Price, Psychology and Vegetable Vendor

Marketing is all about understanding consumer psychology and developing marketing stimuli. Learning can often come from unexpected sources. It was quite a revelation to know how small vendors who peddle vegetables build their pricing strategy based on consumer insights.  How different are the following:

One kilogram of orange which gives 9 pieces at Rs 60 and one dozen oranges (12 pieces) at the price of Rs 80

One pav or (1/4 kg) of kilogram of grapes at Rs 40 and one kilogram of grapes at Rs 160

What will be your strategy to attract customers? Would you call out dozen price or kilo price of orange? Would you shout out one pav (¼ kg) price or kilo price of grapes to lure customers in to buying?

One of the often discussed cases of psychological pricing is that of Bata. Bata’s prices are not rounded off to the next rupee rather they always end up at .99 paisa (like Rs 999.99 or 1499.99). This kind of pricing is based on the notion that though there is insignificant objective difference between 1499.99 and 1500 but these two price point have significant effect on consumer psychology.  This odd pricing works by leveraging consumer’s tendency to round off towards the lower end of the price. In above case the price perceptually falls in the band of 1400. The fraction does not allow it to get rounded off to the next category of 1500 hence creates a perception of being economical or cheaper. The essential issue here is what point is referred to while arriving at pricing interpretation. The consumer attention is focused on the lower price point and the fraction does not allow the price to be bracketed with the next level.  Technically the consumer end up paying 1500 but a perception is creation as if the price paid is in the range of 1400.

In the two examples cited above, the vendor lures customers to buy orange by shouting out price for a dozen not a kilo because the price is perceived to be lower.  However when something expensive is sold the price is usually quoted for a pav or ¼ of kg because the kilo price will be perceived to be too high and customers are likely to be driven away. In case of orange a perception of better deal is created by focusing his or her attention towards the generally bought quantity of purchase but in case of grapes the vendor draws attention to lower price.

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5 thoughts on “Price, Psychology and Vegetable Vendor

  1. Vegetable vendors quote price per 250 grams where the price per kg is perceived high by the consumer; in case of ,say, potatoes they never quote for anything less than 1 kg. Way back in the 1980s one company in South India discovered the importance of per unit price, this company became the first to introduce low cost sachets for their shampoo range. I do not remember the name of this company but the brand was -‘Chik’. Since then all the great multinationals began following Chik by introducing their own shampoos in sachets. I do not know if the Chik brand still exists. One can surely learn from these small guys, whether small companies with limited operations or vegetable vendors.

  2. sir,
    i can relate a similar insight, where a vendor selling coconuts would not display his price against the various sizes of coconut which he had for sale, but instead wanted his customers to come closer have a look and enquire about the cost. This was done with a clear understanding that a cost displayed seen from a distance may turn away the customer but getting him to come closer and enquire might prompt him to buy the coconuts from him.

  3. I believe marketing is more a game of street vendors than marketing managers. I remember when I was a kid, the samosa wala used to sell 2 rupee samosas although the size was too small. Smartness pays in marketing…

  4. Strange that this psychology plays exactly opposite role in disclosing marks of examination….fractions are always rounded off to next level n not to lower level…eg. if i score 83.65 percent, it will always be rounded off to 85 percent n not even 84 at times 🙂

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