Imagine you are selling products or services in different price tiers, and you want to push sales for high-priced items.
How do you make high-price products more attractive without changing the price?
We will find out today…
When customers don't have a clue, they look for a cue.
Let us talk about price-quality inference.
This phenomenon very much means that if something has a higher price, people associate a higher quality with it, which justifies a higher price.
That is why consumers expect a bottle of wine for $10 is much better than a bottle for $1.
The price-quality inference effect is documented – but when does it work best?
When the product quality varies across alternative brands, people need to gauge the quality before purchase and refer to any indicator that might provide a cue for the quality.
Researchers found that people are more likely to apply "price-quality inference" when they perceive a large variance in the quality among product alternatives.
How can you make customers perceive that the quality of different products differs a lot?
There are two ways.
The first way is to make customers more sensitive to price differences.
The researchers found that customers have a local and global identity. They also found consumers are more sensitive to differences if the local identity is more salient.
In multiple experiments, the researchers found that consumers are more likely to relate prices to quality (as measured by a correlation coefficient) when their local identity is triggered.
The triggering can happen with subconscious measures like presenting related words on brochures or letting salespeople wear t-shirts with the wording.
The second way is to manipulate perceived price differences directly.
The researchers manipulated the variance in customer ratings.
When the ratings were more dispersed, customers perceived the quality to differ substantially and were more likely to draw price-quality associations.
What does this mean for you?
If you sell high-price products, you want to stress the perceived quality variance among products to make customers more likely to rely on price cues.
- You could make your customers' local identity more salient by including a reference to local communities in your ads (such as local symbols - like German pretzels - or adding message claims such as "think local").
- You could stress differences in product quality for alternative products (e.g., let experts evaluate product options, stress differences in customer reviews and online ratings)
If you are selling low-price products, you want to make price-quality inferences less likely to occur.
- You could activate your customers' global identity and refer to the global community (e.g., include global symbols or messages such as "think global").
- You could raise awareness of similarities across alternative brands (e.g., highlight converging and similar customer ratings).
References
Yang, Zhiyong, Sije Sun, Ashok K. Lawani, and Narayan Janakiraman (2019), "How does consumers' local or global identity influence price-perceived quality associations? The role of perceived quality variance," Journal of Marketing, 83(3), 145-162.