Reference Prices

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Definition: Reference Prices

A "reference price" is the price that people expect or deem to be reasonable for a certain type of product. Also it is a strategy in which a product is sold just below its main competing brand.

This is because people generally compare prices and has a reference price set in their minds before buying any product.

Factors that affect reference pricing are: -

  • Memory of past prices
  • Consumers frame of reference like the competitors price, substitute product price
  • How the price is presented e.g. psychological pricing

 

 

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