How do consumers process and evaluate prices??

What is Price?

An element of marketing mix that

produces revenue

Consumer PsychologyKey in understanding consumer's way of processing and evaluating price

Processing price information

• Prior purchasing experience• Formal communications• Informal communications• Price variations• Point-of-purchase• Online resources

Set of blue denims

₹499/unitCheap Fashion

₹2499/unitCraftsmanship

Lifestyle

₹10499/unitExclusivity

Status

Street Levis Armani

Reference Prices

Often employed by consumers while choosing products

Possible Reference Prices

• Fair price• Typical price• Last price paid• Upper and Lower bound price• Competitor prices• Usual discount price• Expected future price

Price-Quality Inference

Lower price instincts cheap quality

Price endings

Customers process the prices left-to-right rather than by rounding

Number psychology

• Ending with 9 suggests a discount or bargain

• Prices ending with 0 and 5 are also popular

• 9 influences customers with poor price knowledge

Recap-Customer psychology

• Reference prices• Price-Quality inferences• Price endings

References and Credits

• Marketing management – Philip Kotler• https://

support.content.office.net/en-us/media/07ec15ce-0c1d-4089-a5b6-d106f7b0c7d1.gif

• http://www.astrogle.com/images/2014/09/number-97.jpg

• http://blog.timesunion.com/momsatwork/files/2013/11/blue_jeans1.jpg

• https://www.flickr.com/search/?text=left%20to%20right

• http://www.h3dwallpapers.com/wp-content/uploads/2014/09/Spicejet_logo-4.jpg

Disclaimer

Created by Mohith Reddy, IIT Madras

during an internship by Prof. Sameer Mathur, IIM Lucknow.

www.IIMInternship.com