HBS Note on Behavioral Pricing
My friend Shawn who's studying for his MBA in South Carolina sent me his thoughts on a paper published by the Harvard Business School press. I couldn't have agreed with him more.
Customers' perceptions of product pricing is a complex and difficult equation. The simple curve of supply and demand just does not fit into the complex factors present in the lives of consumers today as well as it used to.
With the success of the convenient store, shopping as entertainment, and the explosion of the merchandising industry, consumers have begun to appreciate and value the entire experience of a product. This experience can include the extremity of a good "deal" - whereas the purchaser bought something solely because alternate purchases would cost more, or for the amount of time required to purchase the product, among many other possibilities.
As the actual activity of shopping plays a more active role in consumers' minds and buying decisions, retailers, consumer product manufacturers, and service providers will need to revisit their strategies for maintaining competitive advantage, high margins, and customer satisfaction.
As I run my own company, I have many times run into a situation where my role as salesperson had a drastic effect on the customers' satisfaction. Even if the "deal" that the customer received was very good and generally unavailable at that price on the general market, if I delivered it without hesitation, it was perceived as having lower value than it actually did. Perhaps if I was feigned reluctance they would have been more satisfied in the end run. Sales and negotiation tactics really are related!
Customers' perceptions of product pricing is a complex and difficult equation. The simple curve of supply and demand just does not fit into the complex factors present in the lives of consumers today as well as it used to.
With the success of the convenient store, shopping as entertainment, and the explosion of the merchandising industry, consumers have begun to appreciate and value the entire experience of a product. This experience can include the extremity of a good "deal" - whereas the purchaser bought something solely because alternate purchases would cost more, or for the amount of time required to purchase the product, among many other possibilities.
As the actual activity of shopping plays a more active role in consumers' minds and buying decisions, retailers, consumer product manufacturers, and service providers will need to revisit their strategies for maintaining competitive advantage, high margins, and customer satisfaction.
As I run my own company, I have many times run into a situation where my role as salesperson had a drastic effect on the customers' satisfaction. Even if the "deal" that the customer received was very good and generally unavailable at that price on the general market, if I delivered it without hesitation, it was perceived as having lower value than it actually did. Perhaps if I was feigned reluctance they would have been more satisfied in the end run. Sales and negotiation tactics really are related!
posted by instoremarketer at 4:56 PM
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