Oleh: Jalu Dibyo Sanwasi | Staff Divisi Kajian Kanopi 2012 | Ilmu Ekonomi 2011
Price. It is the value that producer bestows on their goods and it is one of the most determining factors in a consumer’s choice. As it is not uncommon for consumers to postpone a purchase of a particular good when the price is too high, consumers are also sucked into buying mode when they happened to see four letters constructing the word “SALE”.
Consumers are generally believed to buy more goods when it is on sale. One obviously need not have to be a genius to understand the phenomena. If a consumer can spend less on a particular good than usual, it is viewed as a good transaction; hence, the increase in buys. There is however, a dilemma on how low should the price of a good should go. Should it decrease by a mere 10%? 75%? Or should it go all the way down until the price is zero?
For some, the price of zero is an irresistible purchase magnet. Dan Ariely has done researches that the price of zero is like no other price. When a price is discounted by a certain amount but is able to maintain a price of a particular positive number, the demand for that product increases by a particular amount. When the price however, is decreased to zero, the demand for that product increases exponentially. As proven by the experiment, zero happens to have a very strong effect on demand.
Despite the power of attraction that the price of zero posses, zero also has the curse of scaring off potential consumers. Different experiments has shown that zero creates insecurities among consumers. In some cases, they tend to see “free” as a word congruent with low quality. Therefore, when products are priced as free, people are reluctant to purchase that product. Only when the price is increased to a certain amount will the demand for that product recover.
Prices of goods are used as ways to distribute goods to those who value it most. However, when prices of goods go down to zero, the price enchants the consumers with additional psychological push.It seems that the goal of price as a main factor of allocation also has its drwabacks.