How do consumers process and evaluate prices?

1. CONSUMER PSYCHOLOGY
AND PRICING
-KARTIK BHARGAVA

2. REFERENCE PRICES

3. “Fair Price” (what consumers feel the product
should cost)
Typical Price
Historical Competitor Prices
Expected Future Price

4. Upper-Bound Price (reservation price or the
maximum most consumers
will pay)
Lower-Bound Price (lower threshold price or the
minimum most consumers
will pay)
Usual Discounted Price

5. PRICE-QUALITY INFERENCES

6. Many consumers use price as an
indicator of quality

7. Exclusivity and scarcity signify
uniqueness and justify premium-pricing

8. PRICE ENDINGS

9. Consumer tend to process the price
“left-to-right” hence, $499 falls in
$400 rather than $500 range

10. “Sale” signs next to prices spur
demand, but only if not overused