Reference Pricing for Colonoscopies in California – In 2012, the California Public Employees’ Retirement System (CalPERS) implemented a Reference Pricing program for outpatient colonoscopy services. The program uses targeted financial incentives to encourage patients to receive care from less expensive providers.
What is a reference price example?
Internal and external reference prices – Reference prices are of two types, The first type is what is known as an internal reference price, This is the price that the shopper believes or expects the item should cost based on past experience or knowledge about the product. Source: Thrills as cheap as gas by Thomas Alfather Good Flickr Licensed under CC BY 2.0 The second reference price is an external reference price, This is a marketer-supplied reference price because marketers typically provide it to shoppers so as to influence their decisions.
Marketers have a lot of leeway in providing reference prices to shoppers. They can use advertisements specifically to provide reference prices, they can generate reference prices through price tags, signs or labels, or they can even use prices of surrounding items in the store or website to create influential external reference prices.
The most important thing that shoppers need to know about external reference prices is that marketers can and do use marked prices to manipulate shoppers’ decision making and to get them to buy. Here are three ways in which reference prices affect shoppers: #1: Any external reference price supplied by a marketer, even an exaggerated one, has a positive effect on shopper evaluations.
- Let’s take two cases, a supermarket sign which has no reference price (it simply says that a can of tomato sauce costs $1.00) and another sign which includes a reference price (it says this can of tomato sauce should cost $2.00, but it’s on sale today for $1.00).
- Research shows that consumers evaluate the tomato sauce as having better quality and as a better deal at $1.00 in the second case.
Even when the reference price that the marketer provides is completely implausible (the store claims that the can of tomato sauce should cost $10.00, but it only costs a $1.00 today), it will still make shoppers evaluate the tomato sauce positively. This result can explain many of the ridiculous claims of sales and mark-downs we see all the time.
The upside of providing an external price is clear for marketers: for shoppers, the story is murkier. External reference prices are likely to mislead and indicate something is of a better value than it really is. #2: Consumers are insensitive to price changes within a range around the reference price.
Many shoppers believe they will notice at once when the price of something they frequently buy changes even a little. Nothing could be further from the truth. In reality, there is a range of prices around the shopper’s reference price within which most people don’t notice or react to price changes.
Marketers know this fact and exploit it mercilessly. They even have names for this concept: they call it ” the zone of indifference ” or ” the latitude of price acceptance,” Research shows that this range varies a lot depending on the product and the shopper. In the original study where this concept was introduced, the zone was around 4-5% on each side around the reference price of grocery products.
Consulting studies have shown that for discretionary items like beauty products, it is as much as 17%. Smart marketers use the zone of indifference in two ways. First, they find out what the range is for their brand. (This is not hard to do because they will see their sales drop off sharply when they stray too high in price and on the flip side sales will take off when they stray too low.) Second, they maintain prices close to the higher end of the indifference zone so that shoppers happily pay more money without realizing it.
- Companies such as Panera Bread and Chipotle use the price indifference range effectively, pricing their lunch menu to be substantially higher than places like Taco Bell or McDonald’s but still within the acceptable range of what a lunch should cost for many consumers.
- 3: Prices of unrelated products also affect evaluations.
Whether they are in a store or online, shoppers are inherently uncertain about the value of items they are browsing or considering for purchase. Because of this uncertainty, they can be influenced by arbitrary information, This applies to external reference prices as well.
- Such prices don’t have to be for the same product.
- Any encountered price – even that of an entirely unrelated product – can have an effect.
- In one influential study conducted by consumer researchers Joe Nunes and Peter Boatwright, these authors sold popular music CDs (this study is a few years old) next to sweatshirts that were alternately priced either at $10 or $80 (at every half hour interval) on a popular boardwalk.
Beach-goers were willing to pay only $7.29 for the CDs when they were next to $10 sweatshirts, but their willingness-to-pay jumped almost 18%, to $9, when the same sweatshirts cost $80. Even more interesting was the fact that most consumers did not realize that the incidental prices of sweatshirts were having any impact on their behavior,
What is the concept of reference pricing?
Definition: Reference price is also known as competitive pricing, because here the product is sold just below the price of a competitor’s product. Reference price is the cost at which a manufacturer or a store owner sells a particular product, giving a hefty discount compared to its previously advertised price.
- Description: Reference pricing, in simple terms, is known as that price which users compare with the price of a competitor’s product or the previously advertised price.
- Here the price of the product, which is more expensive, becomes the reference price for your product.
- Marketers generally induce buying behaviour in customers by putting goods and services at a huge discount compared to its original price.
Human beings tend to compare the price of the product with the reference price, and if the new price is heavily discounted compared to the original price, it could trigger buying. Reference pricing is also part of psychological pricing, because it is the price of the product which buyers use as a reference while making a decision to buy the product.
Usually reference price is also mentioned on the product so that consumers can compare the difference in rupee value terms. Let’s understand reference price with the help of some examples. Big Bazaar, India’s leading supermarket store, conducts a sale around Independence Day every year. Here the price is discounted heavily which leads to an increased sales volume.
They also extend discounts to electronics like camera and mobile phones. The idea is to generate sales in that particular time frame. The consumers usually see the difference between discounted price and the original price or the reference price. Online shopping portals such as Flipkart and Amazon also run their big billion days or festive sales on particular days, where products are sold at a hefty discount.
What does RBP stand for in insurance?
Reference Based Pricing (RBP) is used by your health plan to process claims for medical services. The reference that your plan uses to determine the amount that will be paid to the provider for a particular medical service is based upon a percentage above the provider’s Medicare rate.
What are the different types of reference prices?
Types of Reference Pricesü’Fair Price’ (what the product should cost)üTypical PriceüLast Price PaidüUpper-Bound Price (reservation price or what most consumers wouldpay)üLower-Bound Price (lower threshold price or the least consumerswould pay)üCompetitor PricesüExpected Future PriceüUsual Discounted Price2.
What are reference prices and how do customers use them what is the difference between internal and external reference prices?
Internal reference price is based on the past prices paid for the brand by the consumer, and external reference price is dependent upon the prices of all brands in the category at the point of purchase.
What are the four pricing concepts?
What are the 4 major pricing strategies? – Value-based, competition-based, cost-plus, and dynamic pricing are all models that are used frequently, depending on the industry and business model in question.
Why is it difficult to determine reference prices?
Providers are unwilling to estimate prices, Needs of individual customers vary, Price information is overwhelming in services; and. Prices are not visible.
What is AP vs RP in insurance?
From Wikipedia, the free encyclopedia In insurance, mid-term adjustment (MTA), also called a mid-term modification or mid-term change, refers to a change to an insurance policy prior to the end of the policy period (when coverage is offered). The change to the policy may cause a change in the premium : an increase is often called AP (for additional premium) whereas a decrease is often called RP (returned premium).
What is RGI insurance?
RGI is the insurtech leader in Europe, driving the digital transformation of the insurance sector in EMEA through technology. We have been committed for more than 35 years to the Insurance industry. RGI has a wealth experience in dealing with Insurers, Bank Insurers, Agents, Brokers, independent Financial Advisors.
- With more than 1.200 professionals in Italy, France & Luxembourg, DACH & Slovenia, Ireland, Africa & Middle East, we have a proven track record of successfully collaborating with 150 Insurers and 300 brokers across the EMEA region, supporting them on their journey to excellence.
- Our mission is to deliver global digital solutions to provide strong added-value to Insurers’ businesses in EMEA, with agility.
We provide innovation in business models, products and services to help our clients develop sustainably and tackle their challenges. Our vision is to become the leader in the digital transformation of the insurance sector in EMEA with break-through value propositions.
To create differentiating and sustainable value by developing IT solutions and services stand-alone and with partners, leveraging next generation technologies, the Cloud and our ecosystem platform. PASSION : Encouraging employees to be accountable and passionate in their jobs. Never settling for, performing all the activities challenging our ideas of what’s possible in order to better meet our customer‘s needs in accordance with the Group’s high standards of integrity INNOVATION : Having an innovative mindset is the core of our company.
We value original thinking, the passion to perform through challenges supported by continuous learning and research, and thoughtful feedback – openly giving and receiving it. Believing in the change and speaking up. TEAM WORK : Working together, across boundaries, to meet the needs of customers and to help our Group win.
What does TP stand for in insurance?
Key Takeaways –
- Third-party insurance covers an individual or firm against a loss caused by some third party.
- An example is automobile insurance that will indemnify the insured if another driver causes damage to the insured’s car.
- The two main categories of third-party insurance are liability coverage and property damage coverage.
- Most people are required by law to carry different forms of insurance on their homes and vehicles.
What are the 5 different types of references?
Citation Styles: APA, MLA, Chicago, Turabian, IEEE.
What are the two main types of reference?
Professional references are people who know you on a professional basis. They may include contacts from business and sales, clubs, or professional or community organizations. Academic references are instructors and vocational counselors. They can speak about your academic activities.
What are the four types of referencing?
MLA, APA, Harvard or MHRA? There are four widely-used referencing styles or conventions. They are called the MLA (Modern Languages Association) system, the APA (American Psychological Association) system, the Harvard system, and the MHRA (Modern Humanities Research Association) system.
- If you are producing essays for a particular institution or even a particular department make sure you know what system it is using.
- Your tutors may specify one of the four listed above or they may use another one entirely.
- Some departments will produce sheets explaining which system they want you to use.
You can also find detailed guides to these systems in your institution’s library or on the internet. The Modern Humanities Research Association also publish the MHRA Style Book which is available from bookshops like Blackwells for around a fiver. The following sections give the important aspects of the four conventions.
- For more detail, you will need to look in some of the places I’ve suggested.
- The MLA system is a parenthetical system: i.e.
- Bracketed references in the body of your essay are linked to full length citations in the bibliography at the end of your essay.
- The bracket in the body of the essay contains only the author’s surname and the page number or numbers you are referring to.
For example: There are a number of different referencing styles or conventions but there are four that are used most widely. (Kennedy, 17). If your essay quotes from two or more works by the same author then the bracketed reference should include a shortened version of the title to indicate which book is being referred to.
Ennedy, New Relations, 26) A bibliography compiled according to MLA conventions lists items alphabetically by the author’s last name. Each entry should include, in the following order: the author’s name in full, the title of the book, the place of publication, the publisher, and the date. For example: Kennedy, David.
New Relations: The Refashioning of British Poetry 1980-1994, Bridgend: Seren, 1996. Pay attention to how the entry is punctuated as that is part of the system too. The APA system is also a parenthetical system but the bracketed references in the body of your essay are: the author’s surname, the date of publication and the page or page numbers you are referring to.
For example: There are a number of different referencing styles or conventions but there are four that are used most widely (Kennedy, 2003, p.17). The reference always goes at the end of the sentence before the full stop. A bibliography compiled according to APA conventions lists items alphabetically by the author’s last name.
Each entry should include, in the following order: the author’s surname, their first initial, the date of publication in brackets, the title of the book, the place of publication and the publisher. For example: Kennedy, D. (1996) New Relations: The Refashioning of British Poetry 1980-1994,
- Bridgend: Seren.
- Again, pay attention to how the entry is punctuated as that is part of the system too.
- The Harvard system is another parenthetical system and the bracketed references in the body of your essay are: the author’s surname and the date of publication.
- The list of works at the end of the essay is headed ‘References’.
The works listed in it appear in alphabetical order by the author’s surname and follow the same format as the APA system. The MHRA system does not use bracketed references in the body of an essay. Instead, superscript numbers like this 1 are linked to a sequence of notes which appear either at the foot of the page or in a section at the end of your essay.
How do consumers use reference prices?
From Wikipedia, the free encyclopedia A reference price (RP) is the price that a purchaser announces that it is willing to pay for a good or service. It is used by high-volume purchasers to inform suppliers. RP requires consumers to have access to price and quality information, which is not general practice in many industries.
- Further, it does not help consumers with urgent needs, cognitive and/or other impairments.
- Reference pricing requires sufficient competition.
- Otherwise, consumers have no choice about providers, who in turn face less pricing pressure.
- Reference pricing could encourage lower quality.
- Reference price” in this context is distinct from its use in behavioral pricing scholarship.
In that literature, a “reference price” refers to a mental standard of comparison or a posted statement of “normal” prices used to judge whether an offered price is good deal – as in “Was $100, now $70.” Reference prices in this context are related to work by Nobel Prize winner Richard Thaler on “transaction utility” in his theory of mental accounting,
What is reference price internal vs external?
Internal reference prices are memory-resident prices based on actual, fair, or other price concepts. External reference prices are observed stimuli, such as ‘regular prices,’ that stores may display along with a sale price for comparability.
What is a reference price and how does it relate to the mindset of the consumer?
Open Journal of Business and Management Vol.06 No.03(2018), Article ID:86005,11 pages 10.4236/ojbm.2018.63053 Network Consumers’ Reference Price Formation Analysis Haiyan Lin School of Business Administration, South China University of Technology, Guangzhou, China Copyright © 2018 by author and Scientific Research Publishing Inc. This work is licensed under the Creative Commons Attribution International License (CC BY 4.0). http://creativecommons.org/licenses/by/4.0/ Received: May 26, 2018; Accepted: July 14, 2018; Published: July 17, 2018 ABSTRACT In this paper, based on the previous literature on reference prices, the definition, forms of expression and related theories and analysis of reference prices are summarized. 1. Introduction The reference price is a reference point where the consumer evaluates the price of the product and constitutes the consumer’s expectation of the price of the product. It is the result of consumers searching for different information and analyzing information processing.
Reference price is an important tool for consumers to save cognition and intrinsic price measurement in the purchasing decision process, and is increasingly valued by companies. The process of information search is the process of consumer decision making and is an important part of the formation of consumer reference prices.
In general, consumers will search for information according to their own needs before purchasing decisions. Individuals’ limited cognitive ability makes consumers have to use some tools to help them make decisions. Reference prices can effectively help consumers limit the scope of information search.
Save on search costs and cognitive efforts have a major impact on purchase decisions and post-purchase evaluations. It can be seen that research on consumer reference prices can help companies better understand consumer behavior, and price and promotion of products to increase profits. Therefore, based on the summary of previous related literature, this paper analyzes and describes the process of forming the reference price of online consumers to help online retailers better understand the consumer purchasing decision process.
Finally, it provides suggestions for online promotion of online e-commerce companies.2. Research on Reference Prices In recent years, prices have become an important consideration for consumers’ purchase decisions and have become the focus of research by merchants and scholars.
- In the study of Western scholars, it has been pointed out that prices play two important roles in consumers’ value perception and purchase decision-making process.
- The first is to allocate limited resources.
- Prices are the monetary sacrifices consumers have to make in order to obtain goods.
- In general, the higher the price, the stronger the sense of currency perceived by the consumer and the lower the perceived price attractiveness (Blattberg et al.1995),
The second is to pass information. Due to the existence of information asymmetry, consumers often infer products based on limited information (such as price) issued by the merchant when they cannot fully grasp the specific information of the product. For example, consumers will infer the quality and value of goods based on the price of the goods.
Commodity prices influence the behavior of purchase behavior decision-making by affecting the value perception of consumers, and are increasingly valued by more and more research scholars, thus developing the research field of consumer price behavior. In these studies, scholars also realized that the price as a factor of consumer appraisal of merchandise attraction, not only affect its value perception by its own absolute index.
In 1986, Winer first proposed the existence of a reference price phenomenon using an indirect method. In 1995, Kalyanaram and Winer came to the following conclusions through a large number of empirical studies: Consumers will compare the reference price information formed by past prices with the current price, and make different responses based on the price level after comparison.
- Scholars realize that when consumers evaluate price attractiveness, besides the absolute price of the product itself, it will be compared with the reference price formed inside, and thus the level of the price will be perceived and the purchase decision will be made.
- Since then, reference prices have begun to be a part of consumer behavioral behavior and have received the attention of the majority of scholars.2.1.
Definition of Reference Price Many scholars define the reference price from different perspectives. Foreign scholars are relatively advanced in this research. Kalyanarm and Winer (1995) argue that the consumer’s reference price is based on the expected price of past purchase experience and the current shopping environment.
- Some scholars divide the reference price into internal reference prices and external reference prices based on the source of the price information received.
- Alyanaram and Little (1994) pointed out that the internal reference price is the memory price that the consumer touched in the past purchase process, and the external reference price is the price that consumers observe in the purchase environment.
Together, these two parts from their price reference point. Bolton and Lemon (1999) from the perspective of consumer price fairness perception, believe that a reasonable reference price should be “fair” or “fair” to consumers. Bolton, Warlop, and Alba (2003) pointed out that consumers’ perception of price fairness is based on their past purchase prices and prices of other competitors, and on the basis of the evaluation of merchant costs and reasonable profits.
- Mezias, Chen, and Murphy (2002) point out that consumers are members of a social group and point out that the reference prices consumers desire are affected by the purchase prices of other consumers of the social groups they are in.
- Domestic studies on reference prices started relatively late, but they have also developed relatively well.
Domestic scholar Qian Haitao (2007) believes that the reference price refers to the relevant price information that the consumer can recall in the mind when purchasing a product. Chang Xue (2008) pointed out from the perspective of information sources that the reference price was the expected price formed by the consumer based on past experience and the current shopping environment.
In the buying environment, the price information provided to the consumer through advertising and pricing is called the external reference price; the price at which consumers integrate various types of price information is called the internal reference price. Zhang Zhenglin (2011) from the consumer perception of price perception, that the reference price is based on perceived price, quality, past payment prices, competitive price and other factors formed by the price.
With the further development of the reference price, domestic scholars began to make a more comprehensive definition of the reference price starting from the various influencing factors of the reference price. Zeng Yurong (2012) pointed out that the reference price can be summarized as follows: The reference price is based on consumer expectations; The reference price is the price that consumers have adapted in the past and is an internal standard; The reference price is the price that consumers can expect to observe at the point of purchase and is accompanied by a dynamic update of the external environment.
In summary, the reference price refers to the price that the consumer uses to compare with the price provided by the merchant when shopping, and it is the expected price that is jointly influenced by the memory price of the consumer and the current purchase environment. It can be divided into internal reference price and external reference price.
Consumers will judge the “fairness” or “fairness” of this reference price based on past purchasing experience, competitive price, merchant’s cost and reasonable profit assessment, and the purchase price of the social group in which it is located.2.2.
The Expression of the Reference Price It is generally believed that the reference price is stored in the mind of the consumer in the form of a specific number. However, some scholars have found that, in addition to the specific reference price, consumer’s reference price may also be a reference price range (such as Li Ning running shoes may be more expensive than ordinary canvas shoes), or some kind of Commodity price beliefs (for example, many store clothes will be discounted before and after Christmas).
Mazumdar and Monroe (1990) pointed out in the study that when consumers learn a price information in an unconscious situation, they remember more about a price range than recalling a specific price. Mazumdar, Raj and Sinha (2005) pointed out that the storage mode of the reference price in the consumer brain gradually shifted from the specific price information to the evaluation mode.
It can be seen that the consumer’s reference price performance form is summarized into three types: one is a specific digital form; the second is a certain price range; and the third is a price evaluation mode for a certain commodity. In addition, Deaton and Muellbauer (1980) pointed out that consumers would set a budget before purchase to determine the quantity of goods purchased.
Heath and Soll (1996) pointed out that the budget set by consumers before the purchase of goods may become a reference point for consumers to actually spend. It can be seen that the consumer’s reference price may be expressed in the form of consumer budget.
- In general, the expression of reference prices can be divided into digital and non-digital forms.
- The digital form includes a specific price value range or price range, the source of which mainly includes the consumer’s past consumption experience and the budget set by the consumer before consumption.
The non-digital form refers to a consumer’s belief in price, and its source is also due to the future expectations of the consumer based on past consumer experience. That is, based on the “nearer past”, the expectation of future results is formed.3. Classical Theory and Analysis of Reference Price The classical theoretical analysis of reference prices can help us to better understand the process and characteristics of reference price formation.
This paper provides a theoretical basis for the analysis of the formation of the reference price for Internet consumers.3.1. Adaptation Level Theory Helson (1959) proposed the theory of adaptation level, and believed that the current and past experience integrated to form people’s internal models (adaptation level), and people respond to external stimuli based on this internal model.
The theory of adaptation level points out that in the cognitive process of price, consumers will compare the external price stimuli according to their adaptation level (i.e. reference point) to determine the acceptable level of external prices. In other words, when the consumer is facing the advertising reference price, it compares the internal reference price range as an adjustment reference point.
If the reference price of the advertisement falls within the consumer’s internal reference price range, the advertisement reference price will be accepted, and at this time, the consumer is less likely to change or move the internal reference price range; If the reference price of the advertisement is not within the internal reference price range, the consumer may adjust the internal reference price to an appropriate level.
As a result, companies can use this theory to increase advertising prices, prompting consumers to adjust their internal reference prices to higher levels. However, this theory does not fully explain the consumer’s reaction to the reference price of advertising.
For example, when the advertising price is excessively blown, consumers will not change their own price perceptions and adjust their own internal reference prices. At this time, the advertising price will be invalid. The assimilation-comparison theory gives a more comprehensive explanation of this phenomenon.3.2.
Assimilation Contrast Theory Sherif, Hovland (1958) proposed the assimilation contrast theory, whose basic assumption is that individuals compare the new stimulus with the experience of past similar stimulus. This experience constitutes an internal reference range for consumers.
- External reference prices within this range will be accepted by consumers.
- When the external reference price is not within the range but at the margin of the range, the internal reference price range of the consumer may move outward in the direction of the reference price, resulting in a new internal reference price range standard, resulting in the “assimilation” phenomenon; However, when the external reference price is far from the consumer’s internal reference price, it will be compared with the consumer’s internal reference price range, resulting in a “contrast” phenomenon.
The connotation explained by this theory is that when consumers face external reference prices, they will produce two kinds of decision results. First, the internal reference price of the consumer is “assimilated” with the external reference price, that is, the consumer’s internal reference price will be affected by the external reference price and accept the external reference price; Second, the internal reference price of consumers forms an “opposition” with external reference prices.
- That is, consumers’ internal reference prices will not be affected by external reference prices and do not trust external reference prices.
- However, the theory’s limitation is that it cannot explain the following phenomenon: When the exaggerated reference price is not unreasonably unacceptable, the consumer will still adjust the internal reference price to save cognitive costs and accept the exaggerated reference price.3.3.
Expectation Theory The expectation theory of Kahneman and Tversky (1979) believes that consumers will produce different decision responses based on different results after comparing with reference points. When consumers compare with the reference point, the loss they perceive can be stronger than the benefit.
- Many studies also show that consumers’ perceptions of losses and benefits are different, and they respond more strongly to losses.
- In other words, when the consumer compares the actual price of the product with the reference price, if the actual price is higher than the reference price, the consumer will feel “loss”; If the actual price is lower than the reference price, the consumer will feel “return”, but the consumer is more sensitive to the perceived “loss” response.
Mayhew and Winer (1992) in his study also pointed out that the loss caused by the consumer’s response is greater than the response caused by the return. It can be seen that consumers’ perceptions of “loss” and “return” are different. Frankel, Mayew, and Sun (2001) consider the reference price as a consumer’s perception of value, and believe that the perceived price of the reference price to consumers’ benefits and losses will be affected by the consumer’s price sensitivity, promotion sensitivity, and the impact of brand loyalty.
Bell and Lattin (2000) found that different types of consumers have different price reference points, and that price-sensitive consumers have lower reference prices than those who are price-insensitive. Based on the above research and analysis, consumers compare the actual price with the intrinsic reference price, resulting in two perceptions of “loss” and “gain”.
If the actual price is higher than the reference price, the consumer perceives “loss”, and vice versa, the “return” is perceived, and the consumer’s response to “loss” is greater. The reason is that when the consumer is price-sensitive, he will have a lower reference price and therefore may experience more losses in the purchase; when the consumer price is not sensitive, it will have a higher reference price and therefore experience more gains in the purchase.
In addition to price sensitivity, consumers’ sensitivity to promotions and brand sensitivities may also affect consumers’ reference prices, which in turn may affect their perception of “loss” and “return” during the purchase process.3.4. Range Theory Some scholars have proposed Volkmann (1951) to apply the theory of range theory and price perception.
It is believed that consumers will form a price range with upper and lower limits based on past memory prices. Therefore, the relative position of the actual price of a commodity within this price range will become an indicator for people to judge the attractiveness of commodity prices.
Parducci (1995) further proposes a range-frequency theory that the consumer’s reference price is also related to the frequency of the price, and the higher the frequency of a certain price, the greater the impact on the consumer. Janiszewki and Lichtenstein (1999) believe that consumers evaluate the attractiveness of a price by comparing the price of the product with the value of the price range in their mind.
When the reference price exists, when the higher range of the reference price evoked rises, consumers will be more likely to accept the market price of the product. On the contrary, when the lower range of reference prices that are evoked falls, consumers will find it harder to accept the market price of the goods.
- For example, if the consumer’s reference price range for a computer is 3000 – 5000, and the price of an original 5000 computer rises to 5100 in a certain period of time, consumers will expand the reference price range upwards to 5100.
- When the price of computers fell to 5000 yuan, consumers would be more comfortable with the price.
If the original price of 5000 computers is reduced to 2900 due to promotional activities, consumers will expand the reference price range down to 2900, then the price of the computer will return to 5000 after the promotion, and consumers will find it difficult to accept the price.
- Based on the above classic theory of reference prices, the following conclusions can be drawn: First, the reference price is a reference price range that is formed by consumers based on current and past experience; second, the reference price range will constantly change.
- When the reference price range moves to the new price, it is called the assimilation effect.
When the reference price range is larger than the new price gap, the comparison will be harder. Thirdly, the reference price is an important tool for consumers to perceive “returns” and “losses”. Their use results will have an impact on consumers’ purchase decisions, and consumers’ responses to losses are greater than responses to benefits.
Fourth, the values at both ends of the reference price range will change, and compared with the lower range of the reference price, consumers are more likely to accept market prices after the higher range of the reference price rises.4. Network Consumer’s Reference Price Formation With the popularity of the Internet, more and more people tend to shop online.
In the e-commerce environment, the consumer’s purchase process can be divided into four stages: information search, evaluation selection, purchase decision making, after-sales service, and service evaluation. Information search, as the first step in the consumer purchase process, has a crucial influence on consumers’ purchase decisions.
This article is based on the online consumer’s information search behavior, combined with the reference price related theory, such as the adaptation level theory, the assimilation contrast theory, the expectation theory and the scope theory, etc., to analyze how the online consumer information search behavior dynamically affects their reference price.4.1.
The Reference Price Formation of Online Consumers Is Influenced by Information Search Behavior Battman and Park (1980) divided information into internal source information and external source information according to the different sources of information.
Liu Hailong (2009) concluded in his dissertation that internal source information refers to the existing information stored in personal cognitive memory; Information from internal sources is further divided into active acquisition and passive acquisition. Active acquisition is the search of past memories by consumers, memories of personal experiences, etc.; passive acquisition refers to information that is less involved.
External source information refers to information other than consumer memory. According to specific sources, it can be divided into personal source information, such as family, friends, neighbors, etc. Business source information, such as from advertising, distributors, etc.; public source information, such as neutral information without commercial propaganda; Source of experience information, such as experience gained through processing, inspection, and use of the product.
It is also pointed out in their research that consumers tend to use current memory information for price judgment, but if consumers lack the required price memory information, they will tend to search for price information from the external environment to judge. It can be seen that the reference price as a kind of information sought by consumers will be influenced by the information search process of consumers.
Compared with the traditional consumption channels, in the e-commerce environment, the network as a supplement to consumer information search channels, the impact of the formation of consumer reference prices cannot be ignored.4.2. Analysis of Reference Price Formation Based on Information Search Behavior of Online Consumers Research on consumer information search behavior can basically be classified into the following three theories: information economics theory, psychological motivation theory and information processing theory.
- When consumers are in a state of “very knowledgeable,” “uncertain,” or “problem solving,” information search behavior occurs.
- Based on the information processing theory of consumers, the analysis of the process of forming a reference price for information search by consumers under the e-commerce environment is as follows: The first is the identification puzzle.
At this stage, consumers have limited knowledge or lack of past purchasing experience. Consumers’ reference price range for a certain product is not clear, resulting in “knowledge of the very status” and “uncertainty”. And the “problem produced” status; The second stage is that the consumer determines the connotation of the problem according to the nature of the problem, and knows that it is necessary to determine the reference price range of the product through information search; The third stage is the consumer’s specific information search process.
- At this time, different consumers will have different information search focus.
- For example, fair-minded consumers will focus on searching for experience-sharing information for other consumers of the same product, while price-sensitive consumers focus on the price attributes of the product, and price-insensitive consumers focus on other attributes of the product.
This information has become an important factor in the formation of consumer reference prices. The fourth stage is the evaluation of problem solving. Consumers have already formed a reference price range for a certain product in the third stage. At this stage, consumers will use their internal reference price range to assess the attractiveness of the actual market price.
- Similarly, different types of consumers may have different perceived values after using reference prices.
- For example, price-sensitive consumers tend to have a lower reference price floor and are therefore prone to experience “loss”.5.
- Conclusion This article through the combing and summary of reference price related literature, combined with information processing theory, analysis of the formation process of online consumer reference price, draws the following conclusions: First, the reference price is the expected price formed by the consumer based on past consumer experience and the current purchase environment.
The specific forms of expression are digital and non-digital; second, the reference price has dynamic characteristics, and its specific changes will change with the consumer’s information processing; third, the formation of reference prices for online consumers is the result of information search and processing.
Consumers with different characteristics will have different information processing methods. Therefore, different reference prices are formed and ultimately affect the consumer’s purchase decision.6. Some Suggestions for E-Commerce Companies This article is based on the research of consumer information search behavior, using the classical theory of reference price to analyze the formation process of the reference price of online consumers in the e-commerce environment, which is of great significance to the promotion and pricing strategy of the enterprise.1) E-commerce companies provide consumers with reference price information.
The reference price of consumers is easily influenced by external factors. By proactively providing reference price information, companies can effectively increase the reference price range of consumers, thereby increasing consumers’ “transaction value” perception and thus promoting sales activities.2) E-commerce companies focus on product quality, provide good after-sales services, and increase customer satisfaction.
The formation of reference prices for consumers is vulnerable to the impact of post-purchase evaluations by other consumers. E-commerce companies should pay attention to product quality and consumer after-sales service management, so as to increase customer satisfaction after sales, and then form a good range of word of mouth.
At the same time, do a good job in online post-purchase commentary information management, and actively provide effective commentary information to help consumers to better form internal psychological prices. Cite this paper Lin, H.Y. (2018) Network Consumers’ Reference Price Formation Analysis.
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What are the different methods of pricing?
The two types of pricing are cost-oriented and market-oriented pricing methods. The cost-oriented method of pricing is a traditional method that is widely used by most entrepreneurs even today. While in the market-oriented pricing method, the product price is decided based on the latest market trend and research.
What are the three 3 factors affect pricing?
It involves aspects such as demand and supply, cost of the product, its perception and value for the customer and many such factors.
What is an example of list price?
List Price Vs. Sales Price By Danielle Smyth Updated August 14, 2020 The terms “list price” and “sales price” get used frequently in the world of retail, but it can be confusing to know what each means. As a retail business owner or manager, it’s essential you understand the difference and are able to determine how to price your inventory accordingly.
Comparing manufacturer suggested retail prices to list and sales prices before selling items can mean the difference between large profits and small ones. As a business owner, you’ll need to consider list price vs. cost price (also known as sales price). The list price is simply the price that an item is listed to be sold for.
For instance, if you run a T-shirt shop, the list price of a pink shirt might be $24.95, This could be the amount the manufacturer suggests, and it could also be what you decide to charge. The sales price of the pink shirt could be $24.95 if you avoid markdowns, but it might also be $15, or even $5, if it goes on sale or customers have coupons.
A sales price can is simply as what the item actually sells for. When setting list prices, it’s important to consider regular or seasonal sales that you have and to look back over the coupons you have distributed to customers. Calculate the profit you’ll have remaining on the pink T-shirt if a customer buys it during a sale or with a coupon.
If you are still profitable to the extent you would like, then your list price is likely acceptable to keep as-is. Create a list price formula to easily determine how much to charge for new inventory in the future, allowing for sales and coupons. If you work in real estate, your business is highly focused on the differences between list price and sales price.
- Explains that a list price is the amount for which an available property is advertised on the market.
- While your client might sell their home for this amount, it is more likely that buyers will submit a lower offer, and negotiations will ensue in the form of counteroffers.
- In contrast, the sales price of the home is the amount it actually sells for.
This might take into account contingencies or repairs. Just like in the example of a retail store, you should encourage your clients to budget accordingly – assume that the sales price will be lower than the list price. List the home at a price that will net the seller the profit they want, once the reduction for lower offers is taken into consideration.
List price and MSRP are not synonymous, though they are similar. As explains, MSRP stands for the manufacturer’s suggested retail price, and it indicates what a company thinks their product should retail for. However, in many industries, items are never sold at MSRPs. Instead, these figures are used as a basis of comparison to make buyers feel like they are getting a great deal.
In contrast, a list price is usually set by a store or chain of stores, and while it is based on the recommendations of the manufacturer, a number of other factors are considered. These might include loss leader considerations, geographic location and the ideal profitability the company has established for each item.
What is one example of price?
Noun You paid a high price for the car. We bought the house at a good price, The price of milk rose. What is the difference in price between the two cars? I know he said he wouldn’t do it, but I think it’s just a matter of finding his price, Verb They priced the house too high. Chris Isidore, CNN, 1 May 2023 The biggest difference between the two though is easily the price, — Steven Rowe, Verywell Health, 29 Apr.2023 The wireless installation, fast notification times, and clear picture day or night make the Nest hard to beat, especially for the price, — Hunter Fenollol, Popular Mechanics, 28 Apr.2023 Things like toaster ovens and cellphones have gotten a lot cheaper, but as those things have declined in price, median rent has basically doubled in the last two decades; the cost of fuel and utilities and health care have risen. — Barbara Spindel, The Christian Science Monitor, 28 Apr.2023 Great quality at a good price ! — Alesandra Dubin, Woman’s Day Magazine, 20 Apr.2023 And worth the price !!! — Laura Lajiness Kaupke, womenshealthmag.com, 20 Apr.2023 Delivery, shipping, handling and transportation charges are also factored into a purchase’s total price, which could affect tax-exempt eligibility for some items. — Dan Carson, Chron, 19 Apr.2023 Act fast, though, as this is the last chance to grab it at this price, and this deal only lasts until April 23 at 11:59 p.m. PST. — Stack Commerce, Popular Science, 18 Apr.2023 Luckily, my favorite sweets are more modestly priced, like the bar for $8.50 that’s an unusual blend of milk and dark chocolate. — Reggie Nadelson, New York Times, 7 Apr.2023 About 61% of them feel priced out of the current real estate market, according to a December 2022 survey by the Harris Poll of nearly 2,000 U.S. adults. — Megan Leonhardt, Fortune, 6 Apr.2023 View Photos Mercedes has priced the 2023 AMG C43 sedan at $61,050. — Joey Capparella, Car and Driver, 5 Apr.2023 Today, the Brooks Ghost 15 sneakers come in a wide variety of colors and are great for getting around town, plus they’re appropriately priced for their quality and value. — Christopher Friedmann, Travel + Leisure, 5 Apr.2023 Machine-wash cold, tumble-dry low Best Linen-Cotton Blend Southern Living Heirloom Linen & Cotton Sheet Set 4.8 View On Dillards.com Reasonably priced Immediately soft Excellent fit Prone to wrinkling Limited colors and sizes Linen blends are often more affordable than 100% linen. — Theresa Holland, Peoplemag, 1 Apr.2023 Plus, they’re priced right at just $30 per pair. — Mike Richard, Men’s Health, 29 Mar.2023 Most financial assets are priced in comparison to U.S. treasuries, which are generally regarded as risk free. — David J. Lynch, Washington Post, 3 Apr.2023 Range is the magic word At $42,715, Hyundai’s Ioniq 6 is priced to compete with the Tesla Model 3, which starts at $44,380. — Kristin Shaw, Popular Science, 3 Apr.2023 See More These examples are programmatically compiled from various online sources to illustrate current usage of the word ‘price.’ Any opinions expressed in the examples do not represent those of Merriam-Webster or its editors. Send us feedback about these examples.
What is an example of price forecasting?
Straight-Line Method – The straight-line method is one of the simplest and easiest-to-follow forecasting methods. This method measures constant growth rate by analyzing historical data to predict future revenue growth. Here is an example of straight-line forecasting:
A procurement team for a manufacturing company assumes that paper and pulp prices increase by 5% for the next five years based on historical performance. An analyst takes the previous year’s revenue and multiples it by the growth rate to forecast revenue. The forecasted earnings are multiplied by 5% until you arrive at the final year in your determined timeline.
Not only is this method easy to use, but it also tends to have a high accuracy rating for a broader predictive field.
What is an example of paying the price?
The phrase ‘Pay the Price’ means to suffer the consequences of someone’s actions. Example of Use: ‘ Jack drank so much last night! Now he’s paying the price for it.’