How do consumers process and evaluate prices
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How do consumers process and evaluate prices
- 1. HOW DO CONSUMERS PROCESS AND EVALUATE PRICES?
- 2. Consumers often process price information, interpreting it from the context of prior purchasing experience, formal & informal communications, points of purchase & other factors
- 3. Purchase decisions are based on how consumers perceive prices.
- 4. Purchase decisions are based on how consumers perceive prices. Customers may have a lower price threshold below which prices signal inferior or unacceptable quality…….
- 5. …..as well as an upper price threshold above which prices are prohibitive and the product appears not worth the money.
- 6. Understanding how consumers arrive at their perceptions of prices is an important marketing priority. We consider three key topics:
- 7. Understanding how consumers arrive at their perceptions of prices is an important marketing priority. We consider three key topics: REFERENCE PRICES
- 8. Understanding how consumers arrive at their perceptions of prices is an important marketing priority. We consider three key topics: REFERENCE PRICES PRICE-QUALITY INFERENCES
- 9. Understanding how consumers arrive at their perceptions of prices is an important marketing priority. We consider three key topics: REFERENCE PRICES PRICE-QUALITY INFERENCES PRICE ENDINGS
- 11. When examining products, consumers often employ reference prices, comparing an observed price to an internal reference price they remember or an external frame of reference such as posted “regular retail price”.
- 12. POSSIBLE CONSUMER REFERENCE PRICES • “Fair Price” (what consumers feel the product should cost) • Typical Price • Last Price Paid • Upper-Bound Price (reservation price or the maximum most consumers would pay) • Lower-Bound Price (lower threshold price or the minimum most consumers would pay) • Historical Competitor Price • Expected Future Price • Usual Discounted Price
- 13. When consumers evoke one or more of these frames of reference, their perceived price can vary from the stated price.
- 15. $$$ Many customers use price as an indicator of quality.
- 16. FOR EXAMPLE Higher priced cars are perceived to possess high quality. Must be premium quality ! $$$$$$ $$$ $$$
- 17. FOR EXAMPLE Higher priced cars are perceived to possess high quality. Must be premium quality ! $$$$$$ $$$ $$$ Higher-quality cars are likewise perceived to be higher priced than they actually are.
- 18. When information about true quality is available, price becomes a less significant indicator of quality.
- 19. When information about true quality is available, price becomes a less significant indicator of quality. But when this information is not available, price acts a signal of quality.
- 20. #3 PRICE ENDINGS
- 21. Many sellers believe that prices should end in an odd number.
- 22. Customers see an item priced at $299 as being in the $200 range rather than in the $300 range.
- 23. Customers see an item priced at $299 as being in the $200 range rather than in the $300 range. They tend to process prices “left-to-right” rather than by rounding.
- 24. But if a company wants a high-priced image, it should probably avoid the odd-ending tactic.
- 25. PRICES ENDING WITH 0 OR 5 ARE ALSO POPULAR AND ARE THOUGHT TO BE EASIER FOR CONSUMERS TO PROCESS AND RETRIEVE FROM MEMORY
- 26. SO TO RECAP 3 Main Ways for Consumers to perceive prices. • Reference Prices • Price-Quality Inferences • Price Endings
- 27. THANK YOU . Created by Kunal Eapen, IIIT Allahabad During an internship under Prof Sameer Mathur, IIM Lucknow www.iiminternship.com