When Will You Use This?
Identifying effective pricing strategies for different groups of customers.
What’s The Red-Letter Bite Today?
Discriminatory pricing is a common practice today but it can also induce a sense of price unfairness with one’s customers. For example, when your customer finds out that she is paying more than another individual, she may become upset and perceive unfair treatment, leading to complaining, negative reviews, decrease in purchase behavior, etc.
Current series of experiments* explore how the power state interacts with comparative references in shaping consumer perceptions of price unfairness. The evidence supports the fact that high-power consumers perceive stronger price unfairness when paying more than other consumers do, while low-power consumers perceive stronger unfairness when paying more than they themselves paid in previous transactions.
The distinction occurs because consumers experience a threat to their self-importance from different types of disadvantaged comparisons depending on their power states.
Addition To Your Bag of Tricks
You might first ask now how do I differentiate between high power and lowe power people?
Well, authors suggest an idea, saying: “although market segmentation can be performed based on variables that are highly correlated with the chronic sense of power (e.g., high vs. low socio-economic status), it is also possible that feelings of power can be easily and unobtrusively activated in the real world: for example, a psychological state of power can be induced by being exposed to words and advertisements (Rucker et al. 2011) related to power. Therefore, marketers can effectively change consumers’ relative sensitivity to different comparative standards by providing environmental cues that can momentarily shift individuals’ current state of power.”
It is important to identify effective pricing strategies for different groups of customers. As authors note, “ compared with high-power individuals, low-power individuals may need a stronger justification for price increases, but at the same time, the relative insensitivity of these consumers to other-comparisons may be helpful when firms provide differentiated products to different groups of customers.”
Also, when marketing to high-power customers, one can better elicit preference by highlighting the special treatment that they are receiving in relation to other customers.
*Liyin Jin, Yanqun He, and Ying Zhang. “How Power States Influence Consumers’ Perceptions of Price Unfairness.” Journal of Consumer Research: February 2014. {Thanks for the material}
Well, authors suggest an idea, saying: “although market segmentation can be performed based on variables that are highly correlated with the chronic sense of power (e.g., high vs. low socio-economic status), it is also possible that feelings of power can be easily and unobtrusively activated in the real world: for example, a psychological state of power can be induced by being exposed to words and advertisements (Rucker et al. 2011) related to power. Therefore, marketers can effectively change consumers’ relative sensitivity to different comparative standards by providing environmental cues that can momentarily shift individuals’ current state of power.”
It is important to identify effective pricing strategies for different groups of customers. As authors note, “ compared with high-power individuals, low-power individuals may need a stronger justification for price increases, but at the same time, the relative insensitivity of these consumers to other-comparisons may be helpful when firms provide differentiated products to different groups of customers.”
Also, when marketing to high-power customers, one can better elicit preference by highlighting the special treatment that they are receiving in relation to other customers.
*Liyin Jin, Yanqun He, and Ying Zhang. “How Power States Influence Consumers’ Perceptions of Price Unfairness.” Journal of Consumer Research: February 2014. {Thanks for the material}
P.S. When you’re done reading, I’d love for you to share your experience with the discriminatory pricing? Leave a comment or Tweet me, let's chat!
P.P.S. Need some help on crafting your marketing message? Let's do this together.
