What Does Price Mean To The Customer ?

Good question and I would say the answer depends on the customer, to some it suggest product quality, to others it would mean lower quality etc in a nutshell it varies from one group of customers to another. I have done my own little research on the question and I got different answers.

I have mentioned those answers down below, I believe these answers would compel marketing lovers to look deeper into price, its influence on market, business, why does it carries different meaning to different customers etc.

And to know better, to understand further the underlying reasons, like why price meaning differ from one group of customer to another, I would recommend my readers to read the articles, sources given at the end of this article (in references).

Price & Customer

Quality Indicator

The higher the price the higher the quality, it might sound a little weird but if a customer has no idea about the brand, then in that particular case price-quality approach is the right approach for the customers to assess product/service quality. ⁽¹⁾⁽²⁾

Price Discount & Quality

According to another study, people consider the product/service discount in inverse relation to quality, the higher the discount the lower the quality and vice versa. ⁽³⁾

Price & Customer Loyalty/Satisfaction

Study has shown that if customers perceive price to be fair, reasonable then in that case it will improve customer loyalty and satisfaction and vice versa. ⁽⁴⁾

In other words the fairer the price the more loyal and satisfied the customer will be.

You may also like to read How To Set The Right Price

Symbol of Sacrifice & Expectation

Price paid is a symbol of sacrifice that a customer makes when paying for specific product/service. In other words money spent in buying one product is no longer available to spend for anything else the customer desire. ⁽⁵⁾

And perhaps for that very sacrifice customer expect a lot from the product/service, brand (especially if the price paid is significant).

Price & Customer Involvement

Study has shown that price can improve/increase customer involvement in your product/service. In other words the higher the price the more important the product/service becomes which pushes customer to get more information, understanding of the product/service. ⁽⁶⁾

Price & Customer Attraction

Price (particularly lower price) is remembered by the customers and can thus work as customer magnet, driving more customers (price oriented customers) to your business.

Price Anchoring & Buying Decisions

Prince anchoring (anchoring ⁽⁷⁾) occurs when customers use first price (provided by the seller) of a given product/service as a standard from where they negotiate or bargain for what they think is the reasonable, fair price for that particular product/service.

For instance a price told by a seller of a particular product/service to a customer is $450, the customer consider that price (as standard) and then quote their own price (for instance $380) for that particular product/service that he/she is willing to pay (Buying Decision). 

You may also like to read How To Price Luxury Items

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References:

1.      Eskin, G.E. and Baron, P.H. (1977), “Effects of price and advertising in test market experiments,” Journal of Marketing Research, Vol. 14, November, pp. 499-508

2.      Lichtenstein, D.R., Ridgway, N.M. and Netemeyer, R.G. (1993). Price perceptions and consumer shopping behavior: a field study. Journal of Marketing Research, Vol. 30 No. 2, pp. 234-45.

3.      Madan,  V.  And  Suri,  R.  (2001).  Quality  perception  and  monetary  sacrifice:  a  comparative  analysis  of  discount  and  fixed prices. Journal of Product and Brand Management, Vol. 10 No.3, pp170-82.

4.      Martin-Consuegra, D., Molina, A. and Esteban, A. (2007), “An integrated model of price, satisfaction, and loyalty: an empirical analysis in the service sector”, Journal of Product and Brand Management, Vol. 16 No. 7, pp. 459-468.

5.      Bass, F.M. (1980), “Some case histories of econometric modeling in marketing: what really happened?,” Interfaces, February.

6.      Kuang-Jung Chen, (1997),"The Filipino "tingui" retailing approach and cigarette price increase", Pricing Strategy and Practice, Vol. 5 Iss: 4 pp. 148 – 155.

7.      Tversky, A. & Kahneman, D. (1974). "Judgment under uncertainty: Heuristics and biases". Science, 185, 1124–1130.