Incidental Prices Affect Customer Pay Expectations

Here is an interesting research paper from the Journal of Marketing Research about how the prices of things we don't buy still affect the price we expect to pay for our purchases.

To test for the effect of incidental prices, the authors use a combination of laboratory and empirical studies. The results of the first study show that the price of an unrelated good (a sweatshirt that did not interest participants) can affect people's willingness-to-pay for the item that interests them (a music CD). Specifically, when a sweatshirt offered at an adjacent vendor was priced higher, consumers offered more for a CD they wanted to buy. In a separate laboratory experiment, the authors find that if participants see multiple incidental prices sequentially, the one they view most recently has the strongest effect. The third study empirically documents the influence of incidental prices in an auction, using a real-world data set provided by one of the nation's premier classic-automobile auction houses. The authors find that the closing bid for one automobile influences how much consumers are willing to pay for the next car on the block. The auction study reveals that the impact of incidental prices is powerful enough to affect knowledgeable buyers of expensive products in an information rich setting.

The results have clear, direct implications for all parties involved in an auction. The prescription for sellers is clear: Attempt to have your belongings to follow costlier items onto the selling block, the more expensive the better. The marketing implications extend beyond auctions, to online vendors and conventional retailers alike. Virtual resellers may consider which pop-up advertisements appear when Web surfers visit their site. While opening a browser with the intention of buying a book at, a pop-up advertisement that touts flights at "starting at $124," could make shoppers less price sensitive. Are low-priced, impulse products all that should surround a checkout? Perhaps a high-priced item or two may make shoppers feel better about what they are paying for their purchases.

Maybe the next sales tactic will be to employ fake shoppers who spend all day standing in line buying expensive things so that the people in line behind them feel like they got a good deal.

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