I am a budget conscious buyer who looks at the price tag more than once before buying. However, there are situations in which price recedes in my buying decisions. On reflection, I feel that I am not alone in this as I have seen even the shrewdest buyers ignore price in these seven situations. Can this awareness benefit us?
- Low-cost convenience purchases: Where the search cost for a better deal is high compared to the product cost, buyers are better off ignoring price. General stores located in residential areas leverage it. In today’s world, quick-commerce services like Blink-it is built on this principle by providing home delivery.
- Wallet effect: Where the consumer does not pay for it and it is paid from some other persons wallet, price is often ignored. Most visible in corporate executives travelling on expense accounts. With their purse insulated, executives often ignore the right side of the menu in their selection. This is also seen in insensitive guests wasting food at buffet tables.
- Gifting time: Emotions override reason. Often while gifting, budget drives the purchase. Seen both in personal and corporate life, it is most prominent during wedding and birthdays for individuals and festive gifting occasions like Diwali and New Year for corporates.
- Quality impact: Exceptional quality blinds, and with product quality the effect is no different. Also called the Rolls Royce effect, as we tend to fit products of superior quality in higher category. For Rolls Royce is displayed along with private jets, and not cars changing the reference price.
- Switch cost: an apt analogy for the tail wagging the dog. Many times, a lower priced asset can lead to buying higher priced consumable, ignoring more economic alternatives. Think of razor leading to expensive blade purchase, or a gifted blouse triggering a costly sari purchase.
- Relativity at Work -Price paid for door mats and perfumes during a car purchase, or electrical and sanitary fittings during house construction make the buyer insensitive to price due to their relative smaller values. High price for one, makes the buyer insensitive pushing price out of reckoning. Also called the accessory effect.
- Holiday effect: Ever made unnecessary and often paid higher prices while on a holiday? Welcome to the holiday effect, where our economic sense too goes on a vacation. The minute you touch down in your hometown, your economic sense too lands as you get a tighter grip on your wallet.
While this knowledge may not make us shrewd buyers, a sincere hope is for some noticeable change.
Social Profiles