketing strategy can detect
the pulse of the market. Here are some marketing suggestions for the industry:
1. Brand image indeed increases consumers’ purchase intention.
Therefore, we suggest that businesses, particularly cosmetic beauty companies, devote efforts to
elevating and maintaining their brand images, not only to increase sales volume but to improve company
image. Once a positive image is established, a business may utilize the added values, such as brand, for
product line expansion or save some promotional costs when entering a new market.
2. Consumers with various degrees of product knowledge will use different methods to evaluate a product.
Consumers with higher product knowledge have better product understanding and are confident with
what they know. Businesses should provide such types of consumers with complete product information.
Those with lower product knowledge rely on pricing as the main deciding factor. Thus, businesses can
target this type of consumers with attractive prices and sales representatives to improve consumers’
product knowledge and perception, resulting in higher purchase intention.
3. Price discount poses interference between the correlations between brand image and purchase intention.
When it comes to cosmetics, higher price discounts can indeed inspire more purchase intention than
lower price discount, provided that the brand image is also high. Price discounting attracts consumption in
the short-term; however, it also changes how consumers view the brand image, and may thus cause
negative impact caused by anticipation of higher price discounts in a long run. Therefore, businesses
should approach price discounting with a more thorough and cautious attitude, e.g. setting reasonable
pricing and appropriate price discount range to cope with market needs.

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