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  • Writer's pictureDr. Gary Witt

Price Establishes Perceived Quality

You are willing to pay more for Ben & Jerry's Ice Cream than Safeway Ice Cream because of the perception that the quality of Ben & Jerry's is better. People expect to pay more for quality, and usually they are perfectly willing to do so. In fact, many people use price as a major indicator of quality. "If that coat costs $5,000, it must be terrific!" “If that attorney charges $400 an hour, he must really be good!”

Consumers do set limits on this type of judgment. When the price exceeds this personal upper limit, it is judged too pricy, like a $1500 an hour attorney. And when it dips below the lower end, it is evaluated as being too poor a quality to purchase, like the hotdogs that come shrink-wrapped at 20 for $2.00.

Of course, price isn't always the yardstick for judging quality. When independent, unbiased sources of information and opinion are available, such as Consumer Reports, a Five Diamonds or AAA sign, a newspaper review, and so on, they will often be used alongside price in the buyer's analysis of quality, along with their own personal judgment and the opinion of friends. That’s why consumers like websites that allow customer Reviews of their products. We will trust the judgments of people we don’t know over the statements of the company making the product we are going to buy!

The price you charge for your product or service will most readily be used by your buyers as a yardstick for quality when . . .

  • Experience or "common knowledge" leads them to believe that price is a good predictor of quality in your product class. Example: automobiles.

  • There are perceived variations in quality among brands. Example: computers.

  • Quality is difficult to judge in other ways (such as a brand name, store reputation, feel, smell, independent report or review.) Example: lawyers.

  • Buying the best quality for the money is more important than other purchase considerations (such as brand loyalty, brand image, time or availability constraints, etc.) Price is an important consideration.

Many studies suggest that the lowest price or the best "price-quality" ratio aren't always the major consideration. As long as the price of an item falls within a particular range of acceptable possibilities, price is not the biggest factor in the purchasing decision (for example, for products like gum, hamburgers, toothpaste, gas, auto repairs, CDs, small gifts.) Other factors also play a role in determining overall Value.

We usually fill up at the same gas station, even if we could save a few cents by looking around. The same is true of our supermarket, dry cleaners, and countless other stores. Familiarity, personal relationships with store employees, time savings, reduction of frustrations, comfort, and other factors also play a role in the complex decision making that precedes buying.

However, even though studies show that price is often 4th or 5th in terms of importance in making a purchase decision, it is still often the DECIDING FACTOR! Why? Because the top two or three choices are all judged “about the same” on all other factors that are more important than price. So price becomes the deciding factor.

When you understand how consumers use price in judgment and buying decisions, you have a better opportunity to use it as a way to manipulate consumer perception of quality, rather than just cut price and hope for the best!

Read more about using Price to influence buyers, click here.

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