Pricing and the Psychology of Consumption
Ask any executive how pricing policies influence the demand for a product or service, and you'll get a confident, well-reasoned reply。Ask that same executive how pricing policies affect consumption—the extent to which customers use products or services that they've{{U}} (19) {{/U}}for—and you'll get a muted response at best. It is found that managers rarely, if ever, think about consumption when they{{U}} (20) {{/U}}prices—and that be an{{U}} (21) {{/U}}oversight.
For many executives, the idea that they should{{U}} (22) {{/U}}consumers' attention to the price that was paid for a product or service is counterintuitive. Companies have long{{U}} (23) {{/U}}to mask the costs of their goods and services in order to boost sales. And rightly{{U}} (24) {{/U}}—if a company fails to{{U}} (25) {{/U}}theinitial sale, it won't have to worry about consumption. To promote sales, health club managers encouragemembers to get the payment out of the{{U}} (26) {{/U}}early；HMOs encourage automatic payroll deductions；and cruise lines bundle small, specific costs into a single, all-inclusive{{U}} (27) {{/U}}.
However, executives may be discouraging consumption when they{{U}} (28) {{/U}}those pricing practices. People are more{{U}} (29) {{/U}}to consume a product when they are{{U}} (30) {{/U}}of its cost—when they feel'out of pocket'. But{{U}} (31) {{/U}}pricing practices such as advance sales, season tickets, and price bundling all serve to mask howmuch a buyer has{{U}} (32) {{/U}}on a given product, decreasing the likelihood that the buyer will actually use it. And a customer who doesn't use a product is unlikely to buy that product again. Executives who{{U}} (33) {{/U}}those pricing tactics without considering their impact on consumption may be trading off long-term customer retention for shorf-term increases in sales.