How do consumers process and evaluate prices?

1. DEVELOPING
PRICING
STRATEGIES
AND PROGRAMS
Presentation by Srujan Dasari

2. HOW
DO CONSUMERS PROCESS
AND EVALUATE
PRICES ?

3. Purchase decisions are based on how
consumerPERCEIVES PRICES
Traditionally, Consumerswereconsidered “PRICE-TAKERS”-
accepted prices at the“FACE VALUE”
BUT

4. REFERENCEPRICES:
Compare OBSERVED PRICEto INTERNALREFERENCEPRICEor EXTERNALFRAME
Clever Marketerstryto FRAMETHEPRICE
to SIGNALBEST VALUE POSSIBLE (ex: EMIs)
Sellers Often attempt to manipulatethem.
Fair Price Typical Price Last Price Paid
Upper Bound
Price
Lower Bound
Price
Historical
Competitor
Prices
Expected
Future Price
Usual
Discounted
Price

5. PRICEQUALITY
INFERENCES
ManyConsumersuse price as an INDICATORof QUALITY
Some Brands adopt Exclusivity
and Uniqueness
to justify Premium Pricing

6. PRICEENDINGS999/-only
Customers see anItempriced $299to be$200ratherthan$300
“9”-ending also suggests Discounts/-
Prices ending with 0 and 5 are thought be be easier to process

7. DISCLAIMER
Created by Srujan Dasari, IIT Kharagpur,
during an internship by
Prof. Sameer Mathur, IIM Lucknow.
www.IIMInternship.com