It's because when people prefer to "buy local," they more frequently base their decisions on price as a perception of quality, according to research from the Indiana University Kelley School of Business and three other universities.
The study, published in the Journal of Marketing, suggests that marketers can use this understanding of local identity versus global identity to shape consumers' price perceptions and behavior.
Consumers - Price - Product - Quality - Identity
"Consumers tend to use price to judge a product's quality when their local identity is most important to them," said Ashok Lalwani, associate professor of marketing at Kelley. "When promoting high-priced or branded products, marketers can situationally activate consumers' local identity. To accomplish this objective, businesses can encourage consumers to 'think local' or employ local cultural symbols in advertising and other promotional material.
The researchers also suggested that the opposite was true for low-price products.
Discount - Stores - Dollar - Stores - Consumers
"Discount stores, such as dollar stores, should discourage consumers from using the price of a product to infer its quality," Lalwani said. "They would be better served by temporarily making consumers' global identity more prominent. Cues in advertisements that focus on a product's global appeal would help achieve that goal."
Many companies find it difficult to set and increase prices in the digital marketplace because of the pricing transparency of the internet, consumers' deal-seeking attitudes and global product availability.
Study - Lalwani - Colleagues - Interviews - Field
For their study, Lalwani and his colleagues conducted in-depth interviews, two field studies and seven experiments, and reviewed secondary data. In their interviews with 15 senior-level managers from Fortune 500 companies, they found that while the executives considered local or global communities in their pricing decisions, none knew when such strategies were effective or why.
For example, an executive at a snack food maker told them, "It is important to have a reasonably high price since it communicated 'premium-ness' and then reinforce it with advertising and packaging. But we...
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