MARKETING INSIGHT Is the Price of a Product

Only Money?
Most analyses of the price of a product focus on the amount of money a buyer must pay
to purchase. However, there are other costs involved that can strongly influence purchase
decisions. Here are three types of costs marketing analysts should consider when making
pricing decisions.
Time Costs. Time is valuable to most people. Time involved in purchasing products often
could be used for more pleasant activities. Waiting in a long checkout line or waiting for a
pizza to be delivered can be considered a waste of time too. Many people are willing to pay
more money to reduce the time they have to wait to get a product. Vending machine sales
often depend on buyers who will pay more money to get a product sooner and with less
hassle. People who want a product immediately are often willing to finance the purchase
on a credit card to reduce the time waiting to get it.
Psychological Costs. The mental energy and stress in making important purchases and
accepting the risks of products not performing as expected can make buyers uncomfort-
able. Purchasing complex or expensive products can involve investigating and evaluating
lots of information and worrying about making the right choices. Car dealers that offer “no
haggle” sales do so in order to lower buyers’ psychological costs of negotiating.
Behavioral Costs. Buying products and services usually requires some level of physical
activity. These costs can increase if buyers have to drive a long way to make a purchase,
park far away in a large mall parking lot and have to walk to the store, hunt through many
aisles looking for products, and stand for long periods waiting to check out. One way buy-
ers reduce this cost is by shopping and buying from catalogs or the Internet even if they
have to pay more money because of shipping charges.
If buyers in a target market are sensitive to these costs, it is possible for marketers to get
a competitive advantage by reducing them. These strategies include such things as sell-
ing through multiple channels, free shipping, fast delivery, in-store credit, no-hassle return
policies, and money-back quarantees. Another strategy is to reduce the monetary price of
products in order to compensate for higher time, psychological, or behavioral costs. For
example, Walmart’s lower monetary prices help offset the additional costs to buyers of hav-
ing to drive longer distances to get to the stores that are located on the outskirts of most
markets.

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