Does the idea of shopping locally appeal to you as a consumer? If it does, then you may be paying more for your products without even realizing it.
A recent study from Indiana University suggests that consumers who buy local products tend to equate higher prices with higher quality items. And, conversely, they’ll often avoid buying lower-priced items for fear of buying something that’s also lower-quality. The researchers say that dynamic can be manipulated by businesses and marketers.
“Consumers tend to use price to judge a product’s quality when their local identity is most important to them,” said professor Ashok Lalwani. “When promoting high-priced or branded products, marketers can situationally activate consumers’ local identity [by encouraging them] to ‘think local’ or employ local cultural symbols in advertising and other promotional material.”
“Premium” products seen as more expensive
For their study, the researchers conducted several experiments and scheduled in-depth interviews with senior company officials to see how pricing was affected when it came to local products. In one response, an executive said that they actually had to increase prices in order to match consumers’ expectations.
“It is important to have a reasonably high price since it communicated ‘premium-ness’ and then reinforce it with advertising and packaging,” they said.
In general, the researchers found that consumers tend to believe that local brands are much more different from each other when compared to global brands. As a result, the team said that customers often use price as a way of determining which local brands are the best. In the same way, they say that consumers often view lower-priced items as being lower-quality, even when that’s not necessarily true.
“Discount stores, such as dollar stores, should discourage consumers from using the price of a product to infer its quality,” Lalwani advised.
The full study has been published in the Journal of Marketing.