Sunday, February 24, 2008

Lower Price = Lower Value?

This is a follow up to what I wrote about regarding the never ending Presidents Day Sale earlier today. sent this story last week regarding consumers perceptions. It's another argument against sales and discount prices. Read it for yourself and also click on the link at the end for a free pdf report.

Who Can Resist a Bargain?

Many marketers believe customers are attracted to discounted prices. Yet this assumption may be wrong. While a lowered price might make people more inclined to buy your product, they may also be less satisfied with their purchase.

Researchers at Stanford, INSEAD and MIT found that consumers who were given an energy drink felt the product was less effective if it was purchased at a discount. Consumers who drank the discounted product felt they that had a less intense workout than those who purchased the drink at its regular price.

When advised that the drink helped improve mental acuity, consumers who were told that the drink was purchased at a discount were able to solve fewer word puzzles than those consumers who used the same product purportedly purchased at the regular price.

Also, consumers exposed to strong claims about the energy drink's effectiveness were able to solve more word puzzles than consumers who received weaker advertising about the product. Your marketing messages, therefore, may impact your product's potency. Advertising claims, even if not based in fact, may become reality to customers.

The Po!nt: Customers may, in fact, get what they pay for. Price drops, and advertising overall, may shape consumers' expectations, making them believe a product is not as effective, and hence lower in quality.

Source: "Placebo Effects of Marketing Actions: Consumers May Get What They Pay For" by Baba Shiv, Ziv Carmo and Dan Ariely. Journal of Marketing Research, 2005. Click here for a PDF of the report.

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