Outline

Pricing & Promotions • Second presentation of final project

(Shopper Marketing)
• Analysis of prices (homework last week)
Barcelona, April - June 2019

• Two systems of reasoning

• Prices & Size Strategies

• Psychology of Pricing

Edgar Sánchez, Ph.D. Neurosciences •Individual interview for feedback purposes

Project – Pricing analysis

Project – Pricing analysis Project – Pricing analysis

Pr/Lt
1€ (1Lt) vs 0.44€ (5tl)  127% More expensive

Project – Pricing analysis

Conclusions

• Customers don’t take the time to do the

calculations

So what? • Why?
Brain always seeks to minimize
Group Exercise
energy expenditure
 2 Systems of
Reasoning
(2SR)

2 Systems of Reasoning 2 Systems of Reasoning

Autonomous Processes System 1 System 2
− Associations, similarities & spatial and (analytic) (analytic)
Experiential temporal relations.
Non-deliberate Intellectual reasoning
System − (Semi)Automatic  Relatively Fast.
(System 1) − Relatively small cognitive resources
Quick, automatic Controlled & rule-based
demand. Allows for the exercise of free will

Non conscious Conscious deliberation

Deliberate Processes Linked to language
Analytic - Formal symbols manipulation Analytic reasoning and
Emotion-based
System − Hypothetical reasoning. rational choice
(System 2)
− Relatively Slow. Low energy
Skillful and effortful
− Relatively high cognitive resources expenditure
demand.
Image credits femgineer.com
Prepared by the author based on Zurawicki (2015)
 2 Systems of Reasoning 2 Systems of Reasoning
S2 S1 Unconscious
S1 Stimulus  Thalamus  Amygdala 
Inner part, Oldest Reaction
Instincts, Emotions, Impulses

Conscious
S2 Stimulus  Thalamus  Cortex  Reaction
Outer Layer, Newest
Analytic, Reflective,
Thoughtful

Medicine: Clinical Eye, Keen Eye, Sharp Eye

Image credits worldartsme.com 28Ene19
pinterest.com 28Ene19
123rf.com 13My19
derpibooru.org 13My19 Image credits londonhypnotherapyuk.com 30Oc18 Prepared by the author based on Braidot (2000)
http://clipart-library.com 13My19

Relation S1 (experiential) & Pricing?

What we can do with this?

Group Exercise
 Pricing Pricing

People are using

S1 all the time People basically
(almost) work with few

& pieces of info
Such as?
Effort (cues)
minimization

Pricing Pricing

Expensive?

Absolut Prices! YES NO

208€/liter
 Pricing

People do not
realize changes So what?

in the
sizes/quantities

Common
Practice?
Shrinking YES NO

Sizes  ↑Price  ↑Profit

(without change in
(Unnoticed)
tag price)
Pricing Pricing

Bachelor (2014) Allen (2017)

“A grand total of 2,529 products tracked by

the Office for National Statistics have
decreased in size over the past five years”

What is Psychology of pricing?

 Psychology of Pricing

Def:

Psychology of 1. Scientific study of the effects of different levels and

ways to present prices in consumers perception,

Pricing reactions and decision making

Psychology of Pricing
Def:

2. Use/Implementation of that scientific knowledge to

construct strategies for Price
presentations/formats/displaying to

Stimulate buying for income/profit optimization

 Psychology of Pricing Psychology of Pricing
You are in a bar. You are in a bar.
You find this in the Menu. You find this in the Menu.

Do you see Do you see

something special? something special?

If it is the case, If it is the case,

what are consequences? what are consequences?
Kolenda (2016)

Kolenda (2016)

Psychology of Pricing
Results

Experiments 8 Weeks,
1.19K Beers

Why?
On avg. extra $0.24/Beer

Suk, Lee, and Lichtenstein (2012) What is the name

Journal of Marketing Research of this?
(link with any other piece of
the course)

Kolenda (2016)
 Psychology of Pricing Psychology of Pricing
Anchoring
(Relatives and Context)

Price Order Effect

≠ Behavior
≠ Perception 
Kolenda (2016) ≠ Experience

Micro Digression
 Two Paths

Relatives & Context

Vs.

Relatives & Context Relatives & Context

Application

≠ Behavior
≠ Context  ≠ Perception 
≠ Experience
 Relatives & Context

Application Transversality

Mom and her child: Teen girl: Relatives:

Soup Pregnancy & Car Order &
Context

Mecanismo Mental: Relativos & Contexto Relatives & Context

Atención a sensación de cada mano

Vaso Vaso de en Vaso
Izquierdo medio Derecho

Mano Mano
1º Izquierda Derecha

2 Manos
Andy
2º
The context is constructed across
Mismo estímulo pero diferente experiencia en cada mano time, sequentially
Image credits Zazzle.com Feb1,19
Image www.sparklebox.co.ukº Vectorstock.com Feb1,19
credits
 Psychology of Pricing

6€ vs. 5.99€

Psychology of Pricing Psychology of Pricing

6€ vs. 5.99€ 6€ vs. 5.99€

Feels like a lower price

Do you want the science behind it?
less expensive
Appear lower
More attractive
 Psychology of Pricing
Perception of Magnitude

3.59€ vs. 3.60€ 2.99€ vs. 3.00€

More or less the same Right one feels bigger
quantities ↑ 8%

Purchases
Different Perception of magnitude

≠ Context  ≠ Value of 1¢ Schindler &,Kibarian (1996)

Journal of Retailing

Thomas & Morwitz (2005)

Journal of Consumer Research

Psychology of Pricing

Scientific
Data shows it
 produces
impact Is there any case where this
should not be implemented?
Individual Exercise
Group Exercise
 Luxury
 products Not for:
bad thing Quality seekers
for lux
Make
 look   Luxury goods
price
cheaper
represent Price insensible
quality customers
(not price focused)

Optimization of Stimulate consumer


pricing displaying purchasing
Individual
interview