Affordable Prices

When consumers are shopping for something, they often compare prices of items across multiple stores. Some stores show price comparison information in the form of a table, while others display prices by product weight or volume (unit pricing). Understanding these methods for comparing prices can help shoppers make better purchasing decisions. Moreover, analyzing pricing information can provide insights into the effects of promotional strategies for a variety of different products and shoppers.

Across a range of industries, high prices are losing market share to cheaper alternatives. For example, premium skincare products are being replaced by less expensive versions in drugstores and online. This trend is especially pronounced among lower-income consumers, according to new research by Adobe Analytics. Adobe’s analysis of 11 categories of e-commerce data found that higher-priced brands have lost significant market share to lower-priced alternatives over the past two years.

This shift has been driven by lower incomes and rising costs of living, particularly in cities. It’s also been driven by a desire to avoid the risk of over-extending oneself, particularly among younger generations. Interestingly, these price-conscious behaviors are not universal and may vary by consumer segmentation and life milestones. For example, those on the cusp of adulthood (married, having children) may be more hesitant to buy a luxury item than those already on this stage (household-ready).

In a recent experiment, we found that original price moderates the influence of perceived quality and monetary savings on purchase intention for affordable luxuries. In this study, we provided participants with price promotion information for either a high-priced or low-priced affordable luxury product and asked them to indicate their purchase intention. We also collected neural responses to these price promotions, examining how people process the price information they receive.

The results of this study provide insight into the neural mechanisms that underlie consumers’ behaviors on affordable luxury purchases. The findings also contribute to an understanding of the effectiveness of price promotions for hedonic and utilitarian products by considering their original price. The effect of price promotions is stronger for hedonic products than utilitarian ones, because people associate hedonic goods with status and the feeling of being part of an exclusive group that can afford the product. This need for status also explains why sales events and discounts are effective promotional strategies for these types of products.

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