The Psychology Of Price
||The Footwear Event
||Jun 27, 2011
Presentation at the Footwer Event in Chicago, IL.
It may appear that price is all customers are focused on today and, the lower the better. Retailers are reacting by slashing prices without realizing that this can be a race to the bottom which only a few stores may be able to return from. Yet, if you look at the psychological reasons behind our obsession with low price, there are some interesting twists in our thinking that can make things appear to be a lot better than they are. Paying full price, for example, may be unthinkable, yet, what exactly is full price today? Is it the real cost of a product or is it more of a “reference price” that outlets and off price stores use to justify a discount and make it look like the deal is too good to pass up? An inflated price, even though the consumer knows it is inflated, makes a product more desirable to them and makes the discounted price seem low by comparison. Also, it is true that consumers think that they know how much things should cost while in fact, they rarely do. As well, as Donald Lichtenstein, Professor of Marketing, at the University of Colorado pointed out, customers often believe that if something is not true, the store is not allowed to lie to them. These are just a few of what we would call “missing pieces” in the consumer’s psychological perception of price which, if we fully understand, can help us develop a price strategy that can help us cater to their apparent lust for low prices while still maintain a respectable profit margin and customer loyalty. It can be done!
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