January 21, 2008
10 Things I Know About...
Setting Prices
By Keith Coulter
Professor of marketing at Clark University's Graduate School of Management and co-author of "Distortion of Price Discount Perceptions: The Right Digit Effect."
As told to Cory S. Hopkins, Worcester Business Journal Staff Writer.
Consumers perceive numbers in prices irrationally, believing the difference between 1 and 2 to be greater than the difference between 8 and 9, for example.
When two items are compared in price, consumers will gravitate towards the right-most digit as a comparison point.
When advertising a sale or discount, advertise the old price along with the new to give a frame of reference for the consumer.
When comparing prices side by side, the farther away the lower price is horizontally from the higher price, the greater the perceived discount is.
When listing two prices, put the less expensive price in a smaller font. It gives the illusion of an even smaller price.
Stick to lesser known brands with these methods, because consumers have pre-conceived value notions of name brands.
These observations are less effective in big-ticket items like cars or appliances.
These methods are most effective when a consumer is leafing through a magazine or watching TV.
Do you just want to break even on a product, or make a profit? The ultimate goal should guide your price.
Using the above methods, managers can set higher prices while still giving consumers good perceived value.
By Keith Coulter
Professor of marketing at Clark University's Graduate School of Management and co-author of "Distortion of Price Discount Perceptions: The Right Digit Effect."
As told to Cory S. Hopkins, Worcester Business Journal Staff Writer.
10. PERCEPTION DECEPTION
Consumers perceive numbers in prices irrationally, believing the difference between 1 and 2 to be greater than the difference between 8 and 9, for example.
9. THE RIGHT DIGIT
When two items are compared in price, consumers will gravitate towards the right-most digit as a comparison point.
8. IN WITH THE OLD
When advertising a sale or discount, advertise the old price along with the new to give a frame of reference for the consumer.
7. LONG DISTANCE RELATIONSHIP
When comparing prices side by side, the farther away the lower price is horizontally from the higher price, the greater the perceived discount is.
6. SMALL AND MIGHTY
When listing two prices, put the less expensive price in a smaller font. It gives the illusion of an even smaller price.
5. COMMAND THE BRAND
Stick to lesser known brands with these methods, because consumers have pre-conceived value notions of name brands.
4. KEEP IT SMALL
These observations are less effective in big-ticket items like cars or appliances.
3. SHORT ATTENTION SPAN
These methods are most effective when a consumer is leafing through a magazine or watching TV.
2. START WITH A GOAL
Do you just want to break even on a product, or make a profit? The ultimate goal should guide your price.
1. HIGH PRICE, HIGH VALUE
Using the above methods, managers can set higher prices while still giving consumers good perceived value.
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