Question: if you graduate from bschool with the intention of setting...
- If you graduate from B-school with the intention of setting up shop as a consultant, how would you price your services?
- Watch the TV show The Price is Right to identify the psychological factors in pricing that affect the prices and contestants. Select and explanation which are the psychological factors based on the numbers.
There are eight kinds of so-called bias that are actually quite rational:
- • Price often serves as a cue to quality: For some products and services, higher price can make a purchase seem more appealing.
- • Consumers process absolute numbers and relative numbers differently: Consumers tend to compare the discount amount to the original price of the product. The greater the discount amount to the original price, the more likely it is that the consumers will act.
- • The contextual frame matters: This is explained using an example. If the customers have to choose between two holiday destinations, one priced at $499 and the other priced at $599 with a $100 discount when they book, they will prefer the $599 destination because they feel that it is of better quality and they will get more value for the same price.
- • Price discounts serve as mood inductions: Customers think they are smart shoppers when they get a good deal.
- • Prices ending in 9 (e.g., $4.99, $49.99) are more attractive to customers than prices ending in whole numbers ($5, $50) because the majority of customers read from left to right. They process the 4 first and think that the price is $4-ish rather than $5.
- • Consumers keep track of their spending—it is called mental accounting. They also rationalize compensatory or future purchasing, categorize their purchases and budgets within a particular category, and process alternative currencies (company loyalty programs that generate additional currencies that have fairly transparent monetary values and can be traded or given away).
- • Marketers frequently observe the “compromise effect” in consumers: The middle choice in a choice set is an attractive compromise between the two extremes.
- • Consumers work with referent pricing: When people evaluate a product’s price to determine whether the price is fair, they compare the price to some reference [either an externally available price or an internally (mentally) stored price].
Can someone help me answer these questions in detail? Thank you
This relates to the subject of marketing