Some time ago you learned about a psychological pricing effect called “price-quality inference”.
This phenomenon very much means: if something has a higher price, people associate a higher quality with it, which in turn justifies a higher price.
For example – what do you think? Is a bottle of wine for $2.99 of the same quality as a bottle looking very much the same but priced at $11.99?
You conclude this effect is very neat and you wonder when this effect works best.
Yang et al. (2019) found that people are more likely to apply “price-quality inference” when they are reminded on the their local identity and when the quality of similar products actually varies across brands.
People have a more pronounced local or global identity. When the local identity is salient, people identify themselves with their local communities, are respectful of local traditions, and are interested in local events. When the global identity is pronounced, consumers perceive the world as “global village” and view themselves as “global citizens”.
When the product quality varies across alternative brands, people have a greater need to gauge the quality before purchase and refer to any indicator that might provide a cue for the quality – such as the price of a product (or service).
What does this mean for you?
If you are selling high-price products,…
- … 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 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)
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.