Customer perspectives of the price structure
Any price change will certainly affect customers, competitors, distributors, and suppliers and may interest government as well. Here I will consider virgin customers reactions.
Customers do not always put straightforward interpretation on price changes. A price cut can be interpreted in the following ways; the service is about to be repacked; the service has some fault and is not selling well; the firm is in financial trouble and may not stay in business to supply future parts; the price will come down even further and it pays to wait; or the quality has been reduced.
A price increase which would normally deter sales may carry positive meaning to the customer; the service is very hot and may be unobtainable unless it is bought soon; the srvice represents a usually good value; or the seller is greedy and is charging what the traffic will bear. Buyer’s reactions to price changes also vary with their perception of the product’s cost in relation to their total expenditures.
Buyers are most prices sensitive to produce that cost a lot and/or are bought frequently, whereas they hardly noticed higher prices on small items that they buy infrequently. In addition, buyers are normally less concerned with the product’s price than the total costs of obtaining operating and serving the product. A seller can charge more than the competition and still get the business if the customers can be concerned that the total costs are lower.