I can buy a coffee pot at Walmart for $45. That exact same in every way coffee pot sold at Khol’s for $75. Same thing with stores like Meijer where most non grocery items are marked at a premium vs other stores; and they sell.
Why do average (including myself often) people willingly pay more for something they can easily get for less? The entire psychology of pricing confuses me and makes me wonder. How do they trick people just by putting a 1 or a 9 somewhere? Or am I looking at it all wrong?
In: Economics
People think cost and brand equals quality. They will pay more for the exact same coffee pot because it’s from a fancy store instead of Walmart because its obviously better quality in the expensive store vs the cheap store.
Convenience and ignorance. Usually if it means not having to go to a serving store, people are willing to pay a little more. In the case of a big difference like you mentioned, usually ignorance. I needed a countertop appliance, but not badly enough to do my research, I I simply bought it where I usually did and assumed they weren’t cheating me. People are pretty lazy.
In your example of the coffee pot, it comes from perception.
Let’s assume the manufacturer of the pot is exactly the same. Same factory, same production line, same lot, same everything. The only difference is the brand it is sold as. Great Value (walmart store brand) is perceived as being built around lowest possible cost, so therefore some quality sacrifices are made. However, Kohl’s brand is perceived as having a little higher quality, and therefore, a slightly higher price point.
As for why things are priced as XX.99 instead of XY.00 (1 cent higher), consumers tend to not see the whole price. They look at what comes first and ignore the rest. Going back to your coffee pot, on first reaction, which is cheaper? This one that costs $44.99 or that one that costs $45.00? The mind sees the $44 and thinks ” hey, 44 is less than 45, so this one is cheaper! I’m gonna buy this one instead of that one!” Even though they are effectively the same price
I think also the store reputation matters. There are people who wouldn’t be caught dead buying something in a dollar store that is the exact same product they pay more for in a drug store or grocery store. We are conditioned to think “low cost” and “low overhead” means “cheap and poor quality”.
In the 80’s where I lived there was a warehouse style grocery store. They had industrial shelving, left everything in the shipping boxes with just a panel cut away. Absolutely no frills. People thought of it as a place poor people went, because the prices were lower but it looked like a warehouse. Now people flock to Costco for a similar experience.
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