Psychological Price Profile

Author Dr. Florian Bauer is the co-founder of Vocatus AG, a Munich based market research and consulting firm, and a world-renowned researcher in the fields of pricing, customer satis­faction and image analysis. He can be reached at florian.bauer@vocatus.de.

Price interest, price knowledge, and price assessment are fre­quently far more important for the purchase decision than the absolute price level. It is above all crucial to understand the actual course of the decision process in order to make corre­sponding adaptations when conceiving the project. Standard methods such as conjoint analyses are often indispensable, yet in the case of multi-stage decision processes they do not necessarily lead to valid results.

Consumers don’t always react rational­ly to prices, like the academic “homo-economicus”. For example, prices are spontaneously felt to be appropriate or inappropriate, or serve as the basis for decisions even though actual knowledge of reference prices is often limited. This is why a sound knowledge of decision psychology can be very helpful when ini­tially establishing prices, altering them, or developing price models.

Crucial Variables

Price interest, price knowledge, and price assessment are the crucial vari­ables that differ in accordance with the products and markets that are under in­vestigation. Many surveys show that the customer is frequently far less fixated on the absolute price level than companies suspect. Instead of the absolute price, it is far more the case that aspects such as “being treated properly” or “not being disadvantaged” are to the forefront of customers’ needs.

Whereas the absolute price level is thus often of somewhat minor importance, the pricing structure is an important variable for companies. Current pricing research surveys demonstrate that peo­ple are regularly unable to estimate the effective price when dealing with more complex pricing structures. It’s very of­ten asking too much of respondents in the research situation to undertake ratio­nal comparisons, and a similar effect is also apparent when it comes to complex pricing structures in real life.