When 2 + 2 Is Not the Same as 1 + 3: Understanding Customer Reactions to Partitioned Prices

Hamilton Rebecca W. () and Srivastava Joydeep ()
Additional contact information
Hamilton Rebecca W.: Ass. Professor of Marketing, Robert H. Smith School of Business, University of Maryland, Washington/College Park, USA
Srivastava Joydeep: Ass. Professor of Marketing, Robert H. Smith School of Business, University of Maryland, Washington/College Park, USA

NIM Marketing Intelligence Review, 2009, vol. 1, issue 2, 24-31

Abstract: Firms often use a pricing strategy in which they partition the total price of a product and/or service into two or more mandatory components, such as parts and shipping. In this research, we examine how dividing the same total price differently across the components affects customers’ reactions. In a series of studies, we show that customers systematically prefer partitions of the same total price in which the price of low benefit components (e.g., shipping) is lower and the price of high benefit components (e.g., parts) is higher. Thus, for effective pricing, markups on components that consumers believe provide a high degree of benefit should be higher than markups on components that consumers believe provide less benefit

Keywords: Pricing Systems; Consumer Behavior; Price perception; Price Sensitivity (search for similar items in EconPapers)
Date: 2009
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.2478/gfkmir-2014-0075 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:vrs:gfkmir:v:1:y:2009:i:2:p:24-31:n:4

DOI: 10.2478/gfkmir-2014-0075

Access Statistics for this article

NIM Marketing Intelligence Review is currently edited by Christine Kittinger-Rosanelli

More articles in NIM Marketing Intelligence Review from Sciendo
Bibliographic data for series maintained by Peter Golla ().