Imagine you sit in front of your screen, and you design the visual for your price. For example, you are selling dental floss. You can present the price above the product or below the product.
What should you do?
We will find out today.
You can present the price for your product above the product or below the product.
What makes the difference, and how does it work?
The chain of arguments is as follows: Whether the vertical price location – i.e., the price is either presented as "low" (= price is located below the product) or "high" (= the price is positioned above the product) has an impact on the customers' price perception (i.e., whether the price is perceived as low or high – in this study actually as low… or lower 🙂 ), follows two stages.
In the first stage, people recognize that the price is physically located at a "low" or "high" position and attach a meaning to it. Customers get away with the thought of "lowness" or "highness" (based on the visual cue: the price position).
In the second stage, consumers use this meaning to evaluate a price. To reduce uncertainty about the buying decision, they use whatever piece of information they find. In our case, the meaning of "lowness" or "highness" is transferred to the evaluation of the price – as either low or high.
Interesting... and when are consumers more likely to associate a low position with a meaning of low?
The first stage happens if customers have a high sense of power. A high sense of power means that "consumers feel relatively powerful or powerless." (p. 1192)
Another piece of research found that "individuals with dominant personalities are more sensitive to vertical space and respond more quickly to visual cues presented on the vertical axis." (p. 1194)
"These findings suggest that consumers experiencing high power states should be more perceptually attuned to the vertical location of a price." (p. 1194)
When do they use the price position to evaluate a price itself?
It depends on the consumer's personal need for structure, and it starts with judgmental uncertainty.
"Individuals may vary in their threshold for tolerating judgmental uncertainty." (p. 1194). Consumers might be unsure about something. For example, whether a price is high or low.
"For instance, people with a high personal need for structure are particularly motivated to reduce uncertainty in their decision-making as a means of increasing structure and control in their lives." (p. 1194)
"Consequently, consumers who are high in personal need for structure should exhibit a reliance on inputs that enable them to impose structure on judgments involving targets that are difficult to evaluate. (...) For example, when evaluating a target price in the absence of any comparison standard." (p. 1194)
We see if people experience judgmental uncertainty, they use additional structure to reduce uncertainty. Those consumers with a higher personal need for structure are more likely to take the vertical position of a price to evaluate the price itself.
How did the researchers find out?
The researchers conducted a couple of studies, and they checked how consumers with a low or high personal need for structure and with a low or high sense of power would evaluate a price and its perceived price lowness differently when it was positioned low (below the product) or high (above the product).
They found that only if both conditions were fulfilled – i.e., a high personal need for structure and a high sense of power –, only in this case, a low price position was perceived as significantly lower. (Higher scores mean that consumers perceive the price as lower as the scale measures "price lowness.”)
Okay, that's very interesting. But how do I make it work?
First, we can address these customers with different targeting mechanisms that are available to you – for example, in online marketing. We can look for customers with specific demographic and occupational profiles, such as a high household income or more affluent ZIP codes, or a specific occupational situation.
Research confirmed that consumers are more likely to have a high sense of power when they feel higher in an (organizational or societal) hierarchy.
Similarly, for a high need for structure, research found that these customers are usually older and more conservative.
This is how you find them.
Second, you can trigger a high sense of power and a need for structure.
For example, to trigger a high sense of power "firms may also be able to employ our findings in developing traditional and point-of-sales advertising that can encourage price location effects. For instance, certain messages (e.g., Nike's "Just Do IT" slogan, Blue Diamond Almonds' "Crave Victoriously" tagline) are likely to make consumers feel powerful." (p. 1200)
If you have a message that makes customers feel more powerful, this effect might work.
Furthermore, you can also trigger the personal need for structure. "Similarly, presenting information that calls one's attention to how orderly and systematic an object is can prime thoughts of structure (…). In the present context, using in-store displays that arrange products in a logical, systematic manner can activate consumers' need for structure." (p. 1200)
We have two different ways how we can make this effect work: We find the right customers, and we make them more likely to feel powerful and feel the need for structure.
What did we learn today?
We found that if you present a price below the product, customers might perceive it as low.
First, you need customers with a high sense of power. These customers are more likely to think in terms of hierarchies and more likely to recognize this visual cue.
Second, you need customers would take this visual cue of “highness” or “lowness” to evaluate a focal price. These customers are those with a high need for structure to reduce their decision uncertainty.
Third, we also learned that some demographic, occupational, and attitudinal profiles are linked to either dimension, which allows specific targeting.
Fourth, in addition, we can actually even trigger a high sense of power or a personal need for structure.
Barone, M. J., Coulter, K. S., Kulow, K., & Li, X. (2022). Location, location, location: When and how low price locations improve consumer price perceptions. Psychology & Marketing, 39(6), 1190-1203.