Behavioral Economics Deck

Consumers have certain types of perceptions of price in correlation to the product quality and service; therefore, company should base their price on the customer’s perceived value (K&K). Some consumers are price sensitive, while others are quality or both. “The key to perceived-value pricing is to deliver more unique value than competitors and to demonstrate this to prospective buyers” (p.183). For example, Dish Network has introductory price for a year or two, then it bounces back to regular price. Also, the company offers different TV packages, which can be customized according to the station most watched or one can pick one of the package the company provides. I have been with Dish Network for more than 5 years and one thing that kept

I also agree with you in how you stated that the products price and value tie into one another especially when consumers are trying to determine what would essentially be the best option that meets their criteria of value. Likewise, it is important for companies to find significant and unique methods in which to make their product stand out and be the option of choice. Consumers want a product that is highly regarded but that also qualifies with price. They want to know that what they are paying for is of high standards and quality and worthy of the money being spent. Therefore, they look into every possible option to determine if the product meets brand loyalty and has the appeal to be different from their competitors items. You are

The key to successful pricing is to match the product with the consumer's perception of value.

Understanding behavioral economics will also help in making critical decisions like how much a person need to be saving, how much effort we need to put in our works and where we will choose to live in future.

According to Investopedia, it is simply “the worth that a product has in the mind of the consumer,” an influential point of consideration in his or her purchasing decision. Because most people hardly know the physical cost of manufacturing goods and services, they tend to rely on this abstract awareness to gauge the product’s significance, which in turn arbitrarily determines how much they are willing to pay for it. To further understand the distinction between real value and perceived value, University of Richmond business lecturer Joe Geiger presents the comparison of the $1 and $10 bills. He states that the bills are fundamentally indistinguishable: they are the same size, printed on the same type of paper with the same type of ink using the same labor and distribution processes. It is a basic truth, however, that one bill is worth more than the other. People still pay ten dollars for the $10 bill and only one dollar for the $1 bill, even though the factors which constitute each bill’s real value are identical. Through this scenario, Geiger reveals how customers pay based more on what they understand the value of the product to be and less on what it actually is, suggesting the importance for companies to recognize and place higher regard on the consumer’s evaluation of worth rather than their

Jerry Useem has indited, “How Online Shopping Makes Suckers of Us All” to show the online shoppers and readers of “The Atlantic” how price discrimination occurs. He has decided to verbalize about the quandary with online prices since there has been a elevate in the number of online shoppers. In the article, “How Online Shopping Makes Suckers of Us All,” Jerry Useem commences off by expounding how the prices of certain products vary depending on when the customer optically canvasses the product. To integrate on, he goes on to apprise the audience that in the past, buyers and sellers would have to go through haggling in order to get the best deal possible, he then compares the haggling to how people get the best deals now. Furthermore,

In other words most people would prefer to pay more and buy a more expensive product thinking that by paying more it is also superior to the other products of the same category that are cheaper. However, although the phrase “you get what you pay for” might have some validity in it that is not always the case, due to the fact that sometimes the products that might be cheaper are just as good as the competitor brand which has a higher price. In this instant it would be logical to buy the cheaper product however most human beings would opt for the expensive product, assuming that it is of better quality than the cheaper product. On the other hand, Dan Ariely rebuffs this claim and states, “We choose what we like, not what's best.” Sometimes humans don’t make decisions based on their preferences; instead they choose what they want and that leads to a process of rationalisation in order to get what they really want. However, they still want to give the impression that they were acting according to their preferences.

Reports.) But for most of us price matters, especially in a case like this, where the

3. Depreciation: The moment a product is sold it is considered as used product and price of the product is less. There are some exceptions to this rule as land; gold etc. usually appreciates over time. For other products customers are actually buying products that will depreciate over time.

Customers promenade the open, free aisles in a quest to locate special deals. Furthermore, customers are searching for valuable “hot” coupons hidden on products or on shelves like pirates looking for a chest of precious rubies and emeralds hidden in a secret cave. In these aisles, packages radiate their vibrant, glowing colors displaying fireflies of yellow, orange, red, and green. Furthermore, inside of the walls of the supermarket aisles is where couponing itself is put to the test. For example, one necessity for the American household usually includes shampoo. Although many customers choose a store brand or an inferior brand since it is the supposedly cheaper price, with couponing premium shampoos become the cheaper – and often better quality – choice. It is true that Equate shampoo may cost only $1.00 while Pantene shampoo retails for $3.83, but, once Pantene goes on sell for $1.99, a shopper is able to stack a $2.00 off one coupon to make the Pantene shampoo a one cent “money-maker”. Consumers then repeat this shopping method to become successful in spending only pocket change for a copious amount of essential household goods, relieving Americans’ weekly financial burden of having to scrape together scraps of money for

Behavioral economics is “a method of economic analysis that applies psychological insights into human behavior to explain economic decision-making” according to the Google dictionary. This type of economics concludes that people behave irrationally in certain ways. People are neither entirely rational nor entirely irrational, rather their behavior shows a combination of the two. Contrarily, traditional economics assumes that people will make entirely rational decisions, which allows economists to simplify behavior into a model. Juxtaposing the assumption, the coffee mug experiment showed that people behave irrationally in certain cases.

Value pricing is used where external factors such as recession or increased competition force companies to provide ‘value’ products and services to retain sales.” The

According to Sheth et al (1991), the customer perceived value has five dimensions including functional, conditional, social, emotional, and epistemic values. This value derived from the behaviour of the customer and overall purchasing criteria. Furthermore, this dimension clearly illustrates the ability of the customer to choose whether to continue buying the product or vice versa.

Quite often, consumers purchase goods and services based on their perceived need. Upon making the decision that a need is present and a solution is available consumers are more equipped to react to that need. Although previously perceived that consumers will normally accept prices as presented by suppliers that remains to not be the case. Consumers assess and process prices based on past purchases and other psychological process they went through previously such as persuasive marketing strategies, accessibility of the goods or services and possibly information gathered from prior purchasers of a product. There are countless options that are available to consumers. Consumers are then faced with the choice of choosing the product that best fulfills their need at that given point. Consumers who are knowledgeable regarding prices will be aware of the approximated price for products (Zhao, Zhao & Deng, 2015).

Keeping these realities in mind, it is very much obvious that for this market, we choose and follow a value based pricing and do not keep the price of the product too high. It is advisable rather to follow an average pricing and let the consumers build some enthusiasm around the product.