Tuesday, April 23, 2013

Depend on Interdependency for Price-Quality

Consumers see a relationship between price and quality: If you purchase the higher-priced alternative from a set with equivalent features, you’ll receive a more reliable embodiment of those features. Research at Israel’s INSEAD and at Stanford University confirms that when people buy at what they consider to be deeply discounted prices, they end up feeling the benefits are less than if they’d paid full price.
     The price-quality link does yield to experience, though. Any consumer with a few years of purchases behind her can tell you about the high-priced national brand items she came across which were inferior to the discount-tagged house brands and how many low-cost items bring the reliability of basics not seen in over-the-top-priced alternatives.
     After looking into how the price-quality link functions in different societies, researchers at Indiana University and University of Illinois-Urbana/Champaign concluded that the link is strongest in the minds of consumers who are feeling they’re dependent on others. This could be because of cultural background. People who identify with collectivist cultures—such as from Greece, Portugal, South Korea, and the Asian and Pacific Island nations—rely on the price-quality link more than do people who identify with individualistic cultures like Australia, Canada, the Netherlands, the UK, and the U.S.
     Other studies suggest that you can strengthen the sense of interdependency, and therefore the power of the price-quality link, by bringing friends into the frame. Researchers at Hong Kong University of Science and Technology told study participants how much had been paid for a set of items—ranging from yogurt to computers—and then asked each participant to guess the quality of each item. In some cases, the study participant was asked to assume that she herself had made the purchase. In the other cases, the participant was to assume that a friend had made the purchase.
     With the purchases made by friends, there was a more direct relationship between the price paid and the assumed quality of the item.
     To strengthen the price-quality link in the shopper’s mind, a retail salesperson might talk about what other people have paid for the item in the past or what other suppliers are charging. This should be done in a way that highlights the good value offered by your store, and the information should be accurate. Another technique suggested by the researchers is to ask the customer what his friends would think of the product.

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

Click below for more: 
Inject Distance for Price-Quality Link 
Strengthen the Price-Quality Link 
Allow Modest Expectations of Discounted Products

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