Marketing Strategy Apr 16, 2007

Unsure What to Order?

Deci­sions are eas­i­er when every­thing is priced the same

Based on the research of

Alexander Chernev

You’re order­ing dessert and know exact­ly what you want: the laven­der crème brûlée that was reviewed in your favorite food col­umn. Even if it’s the most expen­sive item on the dessert menu, you will prob­a­bly order it. But what about those times when you don’t come armed with advance recommendations?

A study by Kel­logg Asso­ciate Pro­fes­sor of Mar­ket­ing Alexan­der Chernev in the Sep­tem­ber Jour­nal of Con­sumer Research finds that when a per­son is unsure what to choose, pric­ing all items iden­ti­cal­ly can help ease the deci­sion-mak­ing process. The strat­e­gy, known as ldquo;parity pric­ing,” may increase the like­li­hood that the din­er will order dessert at all.

Most pri­or research has exam­ined the impact of assort­ment on choice irre­spec­tive of price or by explic­it­ly assum­ing par­i­ty pric­ing,” writes Chernev. In con­trast, this research doc­u­ments that price dif­fer­en­ti­a­tion can have a sig­nif­i­cant impact on choice and links this impact to pref­er­ence uncer­tain­ty and the con­sis­ten­cy between indi­vid­u­als’ con­sump­tion and resource-allo­ca­tion preferences.”

Chernev com­pares par­i­ty pric­ing with dif­fer­en­tial pric­ing (pric­ing all items dif­fer­ent­ly based on fac­tors such as the cost of ingre­di­ents). He finds that dif­fer­en­tial pric­ing can both help and hin­der deci­sion mak­ing since it makes cost a cru­cial fac­tor and intro­duces con­sid­er­a­tions of splurg­ing or saving.

If items in the desired price range include an item with oth­er appeal­ing qual­i­ties, the deci­sion is made eas­i­er by the price dif­fer­en­tial. How­ev­er, if the items in the price range are less desir­able than more expen­sive items in some way, the con­sumer becomes con­flict­ed about buy­ing any­thing at all.

Thus, when the con­sumer has read­i­ly formed con­sump­tion pref­er­ences, dif­fer­en­tial pric­ing will help’ choice when the most pre­ferred option is also the least expen­sive and will hurt’ choice when the most pre­ferred option is the most expen­sive,” explains Chernev.

About the Writer

Kellogg School press release. Article featured originally in Kellogg World, Winter 2006

About the Research

Chernev, Alexander (2006). "Differentiation and Parity in Assortment Pricing," Journal of Consumer Research, 33(2): 199-210

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