Thursday, March 16, 2017
Experience How Experience Is Price-Quality
The price-quality link is one example. Decades of research have clearly established that people purchasing a higher-priced alternative from a set with equivalent features generally expect to receive a more reliable embodiment of those features. When people buy at what they consider to be deeply discounted prices, they start out feeling the benefits are less than if they’d paid full price. They love having saved money, but as a rule, they are less in love with the item. And whenever they pay top dollar, they’re primed to believe what they’re acquiring is top quality.
Studies at University of British Columbia and China’s Cheung Kong Graduate School of Business document that, if these anticipations are violated, the price-quality link is not so much dissolved as it is twisted. After having consumed the item, people evaluate a low-quality product with a high price more negatively than the identical low-quality product with a low price.
Such violations are fairly common. 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 the many episodes in which low-cost items included the reliability of basics not seen in the over-the-top-priced alternatives.
When your customers come to you with the price-quality link intact, they are willing to pay you more for what they believe has higher quality. This occurs most easily with first-time purchases of the types of items behavioral economists call “experience goods” and “post-experience” goods.
The values of experience goods are difficult for the shopper to assess until they’ve been purchased and used for a while. Unfamiliar foods, innovative tools, gym memberships, and insurance policies are experience goods. Nutritional supplements and investment portfolios are examples of what are generally considered to be post-experience goods. These are items for which it is difficult to evaluate the advantages of having made the purchase even after the use. Because of this, the influence of the price-quality link lingers long after the first-time purchase, and the effect of the link depends heavily on the consumer being convinced of the quality of the items through advertising and salesmanship.
For your profitability: Sell Well: What Really Moves Your Shoppers
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Posted by Bruce D. Sanders, PhD at 9:00 AM