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A trick to making a product seem less (or more) expensive

How can you make a product appear less expensive?

Conventional wisdom says to group it with higher-priced items. But a study co-authored by Jeffrey Shulman finds just the opposite—under the right conditions.

“It’s important for marketers to understand the mechanisms driving consumers’ price evaluations, so they can improve product-assortment strategies, product-line pricing and promotional strategies,” says Shulman, assistant professor of marketing at the University of Washington Foster School of Business.

In three experiments, Shulman and Marcus da Cunha of the University of Georgia demonstrate that marketers can effect consumers’ price evaluations by the way they price and promote a new product in relation to its competition.

When advertisements or displays prompt consumers to think generally about the product category rather than to discriminate the distinguishing features of a particular product, they tend to perceive that product as more expensive when grouped with higher-priced items and cheaper when grouped with lower-priced items.

The company you keep

To illustrate the effect, Shulman offers a new portable media player as an example. Let’s call it the “MuVi.”

An ad campaign or in-store display could emphasize the unique features of this new product—the ability to record in high-quality digital, or a menu of AV-editing options. This would stimulate in consumers a discrimination mindset—focusing on the features that differentiate it from the competition.

An alternative campaign or display could emphasize that this new product has all of the features you expect from a portable music player in its class—wifi capability, color touchscreen, video playback, a radio receiver, advanced playback features, etc. This approach stimulates a generalization mindset—focusing on the features common to all products in the category.

Now consider Jen, who is in the market for a media player. She’ll consider the MuVi and wonder whether its price of $148.98 is a good value. And this evaluation will influence whether or not she buys it.

Marketing orthodoxy says that presenting the MuVi alongside higher priced devices will make it appear to Jen to be less expensive. And Shulman and da Cunha’s study confirms this long-held axiom—if Jen’s mind is discriminating.

But they also found something new. If Jen is thinking more generally about the features of portable media devices—a condition that can be prompted by marketing—she will see the MuVi as less expensive when it is presented in the context of less expensive competitors.

Synchronize price and promotion

The bottom line, Shulman says, is that marketers need to be aware that comparative versus non-comparative advertising and promotion activate opposing mechanisms of processing in consumers. This can lead to very different price judgments and, ultimately, inclinations to buy.

Mix the messages of promotion and pricing, and marketing strategies may backfire.

“When introducing changes to the product assortment, marketers should recognize the effects of other situational factors on judgments of prices,” Shulman says. “In-store displays, advertisements or a sales person may trigger distinct processing goals and influence how consumers reach a price judgment.”

Assimilation and Contrast in Price Evaluations” is published in the February 2011 Journal of Consumer Research.