Starting Prices and Consumer Sensitivity to Customization
Marco Bertini and Luc Wathieu, 2012, 12-114
At first glance, customization is a remarkable proposition that enables consumers to express their preferences and their identity more effectively than they can with standard off-the-shelf alternatives. For the firm, investing in customization can increase the probability of a transaction and reduce wasteful marketing expenditure. For these and other reasons, business experts have praised this concept as an increasingly efficient source of competitive advantage.
Yet, in reality, firms that develop processes of customization often run into two obstacles. The first problem is that people seldom know with precision what they want. The second problem is that the additional choice steps that occur with customization can prove overwhelming.
Here, Marco Bertini and Luc Wathieu propose a simple design intervention that can overcome these barriers and make consumers more mindful of the fruits of customization. Specifically, they propose that posting a starting price—when a product is sold “starting from $…”—creates a useful contrast between the outcome consumers obtain from customization and the baseline, undifferentiated option that the starting price evokes. Focusing the consumer on this contrast accentuates the appeal of customization.
The authors conducted four lab experiments to test this argument. The first two experiments show that posting a starting price boosts evaluation when the benefit of customization is substantial and truly deserving of attention—for instance, when consumers have greater control over product design or when hedonic goals are driving their purchase. This result is good news for firms who provide customization but may otherwise struggle to profit from the investment. It is also good news for consumers who stand to benefit from realizing the full potential of consuming products that better fit their tastes.
They further show that the effect of starting prices is stronger for novices who have a relatively weaker initial sensitivity to the fruits of customization than for experts. In fact, the results of the third experiment suggest that the announcement of a starting price can cancel out the limitations of being a novice. Finally, the fourth experiment demonstrates that announcing a starting price helps the cause of people seeking conformity as much as it helps the cause of people craving singularity. A starting price merely projects a stark comparison to a product that contains no customization. Just how this comparison is interpreted is shown to differ depending on the consumer’s desire for uniqueness.
Marco Bertini is Assistant Professor of Marketing, London Business School. Luc Wathieu is Associate Professor, McDonough School of Business, Georgetown University.
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