Thomas Nagle and Reed K. Holden, writing in The Strategy and Tactics of Pricing (2002) identify nine ‘effects’ that influence willingness to pay and cause buyers to be more or less price sensitive to the difference between price and value (as listed in Table 4.1). A full account is given in Chapter 4 of their book.
|Reference price effect||Price-quality effect||Shared-cost effect|
|Difficult comparison effect||Expenditure effect||Fairness effect|
|Switching cost effect||End-benefit effect||Framing effect|
Source: Nagle and Holden (2002).
Reference price effect
Willingness to pay is influenced by the perceptions buyers have of the relative cost of an alternative. If customers ...