Effect of price on consumer preferences. More or less the information obtained by consumers affects the occurrence of a transaction because consumers have information or references to compare the price of one product with other products and with alternative products.
Consumers in their efforts to make decisions on purchasing a product are influenced by and are known as the role of price awareness and price consciousness.
What is meant by price awareness is the ability of individuals/consumers to remember prices, both the price of the product itself and the price of competitors’ products to be used as a reference. Meanwhile, the notion of price consciousness is the tendency of consumers to look for price differences.
1. Consumers tend to look for alternatives at low prices
Consumers who are said to be price conscious are consumers who tend to buy at relatively lower prices. Generally these customers do not pay attention to the advantages of the product, but only look for prices that have a high difference.
Until now, most consumers who have low incomes are consumers who pay attention to price awareness and price consciousness in making decisions. For that generally they will try to find information about prices and the high selection process.
2. Price Sensitive
In setting prices, producers must understand in depth the amount of consumer sensitivity to price. According to Roberto in the book Applied Marketing Research, the research results state the main issues related to price sensitivity, namely; price elasticity and price expectations. While the meaning of price elasticity is:
- Consumers tend to give a greater response to any increase in plans compared to the reality when the price increases.
- Consumers will be more sensitive to price reductions than to price increases.
- Consumer elasticity will decrease when shopping with friends or influenced by a salesperson.
3. Consumer Behavior
When consumers evaluate and evaluate the price of a product, it is strongly influenced by the behavior of the consumers themselves (Morris, Morris, 1990). Meanwhile, according to Kotler (2000), consumer behavior is influenced by 4 (four) main aspects, namely culture, social, personal (age, occupation, economic conditions) and psychology (motivation, perception, belief).
Meanwhile, the notion of perception is a process of an individual in selecting, organizing, and translating incoming stimuli or information into an overall picture (Schiffman & Kanuk, 2000 and Kotler, 1999).
Thus the evaluation of the price of a product that is said to be expensive, cheap or mediocre for each individual does not have to be the same, because it depends on individual perceptions based on the environment and individual conditions.
4. Consumers in assessing the price
Effect of price on consumer preferences. In fact, consumers in assessing the price of a product are very dependent not only on the absolute nominal value but through their perception of the price (Nagle & Holden, 1995). In general, consumer perceptions of prices depend on perception of price differences and reference prices.
a. Perception Of Price Differences
According to Weber Fechner’s law, in the book The Strategic and Tactics of Pricing, buyers tend to always evaluate the price difference between the price offered and the known basic price.
For example, the high increase in sales of Pioneer’s VCDs by providing a discount of IDR 500,000 (25% discount) in the face of VCDs made in China, however, the same discount amount of IDR 500,000 did not have a high impact on sales of Honda Supra motorbikes (55 discounts).
Dari hukum Weber-Fechner dapat disimpulkan bahwa persepsi konsumen terhadap perubahan harga tergantung pada persentase dari perubahan harga tersebut, bukan terhadap perbedaan absolutnya dan besaran harga baru tersebut tetap berada pada “acceptable price”.
b. Reference prices.
Effect of price on consumer preferences. Other factors that affect the perception of the fairness of a price are price references owned by customers obtained from their own experience (internal prices) and outside information, namely advertising and other people’s experiences (external references prices), (Shiffman & Kanuk, 2000). The information is heavily influenced:
- The price of a product group (product line) marketed by the same company,
- Comparison with the prices of rival products,
- The order of products offered (Top Down selling),
- Product prices that have been offered by consumers (Recalled Price).
Meanwhile, the perception of price fairness can also be explained by the acquisition transaction utility theory. consumers will make purchases (acquisition utility) if the price is associated with gains or losses in the perspective of product function.
On the other hand, for transaction utility, consumers perceive prices with pleasure or discomfort in the financial aspect resulting from the difference between the internal reference prices and the purchase price.