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The Price Is Right, but Confusing

Uniform pricing accentuates products' differences, which makes it harder to choose among them. Karen Hopkin reports

You’re in the supermarket picking a breakfast cereal. Will it be cinnamon raisin or oats ‘n honey? Hard to decide? What if I told you they both cost the same, would that make it easier? Well, a new study suggests it would not. Because researchers have found that uniform pricing actually accentuates the differences between products, which makes it harder to choose. The results appear in the journal Psychological Science. [Jongmin Kim, Nathan Novemsky and Ravi Dhar, Adding Small Differences Can Increase Similarity and Choice]

Consumer psychology is big business. To explore how pricing can sway customer choice, researchers took volunteers on an imaginary shopping spree. Subjects were presented with photos, descriptions and price tags for pairs of similar items, say two different teas or a couple packs of gum.

When the prices were a bit different, the products were seen as being similar. That perceived similarity then made it easier for subjects to choose between them, perhaps because one seemed as good as the other.

But when the price tags were identical, subjects actually rated the items as being less similar, perhaps because they were forced to focus on what made the products different, such as flavor. Now, back to the breakfast cereal: will it be whole milk or 2 percent?

—Karen Hopkin

[The above text is a transcript of this podcast.]

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