An online shop offering the latest mobile phone at a lower price than a physical shop might still lose out on the sale if the customer is going off on a long trip the next day and needs the phone right away. Lise Bergman Nordgren is a PhD in Psychology at Karolinska Institutet and an expert in human behaviour. She identifies five factors that affect the perception of value for money.
How familiar am I with the product?
If we already have a similar item or a product of the same brand that we’re happy with, that will increase the incentive to buy more of the same, even if the product has gone up in price a little. The loyal customer places a high value on peace of mind.
Is it new?
In direct contrast to the previous group, we have the colleague who is always the first to have the latest model. That’s the person who serves you deep fried grasshoppers for dinner and is already planning to buy a solar powered car. And of course that person is glued to their screen for Apple’s launch events.
Do I have any alternatives?
Everyone knows the price of a litre of milk. That’s a product with a low level of price elasticity. The same applies to services such as doctor’s appointments and bus travel. If the price goes up, there’ll be an outcry for a week or two before you get used to it. The price is expected and the alternative is virtually non-existent.
What added value do I get?
A glass of wine from a Tetra Pak might be the finest wine you ever drank if you open it in a beautiful place together with someone you like. The context has a direct impact on the experience of value. There can be a sense of exclusivity in experiencing personal service in a nice shop or in basking in the reflection of an influencer’s glamorous existence when we eat the same yoghurt for breakfast.
How available is it?
A physical product that you can feel or try out might cost a bit more than if you buy it online. But it’s not the only way to create availability. Home deliveries and smooth returns can persuade the consumer not to go to a shop.
Ultimately, which factors are prioritised is an individual matter. The price should be viewed as a suggestion in an ongoing negotiation. Even if a shirt in a sale was originally priced at SEK 1,299, there’s nothing to say that someone was actually prepared to pay that. At the end of the day, it’s always the consumer who decides the value of a product.