Cheaper Is Not Necessarily Better

Do you believe in the saying, “if it seems to good to be true, it probably is?” According to a new study, many consumers do feel that way. The study followed the reactions of consumers to different price guarantee and reimbursement deals from retailers. It showed that these consumers are hesitant to buy if a deal is too beneficial to the buyer. Conventional wisdom tells us that consumers will choose the cheapest option when offered the same product at different prices, but that doesn’t seem to be holding true anymore these days.

The study, conducted by the Value and Research Center at Reims Management School, found that consumers start to have doubts about the quality of the product that they are purchasing if the price is too low, or if a reimbursement guarantee is too high. Adilson Borges, head of the Value and Research Center, says, “If the offer seems to good to be true, the consumer may start to believe that there is a catch, and become wary or suspicious of the details.”

Offering a price guarantee on a product could be an effective strategy for retailers, according to the study, but only if they’re guaranteeing to make up a difference in price, and not go overboard by reimbursing the consumer much more than the price difference.

Borges said that the observation made in this study was that retailers who do offer a price guarantee strive to give the impression that they have the most competitive offer in the market. This should encourage retailers to keep offering a guarantee of the best price, and simply reimburse the difference in price if a competitor undersells them. All in all the study found that consumers may like fairness in pricing, but they don’t accept that they can get something for nothing.

Reference:

Palermo, Elizabeth “When Cheap Is Too Cheap for Shoppers” 1/14/13