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Heuristics
8 Psychological Affordances of Price
Price can produce specific predictable and actionable effects on the consumer.
Posted July 5, 2021 Reviewed by Davia Sills
Key points
- The psychological affordance of price is one of its most potent and under-appreciated aspects.
- Psychological affordances produce specific effects due to the interaction between the consumer, price stimulus, and context.
- The effects of psychological affordances of price are predictable, influential, and actionable.
One of the most potent and under-appreciated aspects of price is its psychological affordance—its ability to produce specific effects. Think of the price as a stimulus that the consumer encounters in a unique context with respect to time, place, and milieu. The consumer’s psychological state, the price stimulus, and the context interact to produce the effect.
Consider a shopper searching for a can of tomato sauce in a grocery store. He actively checks the price tags of different brands to choose a brand. This is a customer–price–context interaction. Now imagine the same individual goes out with friends. The conversation turns to vehicles they own. Our shopper boasts that he owns a Tesla, mentioning the price he paid, $65,000. This is another customer–price–context interaction.
The person is the same, but their psychological state and the context in which price is encountered are different. Price functions differently in the two cases. Its form is different, its purpose is different, and its effect is different. In the grocery store, price is a product attribute and is used as a decision heuristic. In the bar conversation, price is used as both a social signal and as a way to convey self-identity.
In this post, I want to introduce eight different psychological affordances of price.
1. Price as information.
The primary psychological affordance of price is its informativeness, not only in dollars and cents but in cues about the object’s quality. A price tag works in the same way as a brand, embedding meaningful information and conveying various associations. A car’s price is $85,000. My lunch today cost $2. I saw a $75 bicycle at Walmart. Even without any other information, each price brings up a vivid image of the object in our minds.
2. Price as knowledge.
Price can also be stored and used as knowledge. The consumer’s price knowledge is a matter of degree, with total ignorance on one end and nearly perfect price recall on the other. Price recognition, being able to tell that a particular price is a regular price, and deal spotting, superficially recognizing a good or bad deal, fall somewhere in between. Very few customers can recall prices perfectly, and a minority can recognize them. In most categories, far more customers have spotty or poor price knowledge.
3. Price as a symbol.
Relatively superficial properties of the price, such as whether it ends with 9, 99, 5, 95, 0, or some other value, whether it is a round number, whether it includes numbers that are widely considered as lucky or unlucky, and whether it is written out fully in words, all imbue the price with meaning. This is its symbolic affordance, and it has powerful effects on how consumers react viscerally. Relatively superficial and inexpensive visual changes to the price can enhance or dilute its symbolism in powerful ways, influencing consumer responses.
4. Price as a decision heuristic.
Consumers use price in every buying decision. Oftentimes, they use a decision heuristic, choosing from a library of countless heuristics shaped by their history and the buying context. For example, the price can act as an acceptability threshold—on the lower end and the upper end. It can also be used for prescreening when many alternatives are available, a preferred range, a comparison value (e.g., Our price $5, compared to competitor’s price $8), a numerical anchor, and so on. Depending on the heuristic, the price will be more or less influential in the consumer’s decision.
5. Price as a product attribute.
The price is every product’s most important attribute. Consumers primarily use it as a measure of trade-off against other features. The product’s price is the sacrifice, the hard-earned money given up, the hours of life energy exchanged. The product’s other features are the benefits, the rewards gained or enjoyed during consumption. The fundamental question the customer asks is, “Is the product worth the price?”
6. Price as negotiated value.
The idea of a fixed price is a relatively recent one. In reality, prices have always been negotiable and are becoming even more so. The negotiated value affordance explicitly acknowledges two things: (1) the price is a value that can be reached through a process of discussion, negotiation, and consensus between the buyer and the seller, even for everyday consumer products, and (2) every price has a life. Innovative negotiated value methods like Pay What You Want pricing and Name Your Own Price are the result.
7. Price as a marker of self-identity.
In our role as consumers, we put a great deal of stock in our consumption activities to define who we are. We may think of ourselves as a savvy negotiator, a frugal buyer, an environmentally responsible shopper, a minimalist, a social media influencer, and so on. Because of its powerful meaning generation, the price gives us an efficient way to establish our self-identity.
Many price-related concepts become slices of our personality. People who are price conscious are reluctant “to pay higher prices for distinguishing features of a product if the price difference for these features is too large.” Coupon-prone people are more likely to buy just because a coupon is available, irrespective of whether they need the item. This, in turn, can affect behavior in predictable ways.
8. Price as a social signal.
A price can also help to portray a person’s identity to the world. Any time the product’s price becomes a topic of conversation in a group setting, the social signal affordance of price kicks it. When the bar patron boasted that his Tesla cost $65,000, he was virtue signaling and bragging about his money.
Price encapsulates many different meaningful associations and can be used to communicate any of them. An extreme couponer may describe their recent exploits at the supermarket, and a materialist may brag about their recent luxury brand purchase. When price becomes part of the conversation, it not only confers the associations that reside in it (a $40,000 Hermes Birkin bag) to the consumer but also strengthens the associations between the price and other meaningful concepts (like the Bed Bath & Beyond 20 percent off promotion), enriching the meaning contained in the price.
