The price of a product or service is set by a business that follows a strategic plan depending on the type and quality of there offerings. Such a procedure takes into consideration multiple factors that should be treated, such as the manufacturin¬¬g cost, the labor’s cost, the distribution’s cost and the marketing cost. Other than satisfying the expenses of the company, the marketing plan also plays a significant role in the pricing decisions. The price of a product may have an attracting or repelling feature towards the customer (Monroe 1979). This idea is underlined by the behavioral research that clarifies that the consumer perceives the price as additional information of the quality of a product. However, other studies contradict such opinions by ignoring the power of price (Gabor and Granger 1966). Therefore, multiple researchers have looked up into this topic and conducted different and interesting theories. Most of the results are related to the psychological effects on the customers’ buying behavior and their perception of quality.
Marketers use psychology in order to develop multiple ways of attracting costumers. Associating the price cue with the perceived quality is an essential part, since it allows a direct and a subconscious target through the consumers in many cases. This attracting power can be applied, or can also be contradicted. Several researchers have studied these two cases and concluded significant theories.
To begin with, studies are mainly focusing on the conditions where price is perceived as a quality cue. Toh and Berard, have highly underlined this point by introducing three main hypotheses:
- “There is a substantial positive relationship between price and perceived quality for consumer goods.”
- “Th...
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...females were found to be more price reliant than males in forming product quality judgments” (Toh and Berard 1984). Besides gender, age has also played an important role in this analysis. It has been concluded that older consumer are more affected by price/perceived quality than the younger consumers. (Shapiro 1973). As for income effects, it has been proven that it does not strongly impact on the quality of a product. “ Both generations have been reported to be both positive (French et al. 1972; Toh and Berard 1984) and insignificant (e.g. Shapiro 1973) “.
Based on these three analysis, it can be concluded that the influence of the demographic features such as gender, age and income, have a varied outcome depending on the type of the consumer. Therefore, markets have categorized their products depending on the demographic profile for better and advanced targeting.
As we learned from Chapter 12, price must be carefully determined and match with firm’s product, distribution, and communication strategies. (Hutt & Speh, 2012, p. 300) Therefore, there should be a strong market perspective in pricing. In order to build an effective pricing policy, marketers should focus on the value a customer places on a product or service. One of the most effective ways to do so is differentiating through value creation.
Price can sometimes be an indicator of quality with a higher price indicating higher quality (Mowen & Minor, 1998). Consumers perceive that a higher price can be attributed to the higher cost of quality control. Some consumers are highly price sensitive (elastic demand), whereby a high price may shift consumers to competitive brands (Mowen & Minor, 1998). Therefore, price can have a positive or negative influence on customers.
Therefore, value is perceived as a subjective measurement of the usefulness or desired satisfaction that results from consumption. According to her, although what is received and what is given varies among consumers, value represents a tradeoff of the salient of “give” and “get” components. “The benefit components of value include salient intrinsic attributes, extrinsic attributes, perceived quality, and other relevant high level abstractions” (Zeithaml, 1988). Furthermore, value is defined as “whatever it is that the consumer seeks in making decisions as to which store to shop or which product to buy” (Chain Store Age, 1985). One more definition about value is given by Schelter (1984), supporting that value is all the factors, qualitative and quantitative, subjective and objective, that shape the complete shopping experience. In this definition, value includes all relevant choice criteria. The most common definition of value is the ration or tradeoff between quality and price, which a value-for-money conceptualization. These two components (quality and price) have different effects on perceived value for money. According to Zeithaml (1988) some customers perceive value when the price is low, whereas other people perceive value as a balance between quality and price. Therefore, the
Meanwhile, price strategies are important to be considered by every marketer before market a new product into a new market. Basically, the price is the amount a customer pays for the product. It is determined by a number of factors including market share, competition, material costs, product identity and the customer’s perceived value of the product. The business may increase or decrease the price of product if other stores have the same product.
Price is the easiest way to directly communicate with the customer. When comparing with other brands price is a visible difference to the customer. Price is also used in positioning the brand to show its quality or instead give direct competition with other brands (Cravens & Piercy, 2006 p 320).
The purpose of this study is to examine the influence of perceived quality, social influence and consumer traits
Pricing and retail strategy is a key component of any business. These strategies play a major role in a customer’s perceptions of a business. Price is almost always a key factor. “Speak to any average consumer and mention the names of some high quality, leading businesses. The chances are high that one of the first words they will use is "expensive". Not "excellent service", "marvelous range" or even "helpful staff" (2006). Wal-Mart uses an everyday low price pricing strategy which has been a massive success for the company.
Price is the amount that is charged by marketer of his offerings or the amount that is paid by consumer for the use or consumption of the product. Price is crucial in determining the organisation's profit and survival. Adjustments in price affects the demand and sales of the product. Marketers are required to be aware of the customer perceived value of the product to set the right
For example, consider a high luxury cruise liner, where well-to-do people are seeking luxury, comfort and social engagement with similar people. This proven that they are far less likely to make a purchase decision based on the price attribute by putting the attention on the quality instead. Therefore, specialty products are generally priced higher than shopping products. Obviously, the prices still have to be within a consumer’s reference price range. Price reducing is sensitive in the marketplace for specialty product due to discounting and other forms of price incentives are generally ineffective since the consumer with think that it is a signal of a reduced level of
Price is the amount of money paid by customers to purchase the product. Margin account should be taken into account in the decision as a response to the possibility of a competitor according to quickmba, 2004. The price which is creates sales revenue. For example is the cost. The price of goods is an important factor in the value of sales made. In theory, prices should be determined according to customer demand with the goods sold are affordable. Customers will researching the prices of goods sold because it shows how they appreciate what they are looking for and what they want to pay. The price is not issue to my restaurant. This is because my restaurant offers the price that customer can afford. We are offers a premium and medium price to the customer compare to other restaurant. Besides that, we also offering a high quality in service compare to other. For example, other restaurant they offer the best quality food at the highest prices compare to us we are offer a high quality food and service at the premium and medium
A very important factor in the marketing mix is the price. Since a service is not physical, its value must be carefully thought out. The price is sometimes the first thing which tourists look at. Depending on the type of service, perceptions of value differ. The price can act as an indicator of quality. A low price may seem as an attempt to cheat the customer in some way. People expect quality to cost and are willing to pay a higher price for it. That is why the service provider must be aware of how much people would pay for his service and why.
age & lifestyle, geography and gender. Dibb, S, et al (2005). Companies can choose one or several variables, as Appendix I shows segmentation can be grouped into four categories demographic, geographic, psychographic and behaviourist. Demographers study aggregate population characteristics such as the distribution of age and gender, fertility rates, migration patterns and mortality rates. Marketers rely on these demographic characteristics because they are often closely linked to customer’s needs and purchasing behaviour, also can be measured. Dibb, S, et al (2005). For example Tesco have two market segments, first one is customers looking for value and second one customers looking for quality. Tesco (2014). Geographic segmentation is clustering people according to postcode areas and census data. Dibb, S, et al (2005). Tesco will need to take the different languages spoken into account when labelling goods. Tesco has opened Metro and Express stores to make it easier for customers to shop. (http://stores.tesco-careers.com/). Marketers sometimes use psychographic variables such as personality characteristics, motives and lifestyles to segment markets. Dibb, S, et al (2005). Tesco use age and gender segmentation to offer different products and use different marketing approaches for different age and gender groups. Tesco (2014). A programme called the Stanford Research Institute’s Value and Lifestyle Programme (VALS) surveys consumers to select groups with identifiable values and lifestyles. Initially VALS, identified three broad consumer groups, which are outer-directed, inner-directed and need-driven consumers. Behavioural segmentation means dividing the market into groups based on consumers behaviour towards products. Purchase behaviour can be a useful way of distinguishing between groups of customers, giving marketers insight into the most appropriate marketing mix. For example brand loyal
The price of a product brought some interpretation by the user. Low price is considered as poor quality. High price is difficult for the market because customers prefer to choose products at the low price. The price can determine the gain or loss of a business. Marketers must be clever in the pricing of a product.
Every consumer has a unique way of measuring benefits versus costs and will sometimes pay for higher quality items and other times buy the low costs items, depending on which has the highest value to them.
Demographically we can segment the market into groups based on age, gender, family- size, income, family life cycle and occupation.