How do consumers process and evaluate prices?

By,

Anurag Kar

B.Tech. Student

Department of E and ECE

IIT Kharagpur

Based on Chapter 3: Developing Pricing

Strategies and Programs

Of

Marketing Management: A South Asian

Perspective

By Kotler, Keller, Koshy and Jha

Customers today have many ways

of differentiating between sellers

because of

THE INTERNET

Customers

Then Now

Buyers today can:

1. Get instant price comparisons between vendors.

2. Name their price and have it met.

3. Get products for free.

Examples

Earlier

Buyers were “price takers”.

They accepted prices at face value.

Now..

Buyers process various

information and access various

options.

Let’s understand consumers’

perception of prices with the help of

3 sub topics

Reference Prices

Consumers often can’t accurately

recall specific prices.

While examining products, they

employ reference prices.

They compare an observed price to

an internal reference price or

external references such as

“posted retail price”.

Price – Quality Inferences

Consumers often use price as an

indicator of quality.

₹ 3000

It’s so

sophisticated.It has to be

good.

Wow!

This shirt is so good.Because it’s

expensive.

₹ 300

It’s so

dull.It’s cheap.

Ew!

This shirt is bad.Cheap shirts

are never good.

.

Price Endings

Many sellers believe in ending

prices with a ‘9’.

Such as ₹ 299 or ₹ 499 for a

commodity.

This is because people tend to

process prices from

₹ 2 9 9Left Right

₹ 2 9 9

Ends up being in

the 200 range

Rather than the

300 range.

Companies who want to portray an

expensive image on the other hand

should AVOID such pricing because

of the risk of looking cheap.

Recap

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Fonts Sourced from:

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Based on “Marketing Management: A South Asian Perspective”

By Kohler, Kelter, Koshy and Jha

Credits