Bagchi: Compare these two offers, for instance: $29.00 for 70 songs that you can download, or 70 songs for $29.00. Which of these two appears like a better deal?
So what does sound like a better deal, $29 for 70 songs, or 70 songs for $29? I’m Jim Metzner and this is the Pulse of the Planet.
Bagchi: Broadly, I work in the area of numerosity; what that means is, how largeness of numbers influence decision-making.
That Rajesh Bagchi, an Associate Professor of Marketing at Virginia Tech. And the better deal?
Bagchi: Most people find 70 songs for $29.00 as a better deal than $29.00 for 70 songs. But, if you just think for a second, I mean, a nanosecond you will probably realize it’s the same deal. So, it’s kind of ludicrous to even compare the two. But what we essentially show is that when you present the value first, which is 70 songs, consumers just say, “Oh, 70 songs, and it costs me $29.00. That’s not so bad.” But when you present the price first, which is $29.00 for 70 songs, they start saying, “$29.00? That’s expensive. Seventy songs. Huh. That’s not such a good value.” Recognize, though, oftentimes, the prices are 99 cents for a song. So, $29.00 for 70 songs is actually a steal. It’s a great deal.
So, what we we essentially tried to show in this project is that sometimes managers like to highlight price by trying to say, “We’re offering a great deal,” you know, “$5.00 for two roses.” But, somehow, putting that $5.00 first, make consumers more aware of the price, they get more price-conscious because they are anchoring on price and not on value, and that lowers their willingness to pay, lowers their willingness to buy, and it has other consequences.
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I’m Jim Metzner and this is the Pulse of the Planet.