What makes consumers more open to still making a purchase when the price has been raised? A new paper by CATÓLICA-LISBON's Wilson Bastos has identified determinant factors that are at play when a consumer decides to still go ahead with a purchase in the face of a price hike.
Across seven studies, Bastos shows that consumers are more likely to endure a price raise when the purchase is an experience instead of a material object. He writes that “consumers tend to respond more favorably to an experiential price increase.” Also, Bastos finds an explanation for this difference: consumers perceive the opportunity to have a specific experience as more unique, more fleeting.
The paper “Now or Never: Perceptions of Uniqueness Induce Acceptance of Price Increases for Experiences More Than for Objects”, published in the renowned Journal of Consumer Psychology, involved a number of different studies because, Wilson Bastos explains, “showing that a result replicates across various experiments is important” and, additionally, “each experiment brings something new: it offers us new knowledge, or tests the same idea but with a different approach, or something else that adds to our understanding of the phenomenon we are studying”.
These studies showed that, because experiences tend to be viewed as more unique – something which may become unavailable in the near future and must be enjoyed or purchased now – consumers are more likely to go forward with a purchase even if the price has been raised, while this is not as likely with a material purchase. Interestingly, Bastos finds that this effect of unique opportunity is independent of how happy consumers expect to be with the purchase.
“Many firms spend considerable resources to inform us of the features and physical properties of their products. Although that can be important information, it seems that if the goal is to make consumers more accepting of price increases, firms should focus more on telling them about the experiences that those products can offer.”
“This research explains why consumers tend to react more positively to an experiential than a material price increase: they perceive the opportunity to buy a certain experience (vs. object) as more unique. In other words, if you pass up that sports event due to its now higher price, there will not be another opportunity to enjoy it. Differently, it is likely that you would find a similar, if not an identical, electronic gadget in the future”, Wilson Bastos clarifies.
What practical implications can these findings have? Increasing prices is a difficult but necessary measure that managers take, and this study implies that managers who are working with experiential purchases might have at their disposal a greater flexibility for price increases.
“Managers working with experiential purchases (things like travel, theater performances, dinners) appear to have at their disposal relatively greater flexibility in terms of pricing maneuvers”, Wilson Bastos concedes. “However, this does not mean that managers involved in selling material objects are necessarily at a disadvantage. I find in this research that focusing consumers’ attention on the experiential instead of the material aspects of the same product, say a BBQ grill, makes those consumers more receptive to a price increase associated with that product.”
Therefore, when it comes to managers working with selling objects, the study also offers a tool: Encouraging consumers to see the object more as an experience (instead of a physical element) increases consumers’ perceptions that the object is unique and makes them more tolerant to a price increase.
“It was interesting to see that the fairly simple strategy of encouraging consumers to think of a product as an experience instead of as an object substantially changes their reaction to a price increase”, the researcher remarks. “Many firms spend considerable resources to inform us of the features and physical properties of their products. Although that can be important information, it seems that if the goal is to make consumers more accepting of price increases, firms should focus more on telling them about the experiences that those products can offer.”