The dilemma of Perception in Pricing

To all brands, companies, businesses and firms, there is rarely something more important than how a consumer perceives their product.
Brands work relentlessly on a persistent basis, in order to create the right image in a consumer’s mind. The try their best to have the right consumer perception of the product, only to become slaves to it, later on.
It is one of the most interesting things in a competitive atmosphere. How consumers will react, is easily a crucial factor in making a decision. Especially when it comes to price changes, the expected reaction of the consumer base is the most important choice.
However, the modern world has seen this phenomenon become a dilemma. This is due to a number of factors and results in interesting scenarios. The dilemma stems from either of two situations:
1. Consumers perceive price as a determinant of quality
2. The price sensitivity of the product
Taking a look into the first situation, it presents us with some interesting problems. First and foremost, a brand that has spent ages creating the right image for its products cannot afford to make a price change which may alter the consumer perception. Hence, if they offer a product that has a low price or if they offer a discount, it may result in the consumer believing that the product has lesser quality. (Darke and Chung, 2005)
Discounts are believed to have variating results. In most cases, customers welcome discounts and tend to spend more on products that are available on cheaper prices. However, for products that a consumer perceives to be high end, a cut in price could mean a decrease in quality. In some cases, the consumers are willing to pay higher prices as it results in greater satisfaction. This happens because consumers believe that the higher they pay, the higher value they receive. In these circumstances, offering a discount can hurt a brand. (Darke and Chung, 2005)
This is probably why, it is rare to come across luxurious commodities such as the Rolls Royce car come at a discounted price.
On the other hand, the price sensitivity of the product plays a pivotal role in determining the price for the product and how consumers will perceive it. A firm may attempt to increase the price of a product, in order to cater to a different segment or to improve its perception in the minds of the consumers. However, if the product has a price sensitive consumer base, this could end badly. This is because price becomes the primary determinant instead of consumer perception. (Darke and Chung, 2005)
There is more that can go wrong while making the decision regarding the price of a commodity. For example, volatile changes in the price can have unpredictable circumstances. This happens because an unprecedented significant change in price affects stakeholders with likelihood of erratic consequences. Not only does it directly impact the firm, it also has a lasting effect on the market. (Ackerman and Gallagher, 2000)
However, if the marketers can achieve the right placement for the product, it puts the business in a favourable position. The right product placements allows more freedom in terms of making decisions regarding the price of the product. Here the placement does not refer to location, but the placement of the product in the perception of the consumer. (Nakamura and Steinsson, 2008)
Similarly, a price change is also one of the big factors behind success. If the business has a favourable perception in its target market and it applies a price strategy accordingly, the price change can result in great profits.
A good decision, in terms of pricing strategy helps the firm gain market share and an edge over the competition. . It makes for an interesting bet, as the same decision can determine failure or success, making the endeavour as lucrative as it is risky.

References
• “Price, Authority, And Trust: From Ideal Types To Plural Forms On JSTOR”. Jstor.org. N.p., 2016.http://www.jstor.org/stable/2083220?seq=3#page_scan_tab_contents http://www.sciencedirect.com/science/article/pii/S0022435905000047
• “Price, Authority, And Trust: From Ideal Types To Plural Forms On JSTOR”. Jstor.org. N.p., 2016. http://www.jstor.org/stable/2083220?seq=4#page_scan_tab_contents
• “Price, Authority, And Trust: From Ideal Types To Plural Forms On JSTOR”. Jstor.org. N.p., 2016.http://www.ase.tufts.edu/gdae/publications/priceswrong.PDF

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