Prices must be presented convincingly

Behavioural pricing research looks at how customers actually perceive prices and make decisions based on this. These are often contrary to how they should actually rationally behave. Since the 1970s, it has therefore been assumed that people systematically deviate from rational principles of behaviour. This is particularly evident in the perception of prices. Behavioural pricing research helps to predict behaviour despite this. And it enables conclusions to be drawn about factors that influence the acceptance of prices.

In contrast to the past, it is taken into account that numerous psychological processes take place between the objective price and the customer's reaction - i.e. whether or not to buy: A price of, for example, € 5.39 for a certain chocolate confectionery is encoded in the brain and interpreted in the sense of a judgement about whether the price is reasonable, stored in long-term memory and later referred to again for price comparisons.

No. The traditional approach, like the estimation and analysis of price-sales functions and price elasticities, is still useful, but must be extended to include the findings of behavioural pricing research. It is helpful if one is aware of the assumptions that traditional pricing research makes implicitly or explicitly and examines their plausibility for the specific case. For example, that customers are well informed about current market prices. That is definitely not always true - especially online, prices develop very dynamically. In addition, the same product will have different prices depending on where you search. The price of a bag of gummy bears differs between train station vending machines, hotel mini-bars and supermarkets. It also depends on how much customers are interested in a product and what they expect. This is called involvement: Particularly when a product has a higher status, they will look at it more intensively and know the prices.

Here, we can mention the assumption that equal price distances are also perceived in the same way. In reality, however, an objectively equal increase of € 1 from € 98 to € 99 and from € 99 to € 100 is not necessarily perceived as the same. It may be that by breaking the € 100 "sound barrier", the product is suddenly perceived as expensive. The assumption of decreasing demand with increasing price can also only be accepted to a limited extent. An increase may even lead to increased demand. There is also the question of whether customers perceive a price increase as fair or unfair. For example, because they suspect greed for profit as the motive behind it. Whether all this is true or not can be investigated today with targeted market research. Ideally, customers don't even notice a price increase, in the worst case they react indignantly.

The perception of prices is very context-dependent. This means that a price of X for product Y may be perceived differently in one situation than in another. Prices can't be viewed in isolation, they don't exist in a vacuum! As a rule, customers will always compare a price with other prices. The question is: Which reference prices do they use? Internal ones, i.e. those that are remembered, as well as external ones that are available at the point of sale? For example, are all chocolates getting more expensive right now? A price increase of 10 % for a product is certainly perceived less negatively if all competing products have just become 20 % more expensive. By the way, reference prices can also be actively influenced. Let's say a supplier of chocolates sells a box of traditional chocolates for € 10 and a selection of higher quality chocolates for € 20. Demand for the higher-quality variant can probably be increased simply by adding premium chocolates for € 30 to the selection as a third product. Now the € 20 for the medium-priced chocolates doesn't seem so expensive.

On the first point, it can be said that the most expensive product is not always better. Empirically speaking, the correlation between objective quality and objective price is less strong than in the perception of customers. But when customers cannot evaluate quality in any other way, price often serves as a signal for quality and consequently as a decision-making aid. If a product appears so cheap to customers that they doubt its quality, a price increase can make sense and increase demand. Regarding organic and bread, I don't think you can make a general assumption. Sometimes organic products are so much more expensive that customers simply cannot afford them. For staple foods, I suspect that price increases are more closely watched than those for sweets. It also depends on who raises the prices. When the local organic farmer raises the price of bread in the farm shop, that's different from when a large bakery or a discounter does it. And: In retail practice, customers form a certain price image ("Aldi is cheap") not based on all products, but on a few key items. These are often fast-moving items or products for daily use. What these are will have been researched quite thoroughly by the trade. While the price of these products will therefore remain as constant as possible or be discounted from time to time, others could rise in price at the same time.

In B2B, decisions are generally made more rationally - but not always and without restrictions. There as well, things can be "human". In this respect, findings from B2C price research can certainly be taken into account. This includes questions such as whether an increase is perceived as fair and what the motive behind it is. If the supplier can justify it in a comprehensible way - for example with increased raw material prices - an increase will probably be accepted.

Pricing is not easy in principle, but it is important. The fine art of pricing would be to know what value you have created and not just base it on your own costs or the competition. This created value should be reflected in the customers' willingness to pay. However, many companies don't know exactly how great it actually is. It is important to give products the price they deserve. In the same way, it is perhaps time to clean up previous sales structures and establish a transparent, coherent pricing logic.