how does consumer process and evaluate prices

Who are consumers?Who are consumers?

Traditional EconomistsTraditional EconomistsDefine them as:Define them as:““PRICE TAKERS”PRICE TAKERS”

They Interpret that informationThey Interpret that informationin thein the

context of:context of:

Formal communicationFormal communication

Informal Informal communicationcommunication

Extreme Low PriceExtreme Low Price

Extreme High PriceExtreme High Price

Is the product Worth?Is the product Worth?

Is likeIs like

Guess the Prices of Guess the Prices of following Denims:following Denims:

Around 1000/-Around 1000/-

Around 2500/-Around 2500/-

But all are same,But all are same,Blue jeansBlue jeans

Why does the price differ?Why does the price differ?

• LEE and Flying Machine indicate fashion, fit, and finish.

• Levis sells craftsmanship and Lifestyle.

• Armani sells Exclusivity and status.

Its not alwaysIts not always the cost of product making the cost of product making

that decides the that decides the Price.Price.

Understanding theUnderstanding the consumer perception consumer perception

Of prices Of prices is very important.is very important.

• Internal reference, like comparing with latest Price they remember.

• External frame of reference reference like comparing with the “Regular Retail Price.”

• Fair Price• Typical Price• Last price paid• Upper Bound Price• Lower Bound price• Historical Competitor price• Expected future price• Usual discounted price

Many consumers assume,Many consumers assume,

When information aboutWhen information about true quality is available,true quality is available,

ODD Ending Price ODD Ending Price make youmake you

perceive priceperceive price lower than actual.lower than actual.

Like 29$ is looked as 20$Like 29$ is looked as 20$Whereas 30$ as 30$.Whereas 30$ as 30$.

Like….Like….

These kind of pricing luresThese kind of pricing luresCustomers to buy products.Customers to buy products.

Thank You.Thank You.