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I recently talked to a person who is a supplier for an E-commerce website. In this website suppliers can provide their products at the price they choose. So it is probable that a specific product is available at different prices. He said that sometimes although the product is available at a cheaper price, there are some users that buy the product with higher price with same warranty and specifications. Sometimes they pay 50% higher price.

How do they think?

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Perceived value

It's a mental trick. I don't feel entirely comfortable with the practice of using price to play this trick, but it does work. It's related to the idea of …

You get what you pay for.

Some users will see a higher price and assume other value added aspects:

  • Product quality
  • Customer service
  • General seller reliability

That's just a few possible assumptions.

Another common way to impact perceived value with price is simply rounding. Should the price be 19.00, 19.50, 19.95, 19.99, 20.00? And in some markets (think luxury), choosing to omit the $ symbol can have a positive impact too.

Humans are weird, so marketers have to be weird.

Caveat
That's a lot of anecdotal information. Studies have been done on all of this. If I were presenting this to a team of execs, I'd prep a brief on perceived value and pricing strategy. I'm not, so I didn't 😁

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I can't point to specific research, but based on my experience as a user and basic e-commerce knowledge, it's possible that the buyers buy the more expensive one when a cheaper one is available because of a couple reasons:

  • They don't trust the cheaper vendor because of their poor reviews or lack of reviews or general lack of trust
  • They think the more expensive vendor provides more value or better service (on-time delivery, quality, etc.)
  • The more expensive one could be listed first. Depending on the UI of the shop, there's a traditional bias wherein the user chooses the first thing.
  • Anecdotal: my friend recently paid 15% more for a phone because of vendor trust. – Jan Dorniak Aug 31 '18 at 7:50
  • Many vendors with up-front cheaper prices charge an arm and a leg in shipping. And I'll definitely pay more if I think the vendor is more trustworthy, uses a more reliable shipping method, will take the item back without argument if necessary. Maybe not 50% more, but it depends on the initial price too :-) – George M Sep 1 '18 at 1:21

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