Posted at 11.26.2018
Consumer understanding of quality and price dominate the buying behavior and product choice (Bishop, 1984). Perception is the procedure where individuals choose, interpret and coordinate information to make a important picture of the world (Peter Lindsay and Donald, 1977). While reality is what consumer has scarified to obtain a product (Ahtola, 1984). It means the amount of money customer actually pay to owner in substitution for products and services.
Various articles and studies have been specialized in understand the phenomenon of perception, how it impacts consumer behavior and its own importance over actuality of price. However, there's a disagreement on the linkages between them and the study efforts on notion have been criticized for inadequate explanation and inconsistent way of measuring types of procedures (Monroe and Krishnan, 1985).
Before going into the discussions of understanding and reality, it is important to comprehend the why belief is important in consumer decision making. A growing body of research facilitates the difference between price perception and price (Allen Harrell and Hunt, 1976). Studies have shown that consumers generally don't bear in mind the actual prices. However they encode prices in various ways (Dickson and Sawyer, 1985). For example, people buy expensive perfumes like Chanel whenever there are there low price alternatives available for sale. The reason is not the perfume itself only but the perception of the merchandise they had at heart about any of it. They relate it with other psychological features that they have in their heads. Included in these are the appreciation by other folks, special image they will have in the contemporary society and many more. The key point is here now is the fact that perceptions can be created about the purchase price based on different factors which have nothing in connection with reality.
The price information and understanding has been one of the most crucial research issues on the consumer behavior for previous many years. The concept of reference point is vital in this respect and initiatives have been made in order to define it. According to (Lowengart, 2002) consumers set up their reference details according with their personal understanding, annotations, the existing knowledge of prices and their subjective interpretation. The reference point points are reliant of two factors: the kind of information i. e. external or internal and behavioral process of formation of recommendations.
The internal research point comes from the consumer estimation of price in his mind's eye. Both factors contextual and temporal get excited about this formation. The first factor relates to the notion of different prices within the same category of product while buying. The temporal factor depends upon the past buying activities of the customer. The need for both these factors ranges in line with the customer's characteristics. For example, consumer who purchased the one product more frequently will remember its price more obviously and therefore temporal factor will be more important (Rajendran and Tellis, 1994).
External information comes from the marketing and internal form other sources. It means any message of the price consumer will get through external route and which he uses to make comparisons. Owner can control the exterior information by the marketing work i. e. through advertising and some internal factors may be beyond their control. But the information must be credible so that the consumer can use it to make his evaluation of the merchandise (Yadav and Seider, 1998; Chandrashekaran, 2004). Research uncovers that external guide price is related to the contextual component that affects the inner guide price. Hence knowledge of one impacts the other and these principles are meticulously related. The exterior reference point could possibly be the price recommended by owner on the product's packaging, or the brand which is more often purchased or the price tag on the dominating brand. The primary goal of the external reference point point is to boost the internal research price so that customer perceive existing price as attractive and purchase the product
(Cebollada and Mugica, 1997; Compeau et al. , 2004).
However, how internal and external reference points will influence consumer vary in line with the preferences and rate of recurrence of the product purchases. Relating to (Winer's, 1986), there is no distinction between internal and external reference prices. However, other researchers like Bell and Bucklin (1999) and Mazumdar and Papatla (2000) differentiates between external and internal reference point prices and their significance in buying decisions.
The above dialogue about the role of notion shows that why it is so important.
According to Mazumdar et al. (2005), there will vary factors which dominate the imagination of consumers when they made a decision to purchase something. These include the understanding of quality, price, reliability and service by consumers. For instance, consumer recent purchase encounters may influence their perceptions. In addition, customers may favor low prices in one situation while they may prefer quality in other. For example, nourishment and quality is more important than price for the American consumer when buying food based on the research conducted by Braun Research Group. Another research on companies by like banking companies and airlines market sectors indicates the fact that customer service is more important than price. The actual fact that which factor is most important to consumer while buying is a matter of it's notion of good and service. Thus, understanding plays a central role to make purchase decision.
According to the research done by OC & C Strategy Consultants, belief of price is clearly more relevant factor in purchasing decision than truth. Research was conducted in five countries to measure the level to which belief of price is very important to stores. Three factors were recognized which are responsible for price belief. The first one is the quality with which price is communicated, second is price communication on entrance points and the 3rd is overall environment. The research indicated the actual fact that the stores who are perceived as more expensive than others cannot compete effectively on the market.
The following true to life examples will illustrate the fact that how belief of price is more important that reality. A study conducted by (OC & C Strategy Consultants, 2007) on basic level price communication difference of Zara and H&M is a good example. Based on the review, Zara was found to be 31% more expensive than H&M, but the customers' perception of this difference quite low as compared to the actual body. This shows the Zara's potential to manage its conception through effective and clear communication of prices. They have prevailed in portraying their prices as almost equal to competition but in actual their prices are relatively high. The magic of perception has worked effectively in cases like this which reveals the importance of perception the consumers.
Another basic example is the analysis done on the price notion of Argos (super store, UK) which ultimately shows the way they have been able to build their price belief that is preferable to reality. They have got been able to converse their price position in a way that brings about a cheaper price belief than truth. Their advertising strategy was price focused along with visible supply of inexpensive goods to be able to make a cheap price perception of the goods. In this manner, the have had the opportunity to portray themselves as low-priced when compared with competitors while the reality may vary. However, the company has to work continuously to be able to keep up that belief.
According to Mazumdar et al. (2005), the store environment also plays an important role in conception. For instance, if we look at the grocery sector, prices almost always are identical. In the end, it's the perception which concerns. A number of studies have been done on the grocery industry calculating the degree to which understanding plays a role in the purchasing decision. For example, Asda did well in this regard by creating its notion as less expensive than the challengers. Another example is of Morrison which is in fact bill high prices as compared to its competitors but the fact that it's expensive is used too softly by the customers because of its good belief. These examples plainly reveal the facts about the role which conception of price play over the reality.
Up till now, I've given examples related to the consumer markets. However, this notion of conception is not limited by the consumer market segments only, it works evenly well for the professional marketplaces as well. Recent research done by B2b International on the role of conception in industrial market segments indicates critical role that conception plays in identifying the supplier selections. The factors which are relevant in determining the supplier change from company to company however the perception takes on central role in the choices of suppliers made by companies.
Consumer perceptions around the world will vary and it differs significantly for country to country. For instance, US consumers don't perceive retailers as the best choice while the conception of retailers in UK is strictly opposite. There may be quantity of different reasons for the united states specific perceptions of the consumers. These broadly include the economic conditions encircling the countries, rate of literacy and many more. One important factor which is worth mentioning here's demographics such as income, era etc. It's been detected that demographics do influence the way people perceive information. This is actually the factor which is utilized for market segmentation by the marketers. Different market segments are targeted relating with their demographics by the retailers in order to produce positive perception about the company. From the above point out facts it is noticeable that whatever the reasons are, understanding always plays key role in consumer collection of goods and services.
The above conversation about the role of price understanding is enough data to conclude that perception is directly related to the success of the company. Although in the long run what customer gives is the reality but how it extends to at his decision is what is dependent on the perception. As the company is prosperous in creating the required perception of the merchandise only then your customer will consider buying it. Hence, it's the price notion that precedes the buying decision of the customer. This is why notion is among one of the most important factors while crafting the advertising strategies of the company. For a successful advertising strategy, it is very important to learn the heads of the customers. The idea of perception really helps to understand those psychological factors which can be in the intellects of the customers and form that they make their purchasing decisions. Understanding the factors by which owner can affect the perceptions is vital for the companies in order to entice and maintain customers. This assists them to look for the prices strategy that will ensure their competitiveness in the market and thus, superior financial profits.