Issue 20 of The Psychology of Pricing
If the world is stable, it is easier for people to use the information they have to make decisions about what products to buy. People can form habits, and don’t need to expend energy making new decisions about what the optimal product is every time they need to refill or replace it. However, if the world is unstable and prices fluctuate as a result of constant promotions, people struggle to put the decision out of their minds. They are more likely to jump around between different products.
This idea goes back to Pavlov and his work on conditioning; this is known as the orienting reflex (Pavlov also called it the “What is it?” effect). The orienting reflex refers to the ways in which people respond to changes in their environment when the changes aren’t sudden enough to startle people. In essence, when something becomes stationary, people can stop paying attention to it, and when something is novel, their attention is drawn towards it.
When a company uses promotions regularly, people can’t stop paying attention to the price. This is rarely a good thing. By offering fluctuating prices, companies are not allowing consumers to put the decision aside and habitually stick to a product they’ve decided to buy once. This has the negative consequence of hindering repeat purchases.
To understand this, one must only stand in front of the dental care aisle. Toothpaste and toothbrushes were once products differentiated on value – whitening, bristle strength and so on. Now, the ever-present discount stickers make it hard to evaluate them on anything but price.
When possible, keep prices stable and predictable, especially for products designed for consumers to come back and buy again. The uncertainty of fluctuating prices makes it difficult for people to form that coveted repeat-purchase habit.
What are the types of products that benefit the most from stable pricing? Hint: think of habit formation.