When you’re selling products or services, you want to set prices that achieve a positive result. But strategic pricing isn’t just about lowering prices; consumer perceptions also play a significant role. Here’s a look at how consumers view and value “low” prices and what a business can do to change their perspective while setting price points that work for everyone.
How do shoppers interpret low prices?
It turns out that cheaper is not always better, in spite of all the hype surrounding fantastic deals. According to Vanderbilt University research that was published in the Journal of Consumer Research, consumers sometimes perceive low prices as a sign of a low-quality product, which can work against retailers.
The researchers did discover, however, that customers occasionally mistake low prices for good offers. The factors that influence how consumers perceive a low price when making a purchase decision.
According to the lead author of the study and professor of marketing at Vanderbilt University, Steve Posavac, “the conclusion of our research is that people can hold two opposing beliefs about a product.” “When it comes to price, the majority of people simultaneously think that low prices equate to good value and low quality. However, consumers do not always hold both of these beliefs in equal measure.
How do shoppers evaluate the worth of low prices?
When a customer finds a product or service for a low price, they might think it is a good deal or they might think it is not worth their time or money. Just as crucial as the actual price is how consumers perceive it.
As they consider and select products, “consumers rarely have complete information, and [they] use various strategies to fill the gaps in their knowledge,” Posavac said. One of these tactics entails the use of naive theories, which are informal, everyday explanations that people use to make sense of their surroundings.
Customers may view a business as “upscale” and believe its prices are too high, or they may view it as a discount retailer with prices that are way too high given its standing. They might consider the goods sold by the discount merchant to be subpar. It is difficult for a company to control how its customers view price versus value.