How do consumers process and evaluate prices
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Transcript of How do consumers process and evaluate prices
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Developing Pricing strategies and programs : Part 1
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The only element of the marketing mix that produces revenue!
The other elements
produce costs. It is also the
easiest to adjust!
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Internet especially
has had a profound
impact on buyers
and sellers!
Changing pricing environment:
Easy access to credit,
enticing market campaigns,
progressive technology
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Buyers can
Get instant price comparisons from a slew of vendors
Name their price and have it met (Priceline.com)
Get free products (eg: free software products)
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Monitor customer behaviour and tailor offers accordingly
Give certain customers access to special prices
Negotiate prices in online auctions and in person
Sellers can
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Developing appropriate
pricing strategies and
programs is
extremely important!!
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How do consumers process and evaluate
prices?
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Traditionally , economists assumed
consumers were price takers.
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Marketers should know that consumers actively process
price information.
How prices are perceived depends on their disposable
income, occasion of purchase, economic conditions etc
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3 Key Topics to understand how consumers perceive prices.
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Reference prices
Fair price, typical price, last paid price, upper bound price, lower bound price, historical competitor prices, expected future price, usual discounted price
Consumers evoke one of these frames of
reference to arrive at their perceived
price.
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Price-quality inferences
Greater the price, better the quality
When information about true quality is available, this does not apply.
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Price endings
The way a price ends influences a buyer’s psychology
Prices ending in odd numbers, 9,
0, 5 lures in buyers.
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Recap!
How do
consumers
process and
evaluate
prices?
Reference
prices
Price - Quality
inferences
Price endings
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Thank you!