Online research suggests that only 60% of online purchase decisions are based on price.
Don’t Forget about the Purchase Value to the Customer – Products can have significantly different value to different customers. Sometimes convenience and flexibility are far more valuable than price. Airlines have found this to be a highly valuable way to price discriminate between customers on the same flight. Fully refundable tickets are often four times more expensive than non-refundable tickets for the same seat on the same flight.
The Time Value of Money Can vary Significantly by Customer – We all know someone who is happy to change their own oil rather than have a mechanic do it for them. In most instances, even if one has the skills to do the work, a shop that specializes in oil changes can perform the task far faster. People who do it themselves often undervalue their own time. Other customers will highly value the convenience and be far more willing to pay for the same service or product.
This is the second of our 3-part series on cognitive bias and pricing 101. Make sure to come back in a few days for the last piece of the series!