How do consumers compare prices? It depends on how powerful they feel
Your reaction to the price on a bottle of wine or another product is partly a response to how powerful you feel, according to a new study in the Journal of Consumer Research.
"The degree to which one feels powerful influences which type of price comparison threatens their sense of self-importance and, in turn, affects the perception of price unfairness," write authors Liyin Jin, Yanqun He (both Fudan University), and Ying Zhang (University of Texas, Austin).
Variations in price are common in today's market, the authors explain, but companies risk consumers' wrath when those customers perceive unfairness. According to the authors, consumers have two main ways of evaluating the fairness of a price: they compare with what they've paid for the same item in the past (self-comparison) or they ask how the price compares with what other customers are paying (other-comparison). The authors looked at the ways consumers' self-perceptions affected their reactions to the two kinds of comparisons.
In one study, the authors found that participants who felt powerful experienced more unfairness when it appeared that they were paying more than others. But people who did not feel powerful experienced more unfairness when they used self-comparisons. The study also revealed that "high-power" participants were more likely to get angry about unfairness and indicated they were more likely to complain about the perceived unfairness. Meanwhile the "low-power" individuals were more likely to feel sad and to use tactics to avoid thinking about the unfair price.
"Our findings suggest important ways that marketing professionals can engage customers of different power statuses," the authors write. "For example, when marketing to high-power customers, one can better elicit preference by highlighting the special treatment that they are receiving in relation to other customers. Conversely, when the target customers are relatively low in power, loyalty may be better cultivated by highlighting the consistency in service or the level of commitment to these customers."