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The Importance of Price Stereotypes for the Price Image in Consumer Products
Anneke Zwart, Student (University), Netherlands
Research by Hamilton and Chernev (2013) revealed that consumers persist to believe certain general stereotypes when it comes to pricing (whether true or not). Retailers need to understand and manage 3 signals in order to avoid sending incorrect pricing cues:
- THE HIGHER THE VOLUME, THE LOWER THE COSTS AND THUS THE PRICE: This refers to the stereotype that focusing on volume implies that stores are able to generate deep discounts from suppliers, as such they are able to sell it at low margins which in turn lead to low prices. There are several components that signal high volumes. First of all, it is often thought that those stores outside city centers serve large customer bases. Secondly, the size and of assortment signals creates the impression of large volumes.
- FRILLS INCREASE THE PRICE: Customers often subconsciously believe that everything additional has to be paid for. Examples are excellent service delivery; extended working hours or a beautiful interior design: such factors are associated with higher prices.
- UNCONVENTIONALITY INCREASES THE PRICE: Where unadorned functional products are associated with low prices, unconventional products are associated with the assumption that the shop will have high prices.
It is critical to comprehend those stereoptypes, especially now that consumers can check out product and service prices of competitors quickly through the internet.
Sources:
Hamilton, R. and Chernev. A. “Low Prices are Just the Beginning: Price Image in Retail Management” Journal of Marketing 2013
HBR April 2015 “How Consumers Understand and Misunderstand Pricing Cues”.
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