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Reference Pricing How Effectiv - Research Paper

Reference Pricing How Effectiv


There is a psychological theory that states that people for perceptions based on present and past stimuli (Helson, 1964). This has been extended by marketing academics to include the concept of reference pricing. They do this by stating that consumers, based on their previous exposure to products and their promotion - have an internal 'learnt pricing level that they believe is equitable for a given product (Jacobson & Obermiller, 1990). This essay examines the role of reference pricing in the pricing decision, and particularly the evidence on which this theory is based. It will be concluded that although the reference price provides a starting guideline for making the price decision - ...

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1993). The second major type of reference price is the internal reference price. These exist in the consumer's mind as either a point or a range of points (Putler, 1992). In either case, the reference price is used to evaluate the value of a price under consideration. The concept of the reference price is consistent with a number of psychological theories including adaptation level theory and assimilation-contrast theory (Kalyanaram & Winer, 1995).
Two important sides to the reference-pricing debate have emerged. Gijsbrechts (1993) takes a cognitive-based approach by saying he believes that it is important to examine three key areas. First, whether the reference price is a point or range. Second, determining how a consumer formulates the reference price (that is whether it is based on the highest, lowest median, etc.) and finally to examine how consumers store the reference price.
An opposing viewpoint takes the behaviorist's approach. These researchers (for example ...

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to be lower than necessary for consumers to have accurate internal reference prices for many products.

Gijsbrects (1993) disputes this and points out a number of reasons why. First, these studies concentrated on convenience, fast moving consumer goods. These goods tend to be low involvement goods, so the consumer doesn't take much note of the price of the product. Second the degree of pricing knowledge varies from consumer to consumer. Those with little price knowledge may have just begun to buy the product, while those who have extensive knowledge may have a very firm reference price. Finally, the lack of knowledge may simply be due to the encoding methods that the consumer uses ...

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PAPER DETAILS
Added: 4/27/2008 10:06:06 PM
Category: Miscellaneous
Type: Premium Paper
Words: 2173
Pages: 8

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