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Mind Your Pricing Cues

Mind Your Pricing Cues

Below are the available bulk discount rates for each individual item when you purchase a certain amount

Publication Date:
September 01, 2003

For most of the items they buy, consumers don’t have an accurate sense of what the price should be. Research shows that consumers’ knowledge of the market is so far from perfect that it hardly deserves to be called “knowledge” at all. Yet, people happily buy products every day. Is this because they don’t care what kind of deal they’re getting? No. Remarkably, it’s because they rely on retailers to tell them whether they’re getting a good price. In subtle and not-so-subtle ways, retailers send signals to customers, telling them whether a given price is relatively high or low. In this article, the authors review several common pricing cues retailers use–“sale” signs, prices that end in 9, signpost items, and price-matching guarantees. They also offer some surprising facts about how–and how well–those cues work. For instance, the authors’ tests of several mail-order catalogs reveal that including the word “sale” beside a price can increase demand by more than 50%. The practice of using a 9 at the end of a price to denote a bargain is so common, you’d think customers would be numb to it. Yet, in a study the authors did involving a women’s clothing catalog, they increased demand by a third just by changing the price of a dress from $34 to $39. Pricing cues are powerful tools for guiding customers’ purchasing decisions, but they must be applied judiciously. Used inappropriately, the cues may breach customers’ trust, reduce brand equity, and give rise to lawsuits.

Copyright © 2020 Harvard Business School Publishing. All rights reserved. Harvard Business Publishing is an affiliate of Harvard Business School.

Mind Your Pricing Cues

Research & References of Mind Your Pricing Cues|A&C Accounting And Tax Services

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