The Psychology Of Price
Sure a price tag is more than just what someone pays for a product or service. “Pricing tells a story,” says Per Sjofors, managing partner at Atenga, a consulting firm in California, that specializes in pricing. Go too low, and buyers looking for quality may turn elsewhere. Indeed, there are cases in which the best way to attract new clients is to push prices higher. In one interesting study Harvard University Professor John Gourville tested the possibility of using pricing to get customers to keep customers returning. He and his team tested factors such as how, when, where, and in what form all contribute to what we call the psychology of price. You can take the very same physical price and break it up into parts, bundle it with other items, ask for payment early, or ask for payment late, and change consumers’ perceptions of that price in the process. One of the interesting things that the team observed was that people are more likely to go to a ball game when they have purchased tickets to a single game than when they purchased tickets to multiple games. The research has some interesting pricing experiments like how a dollar a day payment is seen as lower by consumers than a lump sum of $365. Or how consumers don’t mind paying smaller EMIs longer. Here’s the link to the Harvard Study. Another story on low pricing in INC Magazine.