Do yellow price tags matter to consumers?

Abstract (via Tanel Mehine)

The purpose of this article is to find out the relationship between yellow price tags and consumer reference prices. A laboratory study was conducted among 150 respondents, who were put in an experimental purchase situation and their initial internal reference prices were compared affected reference prices. The results revealed that consumers perceive yellow price tags as presenters of discounts. A comparison of the mean values showed that yellow price tags influence the reference price and, moreover, a yellow price tag increased the reference price. As a practical outcome, the results of the study indicated that companies have the opportunity to increase the consumer’s reference price and thereby to raise revenues by changing the colour of the price tag without offering an actual discount.

Excerpted Implications (via Tanel Mehine)

From a practical perspective, the positive effect of yellow price tags on the reference price means that a company can increase the consumer’s reference price in quickly and easily. As was also mentioned in the earlier sections, a higher reference price means that the consumer is more likely to accept expensive prices. For example, this would mean that a consumer has a fixed internal reference price of 10 EEK for a certain product and the prices in the store also offer 10 EEK as the average price, but the price tag on one of the products is yellow. The consumer now interprets the price marked on the yellow price tag as a discount and calculates the average price of the product by adding a value to the yellow price tag (the amount of the assumed discount). The next time s/he goes to the store, however, the price of the product, which seemed too expensive during the last visit, does not necessarily seem so expensive anymore as a result of the increase in the average price of the store and a positive buying decision is more likely. The result is particularly important in the case of brand loyal consumers, where using a yellow price tag and thereby increasing the price helps to gain additional revenues. In addition, what is also important is that the consumer him/herself regards the new higher price as being entirely justified. From the perspective of the business operator, an increase in the consumer’s assessment would mean additional revenues as well; at the same time, it is possible to hide a price increase because the limit of the change perceived by the consumer has risen. Thus, since the Estonian legislation does not set any restrictions on such price tags, the business operator can show the consumer a discount and thereby increase sales quantities without actually lowering any prices and by simply altering the colour of the price tag. So the yellow price tag is a good promotional tool but, at the same time, also an unethical trading method.

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About Miguel Barbosa

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31. August 2010 by Miguel Barbosa
Categories: Curated Readings, Psychology & Sociology | Leave a comment

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