The Price Of A Product Or Service

The price of a product or service is set by a business that follows a strategic plan depending on the type and quality of there offerings. Such a procedure takes into consideration multiple factors that should be treated, such as the manufacturin¬¬g cost, the labor’s cost, the distribution’s cost and the marketing cost. Other than satisfying the expenses of the company, the marketing plan also plays a significant role in the pricing decisions. The price of a product may have an attracting or repelling feature towards the customer (Monroe 1979). This idea is underlined by the behavioral research that clarifies that the consumer perceives the price as additional information of the quality of a product. However, other studies contradict such opinions by ignoring the power of price (Gabor and Granger 1966). Therefore, multiple researchers have looked up into this topic and conducted different and interesting theories. Most of the results are related to the psychological effects on the customers’ buying behavior and their perception of quality.

Marketers use psychology in order to develop multiple ways of attracting costumers. Associating the price cue with the perceived quality is an essential part, since it allows a direct and a subconscious target through the consumers in many cases. This attracting power can be applied, or can also be contradicted. Several researchers have studied these two cases and concluded significant theories.

To begin with, studies are mainly focusing on the conditions where price is perceived as a quality cue. Toh and Berard, have highly underlined this point by introducing three main hypotheses:

- “There is a substantial positive relationship between price and perceived quality for consumer goods.”

- “Th...

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...females were found to be more price reliant than males in forming product quality judgments” (Toh and Berard 1984). Besides gender, age has also played an important role in this analysis. It has been concluded that older consumer are more affected by price/perceived quality than the younger consumers. (Shapiro 1973). As for income effects, it has been proven that it does not strongly impact on the quality of a product. “ Both generations have been reported to be both positive (French et al. 1972; Toh and Berard 1984) and insignificant (e.g. Shapiro 1973) “.

Based on these three analysis, it can be concluded that the influence of the demographic features such as gender, age and income, have a varied outcome depending on the type of the consumer. Therefore, markets have categorized their products depending on the demographic profile for better and advanced targeting.