03_Pricing and Branding

1. Introducing a lower quality item for comparison.

2. Makes another item appear superior.

1. Choosing a middle option between two extremes.

2. "Seems just right" attitude.

3. Common in consumer decisions.

Similar options compete with each other, Reduces the likelihood of either being chosen.

1. Preferences are context-dependent

2. Can lead to preference reversals

3. Influences marketing and pricing strategies.

1. Preferences are mostly constructed

2. People are more likely to make a decision if they can find a strong reason to justify it.

3. IIn a scenario where students were offered a vacation package before knowing their exam results, many chose to pay a small fee to postpone the decision until they had a clear reason (e.g., knowing their exam outcome).

4. The study demonstrated that having a justifiable reason (passing or failing an exam) significantly influenced the decision to purchase the vacation package.

What is evaluability?

1. The hypothesis suggests it is difficult to assess the value of an attribute independently.

2. Comparisons are needed for a well-informed decision, emphasizing the context-dependent nature of evaluations.

3. Example: Need for comparison when choosing between two smartphones with different features.

What is the choice overload hypothesis?

What are the effects of choice overload on consumption?

The study found that larger assortments led to lower purchase likelihood.

1. Consumers were more satisfied with fewer choices, suggesting that too much choice can be demotivating.

2. Example: 30% purchase rate with 6 jams vs. 3% with 24 jam

How was choice overload examined in the meta-analysis?

• The meta-analysis compared studies on large versus small assortments.

• Results were mixed, indicating that the impact of choice overload varies across different contexts and conditions.

• Example: Some studies showed less choice leads to more satisfaction, while others did not.

• But Food: More Variet y = More Consumption

What moderators influence choice overload?

• Cognitive processes, individual differences, and the number and type of available options all influence the effects of choice overload.

• Example: More options can be overwhelming for individuals with higher cognitive load.

What is the placebo effect in marketing?

• The placebo effect in marketing refers to the perception that higher-priced products are of higher quality.

• Belief in the product's effectiveness can enhance its perceived performance, independent of its actual properties.

• Example: Expensive wine tastes better than cheaper wine.

What role does price play in the placebo effect?

• Price plays a significant role, as expensive products are often perceived as more effective.

• Example: High-priced energy drinks perceived to improve performance more than cheaper ones.

What did the Waber, Shiv, Carmon, and Ariely (2008) study show?

• The study found that higher prices lead to better perceived results.

• Example: More puzzles solved when an energy drink was priced higher.

How does the placebo effect influence product performance?

• Perceived quality increases with price.

• Actual performance is influenced by expectations.

• Example: People report feeling more energetic after consuming a higher-priced energy drink.

What are the implications of the placebo effect for brands?

• Brands can charge higher prices, as consumers believe in higher quality.

• Example: Red Bull's premium pricing leads to perceived higher effectiveness compared to cheaper alternatives.