Featured Research

from universities, journals, and other organizations

Consumers perceive risk when 'price' means more than money

Date:
August 13, 2012
Source:
University of Cincinnati
Summary:
When faced with paying for a product or a service with more than money -- say with effort or information -- consumers perceive greater risk in the transaction.

When companies combine different pricing structures -- such as asking for effort or information in combination with or instead of money -- consumers perceive a greater risk in the decision to buy.

Related Articles


That's according to University of Cincinnati research to be presented at the Aug. 15-17 Behavioral Pricing Conference in Detroit, Mich., by doctoral marketing student John Dinsmore. His paper is titled "Mental Accounting, General Evaluability Theory and the Framing Losses Posed by Partitioned Monetary and Nonmonetary Prices."

According to Dinsmore, shoppers routinely arrive at buying decisions by categorizing and evaluating prices, a process known as mental accounting that helps consumers judge a level of loss or sacrifice posed by pricing strategies.

"Companies have lots of options when pricing products. They can charge money, or they can require something else such as watching an advertisement," explained Dinsmore of UC's Carl H. Lindner College of Business.

And in the eyes of the consumer, greater sacrifice means more risk, he added.

This risk can be tied to cash outlay and an additional consumer sacrifice to obtain a good or service, such as time spent evaluating product information, partaking in services or registering personal information to be granted user access.

Dinsmore's research, for which he won an honorable mention from the Fordham University Pricing Center, New York, as one of three finalists in the 2012 Behavioral Pricing Dissertation Competition, consisted of an online survey of about 300 people in which he presented them with identical product descriptions and randomly used three different pricing structures.

Surveyed "consumers" were asked to consider different expenses (money, time and information privacy) and assess anticipated risk.

"I found that products with multiple monetary prices did not appear any riskier than products with a single price," he said. "Products with different price categories, for example charging money and requiring consumers to view an ad before buying a product, seemed riskier."

In other words, these nonmonetary costs evoke different mental considerations, a field of study known as behavioral pricing research that observes buyer behavior as it relates to characteristics behind perceived value.

What does it mean for businesses? It's all about striking a risk balance, Dinsmore explained.

"As businesses seek new ways to make money off their product or search for new revenue streams, there could be negative unintentional consequences for combining different categories of prices, " he stated.

Dinsmore added that for each type of price a company attaches to a product, a different set of consumer concerns may arise: "The wider array of concerns (e.g. privacy), the riskier that product seems."

Businesses will need to assess whether they can afford if their product is viewed as slightly more risky, he said.

"Companies may be better off charging a higher monetary price than opting for a seemingly cheaper (monetarily) but combined pricing strategy," according to Dinsmore.


Story Source:

The above story is based on materials provided by University of Cincinnati. The original article was written by Judy Ashton. Note: Materials may be edited for content and length.


Cite This Page:

University of Cincinnati. "Consumers perceive risk when 'price' means more than money." ScienceDaily. ScienceDaily, 13 August 2012. <www.sciencedaily.com/releases/2012/08/120813120311.htm>.
University of Cincinnati. (2012, August 13). Consumers perceive risk when 'price' means more than money. ScienceDaily. Retrieved February 28, 2015 from www.sciencedaily.com/releases/2012/08/120813120311.htm
University of Cincinnati. "Consumers perceive risk when 'price' means more than money." ScienceDaily. www.sciencedaily.com/releases/2012/08/120813120311.htm (accessed February 28, 2015).

Share This


More From ScienceDaily



More Mind & Brain News

Saturday, February 28, 2015

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

The Best Foods to Battle Stress

The Best Foods to Battle Stress

Buzz60 (Feb. 26, 2015) If you&apos;re dealing with anxiety, there are a few foods that can help. Krystin Goodwin (@krystingoodwin) has the best foods to tame stress. Video provided by Buzz60
Powered by NewsLook.com
Sleeping Too Much Or Too Little Might Increase Stroke Risk

Sleeping Too Much Or Too Little Might Increase Stroke Risk

Newsy (Feb. 26, 2015) People who sleep more than eight hours per night are 45 percent more likely to have a stroke, according to a University of Cambridge study. Video provided by Newsy
Powered by NewsLook.com
Mayor Says District of Columbia to Go Ahead With Pot Legalization

Mayor Says District of Columbia to Go Ahead With Pot Legalization

Reuters - News Video Online (Feb. 25, 2015) Washington&apos;s mayor says the District of Columbia will move forward with marijuana legalization, despite pushback from Congress. Rough Cut (no reporter narration). Video provided by Reuters
Powered by NewsLook.com
Marijuana Nowhere Near As Deadly As Alcohol: Study

Marijuana Nowhere Near As Deadly As Alcohol: Study

Newsy (Feb. 25, 2015) A new study says marijuana is about 114 times less deadly than alcohol. Video provided by Newsy
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:

Strange & Offbeat Stories


Health & Medicine

Mind & Brain

Living & Well

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins