{"id":4612,"date":"2013-06-14T17:10:50","date_gmt":"2013-06-14T17:10:50","guid":{"rendered":"http:\/\/www.vanderbilt.edu\/magazines\/vanderbilt-business\/?p=4612"},"modified":"2015-07-17T13:40:21","modified_gmt":"2015-07-17T13:40:21","slug":"when-is-cheap-not-cheap","status":"publish","type":"post","link":"https:\/\/blogs.owen.vanderbilt.edu\/vanderbiltbusiness\/when-is-cheap-not-cheap\/","title":{"rendered":"When Is Cheap Not Cheap?"},"content":{"rendered":"

Lowest prices of the year! Markdowns! Exclusive Dealer! Top Quality! <\/strong>We\u2019ve all been exposed to them\u2014the marketing strategies promising bargains or high value. Yet as alluring as those pitches can be, consumers draw very different\u2014and sometimes contradictory\u2014 conclusions when it comes to sale prices or value. To make it even more challenging, consumers often fill in gaps in their knowledge by drawing inferences about products.<\/p>\n

New research co-authored by Steve Posavac, the E. Bronson Ingram Professor in Marketing, finds that in some consumers\u2019 minds, price denotes quality. Yet for others, low price leads a consumer to believe he or she is getting a good value.<\/p>\n

\"Steve<\/a>
Steve Posavac<\/figcaption><\/figure>\n

\u201cConsumers rarely have complete information and use various strategies to fill the gaps in their knowledge as they consider and choose products,\u201d the researchers wrote in an article published in the April 2013 Journal of Consumer Research. \u201cOne of these strategies involves using naive theories: informal, common sense explanations that consumers use to make sense of their environment. For example, consumers may believe that popular products are high in quality while also believing that scarce products are high in quality.\u201d<\/p>\n

Posavac and collaborators H\u00e9l\u00e8ne Deval, Susan P. Mantel and Frank R. Kardes found that consumers use a series of theories when considering value and price. How they size up a possible purchase depends on what is on their mind when they\u2019re thinking about a given product\u2014 something marketers need to take into account when crafting ads, marketing strategies and promotions.<\/p>\n

Price vs. Quality Experiments<\/h3>\n

The researchers conducted eight experiments that tested marketing techniques that leaned toward price or quality. In one experiment, consumers were shown an ad for a bottle of wine with either a high or low price. When subtly reminded of quality, consumers evaluated the expensive wine more favorably than the cheap wine. However, when subtly reminded of value, they rated the cheap wine more favorably.<\/p>\n

\u201cIn the case of price, most people simultaneously believe that low prices mean good value and that low prices mean low quality. But these two beliefs are not equally present in consumers\u2019 minds all the time,\u201d the authors wrote. In short, people can hold opposing beliefs about the same product.<\/p>\n

When Product Marketing Backfires<\/h3>\n

Sales promotions succeed when consumers perceive that they are getting a good deal, but they can also backfire if consumers perceive that lower prices indicate poor quality. And if the company makes assumptions that one naive theory guides consumers, they run the risk that the strategy could actually cause a decrease in sales and perceived value. \u201cFor example, a marketer who feels that low prices signal value may go all in on a low-price strategy in an attempt to drive sales but may succeed only at reducing brand value and alienating consumers if a substantial percentage of the firm\u2019s customers believe that low prices are commensurate with low quality,\u201d they wrote.<\/p>\n

Posavac and his fellow researchers cite retailer J.C. Penney as an example. The company moved to a new strategy of abandoning sales events in favor of everyday low pricing. However, J.C. Penney customers had been so conditioned to the naive theory that sales promotions signified good deals that the absence of such events was taken by many longterm customers to mean that there were no longer opportunities to get good deals\u2014and sales dropped.<\/p>\n

\u201c[Companies] design a strategy by assuming that a certain naive theory is going to drive consumer evaluation and choice when, in fact, several naive theories are available to the consumer,\u201d the authors conclude. So what\u2019s the best strategy? The authors suggest that, in practice, marketing communications that set the stage by suggesting a given naive theory\u2014quality, for example\u2014and then make a product appeal in keeping with that theory will have the best results.<\/p>\n","protected":false},"excerpt":{"rendered":"

We\u2019ve all been exposed to them\u2014the marketing strategies promising bargains or high value. Yet as alluring as those pitches can be, consumers draw very different\u2014and sometimes contradictory\u2014 conclusions when it comes to sale prices or value. <\/p>\n","protected":false},"author":341,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[66,12],"tags":[50],"class_list":["post-4612","post","type-post","status-publish","format-standard","hentry","category-departments","category-inside-business","tag-spring2013"],"_links":{"self":[{"href":"https:\/\/blogs.owen.vanderbilt.edu\/vanderbiltbusiness\/wp-json\/wp\/v2\/posts\/4612","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.owen.vanderbilt.edu\/vanderbiltbusiness\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.owen.vanderbilt.edu\/vanderbiltbusiness\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.owen.vanderbilt.edu\/vanderbiltbusiness\/wp-json\/wp\/v2\/users\/341"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.owen.vanderbilt.edu\/vanderbiltbusiness\/wp-json\/wp\/v2\/comments?post=4612"}],"version-history":[{"count":1,"href":"https:\/\/blogs.owen.vanderbilt.edu\/vanderbiltbusiness\/wp-json\/wp\/v2\/posts\/4612\/revisions"}],"predecessor-version":[{"id":8735,"href":"https:\/\/blogs.owen.vanderbilt.edu\/vanderbiltbusiness\/wp-json\/wp\/v2\/posts\/4612\/revisions\/8735"}],"wp:attachment":[{"href":"https:\/\/blogs.owen.vanderbilt.edu\/vanderbiltbusiness\/wp-json\/wp\/v2\/media?parent=4612"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.owen.vanderbilt.edu\/vanderbiltbusiness\/wp-json\/wp\/v2\/categories?post=4612"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.owen.vanderbilt.edu\/vanderbiltbusiness\/wp-json\/wp\/v2\/tags?post=4612"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}