Reference Prices Are Those That Are Carried in Customers’ Minds and Which They Refer to When They Look for a Given Product. Why Might Reference Prices Be Used When Buying Some Products and Not Others? Why Might a Higher

ILA 3

Reference pricing is how much a buyer is willing to pay for a good or services based on past personal observations. This is the price that consumers have in their mind when looking for a specific good or service. Its part of psychological pricing where the expected price is usually not base on just economics but a perception that consumers have such as higher priced products means higher quality. This is base on personal experiences and judgment that can be different from one person to another. The mains points of reference prices are the types of products, the types of consumers as well as the buying situations.

The types of products are products that the buyer has used it before and therefore they may have some experiences before that therefore this helps them choose the products base on past experiences. The types of consumers are based on their education, income and family size. For example, people with low income will tend to be more sensitive to the changes in price as they want to get the most out of their money. Whereas high-income earners are more sensitive to the quality of the product rather than the price of the product. The buying situation is when a person determines whether or not they should buy the product now knowing that there might be a sale coming soon, If they really needed it they wouldn’t be price sensitive.

It is a combination of these factors that is going to have an impact on reference price buys the consumer when choosing their goods or services.

Why reference prices might be use when buying some products and not others is because most consumers don’t have the skills and or past experiences from a certain product as well as time to compare both price and performance.

Reference prices will not work in emergency situation such as ambulatory surgical procedures as the consumer does not have to time to decide whether they want to choose an alternative treatment in such a short period of time. Reference price does not work with...