Corner Risks with Partitioned Pricing

So this consumer psychologist says to his wife, “I got the strangest message from Dean. He wants me to get together with him to go shopping for a good corn dog.”
     “Are you sure you heard that right?,” asks the wife, with understandable skepticism.
     “Yep. I listened to it twice. Maybe it’s Dean’s way of saying he’s getting together a group for the state fair. I called him back, but nobody answered.”
     Then the consumer psychologist starts thinking about what goes into somebody deciding what’s a legitimate price to pay for a corn dog at a state fair. Are people willing to pay more than if they’d gotten it at a fast food restaurant? Does the excitement of eating a corn dog at a state fair add value? Do the memories of other corn dogs eaten at fairs up the threshold for an acceptable purchase price?
     Consumer psychologists think about these things. This one relates to the topic of partitioned pricing. Partitioned pricing presents an item’s cost as a main price plus one or more surcharges. For the state fair vendor, adding a special souvenir wrapper or napkin to the corn dog makes acceptance of a higher price more likely by the shopper.
     Research findings from Adelphi University, University of Alabama-Huntsville, and University of Dayton suggest the following tips on using partitioned pricing:

• Partitioned pricing calls attention to each of the components for which a cost is stated. Use partitioned pricing to highlight what you see as benefits to the shopper: Expedited delivery. The budgeting aid from layaway plans. Knowing the product can be personalized.
• Do the partitioning so that the amount of each surcharge is no more than 20% of the base price. If any surcharge is a higher percentage, consumers will consider the entire pricing structure unfair.
• Compared to bundled pricing, partitioned pricing increases purchase intentions with items that carry financial or psychological risk. Partitioned pricing makes little difference in purchase intentions for routine purchases.
• The rules for e-tailing are a bit complicated: E-tailing customers get irritated when they can’t quickly and easily discover shipping or handling charges. So as a general rule, use partitioned pricing in e-tailing. But the research also finds that for e-tailing purchases of luxury items, bundled pricing works better.

     Later, the consumer psychologist gets a return call, only to find his buddy’s invitation was for an outing to buy a coon dog.

For your profitability: Sell Well: What Really Moves Your Shoppers

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Use Partitioned Pricing to Highlight Benefits
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