Now let's think of some examples, where we look at

different types of consumptions visibility and different types of involvement.

So consider a low involvement high visibility situation.

This is like eating a double cheese burger, right?

You're sitting in a restaurant perhaps and people are definitely seeing you eat it.

Probably plenty of people you don't know, maybe a few people you do know.

But it's relatively low involvement, you've really spend a lot of

time considering getting that double cheese burger.

It might be a habit of yours, right.

You just went in, you got the double cheese burger, you sat down and

you ate it.

Now, what about high involvement, high visibility?

Well, look at this outfit right here, this nicely put together outfit.

The yellow dress, we've got yellow shoes, we have a small purse there and

some glasses.

Do you think that the person that would wear that considered,

how much time metal energy they going to put in doing this?

Was that higher or low?

Well probably pretty high, why?

It's high visibility, and when that person puts on that dress,

they think that reflect something of themself to the outside world.

So visibility is high and involvement is high because I think that

going to reflect me, I better carefully consider my purchase.

You also have things that are low involvement and

low visibility here is a candy bar, how do you buy a candy bar?

You're standing at the checkout at the grocery store, and you're hungry and

you just grab one.

Probably, maybe you're going to eat it in the car on the way home, I don't know.

But maybe nobody's going to see you eat this candy bar.

And you did not spend a lot of time thinking about the purchase process.

Contrast that to a low visibility item, but really high involvement.

A mattress, in general, not a lot of people see your mattress.

Few people may see your mattress, but not a lot of people see your mattress.

Yet on the other hand, it's very important that you've a good mattress for

good night sleep.

If you have a bad mattress that kind of messes with your life, right?

That can cause you pain in the morning, so you are going to carefully consider,

what kind fo mattress you should buy.

Both because it is important maybe for your physical and

mental well being, but also because these things could cost a fair amount of money.

So you can have all different variations of this.

High and low involvement, high and low visibility, and

that impacts the way people process price, let me sort of point to that now.

So let's take the low involvement, low visibility.

Typically, people will have price thresholds.

That means, now look at the candy bar and let's say, it is under a dollar or

like it's under dollar, I'm not even considering it further,

I'm grabbing it and go.

So it's a very quick decision.

Yes, it's below some threshold I'll buy it,

if it's above some threshold mI'm like it's too expensive, I'm not buying it.

That's it, but generally it would happen in a second or even less than a second,

and your price insensitive below threshold.

So if your threshold are dollar whether is 99 cents or 89 cents, it's

not going to make that much difference, you going to buy it either way.

And price takes a back seat to convenience, which really important in

this kind of purchases, is it there right at the time that you want to buy it?

And if it is there, right at the time you want to buy it,

there is a broad range of price insensitivity at that time of purchase as

long as it is again below that mental threshold.

Clearly, if the candy bar cost a $100 you'd be like no way.

Okay, what about this low involvement high visibility purchase like that double

cheese burger, well again, people typically have price threshold.

It is true in these situations that if you have a price threshold and

you walk in and you buy the double cheeseburger and

it's more than you expected, you might still buy it.

Because the convenience is going to be important to you.

But if you are planning on repeatedly purchashing this, this is a habitually

purchasing, that price could be important in your repeat purchase decision.

So that's the way people would process that information,

maybe not precluding at that particular moment, but precluding repeat purchases.

And this market,

it is typical the case particularly if they repeat purchase a lot.

But people are deal seeking, and look for

coupons things like that to try to get the price of this particular object down.

Now, let's think about high involvement and low visibility.

We have that mattress, so price impacts something called the consideration set.

What is a consideration set?

Well, that is the set of objects or

goods that you're really going to seriously consider buying.

For example, there are lots of things that you would never consider buying.

Supposed you're a single person, and you're going out to buy a car,

are you going to buy a minivan?

Probably not.

It doesn't probably make much difference if the price of the minivan is low.

You're just not going to consider a minivan.

On the other hand, if you're married and have three children,

are you going to buy a two seater sports car?

Well you might like to buy a two seater sports car, but it's not practical.

So the price of the two seater sports car isn't that important to you,

because you're going to eliminate it right away.

Just like that you may walk into a mattress store, and say,

I'm only going to consider mattresses that cross less $2,000.

That's my upper limit once I get under $2,000, I'll consider it carefully.

But anything outside of that price range, I'm not even going to consider it at all.

And then price begins to be weighed against other attributes.

Is the $1,800 mattress really a lot more comfortable than $1,500 mattress?

This trade off does not happen when you buy the candy bar, but do for

something like a mattress.

And what's very important here is extensive price search is

quite possible and even likely.

Before you buy something like this, you going to go online and

you going to check publications, you going to do your homework on price.

Because is a lot of money on the line, and you want to get the best value for

your money.

Finally, we have the high involvement high visibility item.

That sort of outfit, we put together again.

Price impacts the consideration set.

Just like I said before, because it's a high ticket item, and

people will do extensive price search.

There is one difference there worth mentioning.

The price may become the part of consumption value.

That means that you may want other people to know how much or

how little you paid for the item.

Because the price becomes part of what you're trying to project to the greater

world whether that be a high price or a low price.

You want people to know it,

because you believe that impacts their perception of you.

That's what happens in these high visibility markets.

Now, so let's summarise what we need to take into account in terms of price.

Well, the more involved the buying process,

the longer the buyer is going to consider price.

So what does that mean for you?

You have to pay attention to price search,

you have to do things like search engine potimization or SEO.

You need to consider doing thing like advertise price and

putting that price under and to the wall.

So people are more easily able to do research on your good or

service, when they engage in that research process.

You also need to consider something called mental accounting type deals.

I haven`t defined mental accounting yet

that going to happen week four of the course.

But when we get in to the psychology deal making, we going to remember this term,

these mental accounting type deals.

And these deal structures are going to be very important marketing decisions

to make.

And finally, you may need a product line in this situation.

Why?

Because customers are going to be trading off between different attributes,

and price.

And different customers may trade off those attributes differently.

So when they walk in the door, you want to have perhaps a mountain bike that's

priced at $1,200 and has a lot of features.

And another one that's priced at $800 and has fewer features.

Because you know those tradeoffs are going to be different.

We are going to talk about product line pricing more extensively,

we've talked about it in a primitive way in the previous course,

we'll talk about it again.

But this is a good application of that, if you think the buying processes

very involve, that's a real place to think about product lines.

And finally, what about visibility and consumption?

If it's visible, it's more likely that price is part of that intrinsic value.

And that could be high prices or low prices, right?

It depends on the individual's self image and

what they want to project to the world.

For example, Sam Walton founded Walmart.

He famously drove a pickup truck, why?

Because he was projecting to the world that he was a simple man.

He had simple taste and although he could afford living extravagant lifestyle that

wasn't part of his personal value.

And he didn't want to show that to the world.

On the other hand, you have things called Veblen goods, okay.

Veblen is named after somebody who wrote a book a 100 years ago,

a little more than a 100 years ago.

And this are really money burning purchase occasions.

Here, I have champagne, whisk sparklers and what is that?

You can go into a maybe to a high end bar, and then a high end bar, where you can

even spend a thousand dollars on champagne and bring amount of sparkler.

I heard a story on the radio of one of the mortgage brokers.

Who was working before the financial crisis happened in 2007,

at that time guys were making crazy money.

This was a guy in his 20s, and he was tell a story about going out to bars with his

friends, spending thousands of dollars on champagne.

And looking around when they brought the champagne was sparklers and

everybody was sitting in there was saying, hey, look who the cool rich guys are.

And that's what he was trying to project to the world, he was a cool rich guy.

So in these kind of visibility situations, you do have to take into account the self

image of the individual, what they're trying to project into the world, and

that's going to be built in to the pricing decision.

Mapping Purchase Processes

Customer Value in Pricing Strategy

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