Document Detail

Pricing and the psychology of consumption.
MedLine Citation:
PMID:  12227149     Owner:  NLM     Status:  MEDLINE    
Most executives know how pricing influences the demand for a product, but few of them realize how it affects the consumption of a product. In fact, most companies don't even believe they can have an effect on whether customers use products they have already paid for. In this article, the authors argue that the relationship between pricing and consumption lies at the core of customer strategy. The extent to which a customer uses a product during a certain time period often determines whether he or she will buy the product again. So pricing tactics that encourage people to use the products they've paid for help companies build long-term relationships with customers. The link between pricing and consumption is clear: People are more likely to consume a product when they are aware of its cost. But for many executives, the idea that they should draw consumers' attention to the price that was paid for a product or service is counterintuitive. Companies have long sought to mask the costs of their goods and services in order to boost sales. And rightly so--if a company fails to make the initial sale, it won't have to worry about consumption. So to promote sales, health club managers encourage members to get the payment out of the way early; HMOs encourage automatic payroll deductions; and cruise lines bundle small, specific costs into a single, all-inclusive fee. The problem is, by masking how much a buyer has spent on a given product, these pricing tactics decrease the likelihood that the buyer will actually use it. This article offers some new approaches to pricing--how and when to charge for goods and services--that may boost consumption.
John Gourville; Dilip Soman
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Publication Detail:
Type:  Journal Article    
Journal Detail:
Title:  Harvard business review     Volume:  80     ISSN:  0017-8012     ISO Abbreviation:  Harv Bus Rev     Publication Date:  2002 Sep 
Date Detail:
Created Date:  2002-09-13     Completed Date:  2002-10-21     Revised Date:  2004-11-17    
Medline Journal Info:
Nlm Unique ID:  9875796     Medline TA:  Harv Bus Rev     Country:  United States    
Other Details:
Languages:  eng     Pagination:  90-6, 126     Citation Subset:  H    
Harvard Business School, Boston, USA.
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MeSH Terms
Commerce / economics*,  organization & administration
Consumer Participation / economics*,  psychology
Cost-Benefit Analysis
Fees and Charges
Product Line Management / economics*
Psychology, Social
Time Factors

From MEDLINE®/PubMed®, a database of the U.S. National Library of Medicine

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