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This paper seeks to examine the relationship between the price of the product and the buyers' perception of quality in respect of durable, semi-durable, and non-durable products in the Indian context. Three products were selected for the purpose of the study: colour television as a durable product; T-shirt as a semi-durable product; and toothpaste as a non-durable product. Data were collected from the primary sources with the help of a non-disguised, pre-structured questionnaire.
In particular, the study sought to explore answer to two questions: (1) Does high price have a positive influence on the buyers' perception of product quality? (2) Is there a significant difference in the buyers' perception of the quality of products falling in different price ranges?
Price is also one of the most important marketplace cues. The all-pervasive influence of price is due, in part, to the fact that the price cue is present in all purchase situations and, at a minimum, represents to all consumers, the amount of economic outlay that must be sacrificed in order to engage in a given purchase transaction. Although it is believed that price serves as an indicator of quality, there exists no general price-perceived quality relationship. In fact, price becomes a less important indicator of quality in the presence of other product quality cues such as brand name or store image. The use of price as an indicator of quality
In one of the pioneering studies on price-perceived quality relationship, Leavitt (1954) observed that the buyers tended to have doubts when they chose the lower-priced brands than in the case of higher-priced brands. He concluded that a higher price might sometimes
increase the buyers' readiness to buy. Price would be an indicator of quality for commodities such as textile products where quality cannot be ascertained by sight and where, owing to changes in technology and fashion, past experience was of little use.
Price plays an important role in indicating quality of many products for four reasons:
• The ease of measurement since price is a concrete, measurable variable.
• The effort and satisfaction, i.e., consumer satisfaction with a product depends on the amount of effort spent by the consumer in acquiring the product and an expenditure of money may be viewed by the consumer as similar to an expenditure of effort.
• The snob appeal.
• The reduction of the perceived risk of buying a product of poorer quality.
However, marketers must be careful that the concept of price as an indicator of quality should not be applied indiscriminately in making pricing decisions.
McConnell (1968) examined the relationship between price and the quality of beer which is a frequently-purchased consumer product. He found that the buyers used price as an indicator of product quality. With a homogeneous product and various unknown brand names, buyers perceived the highest-priced brand to be of better quality than the other two brands. He concluded that price, without any other cue, was an effective measure for brand evaluation.
In an experimental study, Gardener (1971) explored the degree of price-quality relationship for three products: toothpaste, a man's shirt, and a suit. He concluded
that while price did not affect the perception of product quality in case of all the three products, whether branded or not, it did affect the willingness to buy a shirt.
Shapiro (1973) sought to determine whether price would act as a communicator of quality and ascertain the reasons for consumers judging the product quality by price by determining the correlates of price reliance. It was found that, for most of the dimensions such as quality, durability, looks or fragrance, the number of buyers ranking the high-priced product better than the low-priced product was greater than the number of buyers
ranking the low-priced product better than the high-priced product. But, a substantial number of buyers rated the products as equal. The study revealed that price was a communicator of quality and the associated attributes in the marketplace when the product was actually present and the setting relatively realistic. On the other hand, the data showed that price was not a strong communicator of quality. Furthermore, price reliance appears to be a generalized mental construct - an attitude or trait, i.e., some people seem to be price-reliant regardless of the product under consideration. Interestingly, the study of the relationship between demographics and generalized price reliance shows price reliance to be correlated with older age and lower education but not with income. Price reliance depends upon the consumer's trust in the competence and honesty of the price-maker, perceived risk in a purchase situation, self-confidence of the customers, snobbery among them, importance of shopping speed, and the perceived quality difference among the brands. Price and quality were linked together in the mind of the consumer.
Price plays different roles in the purchase-decision process. In traditional economic theory, since higher price has a negative impact on the consumer's budget, price has a negative influence on his buying decision. However, from a behavioural perspective, price may be
perceived as a product quality cue. Therefore, price may be viewed either as an indicator of sacrifice, or as a quality cue, or both. It is found that price increase might play a positive or a negative role in the purchase-decision process.People is more likely to use price as an indicator of quality for expensive products. As price increases, the risk of an incorrect decision increases and the buyer is often less familiar with the product because of the in-
frequency of purchase. In such situations, simple learned heuristics, based on folk wisdom, such as 'you get what you pay for,' are likely to be used.
In the Indian scene, Mehta, Parasuraman and Ambarish Kumar (1972) conducted an experimental study to find out the relationship between quality and price and to examine the consumers' brand choice with respect to ready-made shirts. The study indicated that a
majority of the buyers perceived some quality difference between the two shirts which were identical in all respects except for the brand names. The study revealed
that the name of a well-known brand induced the consumers to be favourably disposed towards that brand in terms of quality and price perception and they were willing to pay a higher price for the well-known brand.
PRICING AND INDIAN BUYERS' PERCEPTION OF QUALITY
In this paper, we use Indian data to answer the following two questions:
• Does high price have a positive influence on the buyers' perception of product quality?
• Is there a significant difference in the buyers' perception of the quality of products that fall in different price ranges?
Three products-colour television, representing the durable category; T-shirt, the semi durable category; and toothpaste, the non-durable category were analysed. Information was elicited from consumers on these three products through a questionnaire.
The questionnaire contained statements relating to the factors that the respondents might have considered while buying the product and their general opinion regarding the quality of that product.
The seven factors identified were - brand reputation, price, features, promotion, brand loyalty, store reputation, and store loyalty. The second set of factors consisted of the buyers' perception of the quality-revealing ability of five out of the seven factors, i.e., brand reputation, price, features, promotion, and store reputation.
Factors Considered while Buying the Product
In order to determine the importance of the seven factors for the respondents while buying the three products - colour television, T-shirt, and toothpaste - the mean, percentage mean, and standard deviation were computed. On the basis of their mean values, the factors were ranked. The results are presented in Table 1.
Consumers considered price as an important factor for purchasing the product. This was particularly true in the case of consumer durables like colour television as well as for semi-durable products like a T-shirt. While, for colour television, price bagged the first rank, in the
case of T-shirt, it was ranked second. The buyers paid less attention to price while purchasing toothpaste and, hence, it managed to secure the fifth rank among the seven factors. The possible reasons for this phenomenon is that people habitually buy a particular brand of toothpaste and do not pay much attention to the price.
Quality Perception of the Influencing Factors
In an attempt to compare the quality perception of the factors with regard to the three products, the mean scores and the corresponding ranks were computed. The results are presented in Table 2.
It is noticed from Table 2 that buyers, to a considerable extent, judged the quality of the product on the basis of brand reputation. This was true for all the three products. Therefore, this factor secured the second rank in the case of both colour television and T-shirt. However, in the case of toothpaste, this factor bagged the first rank. Buyers gave maximum weight to product features but price was ranked third among the five factors, for all the three products. This suggests that buyers generally believe that the higher the price of the product, the superior will be its quality.
Price-Quality Relationship: Durable Product
The findings reported in Tables 1 and 2 reveal that price is considered to be an important factor by the respondents in product evaluation. As reported in Table 1, price is considered to be the most important factor while buying a colour television and people go for high-priced brands with the belief that it would ensure value for their money. It is also clear from Table 2 that people perceive that higher the price of colour television, the superior would be its quality and, hence, price managed to secure the third rank in terms of its association with quality.
Perceived Quality of Colour Television Falling in Different Price Ranges
In order to ascertain whether the buyers' perception of quality was affected by price of the colour television, the respondents were asked to judge the quality of a regular 21-inch colour television on the basis of five price ranges. Their responses are summarized in Table 3. Only 7 out of 179 respondents (3.9%) believed that a low-priced colour television set would be of high quality, i.e., if it is priced 'up to Rs 10,000.'
On the other hand, for the television falling in the highest price range of 'Rs 25,001 and above,' 142 respondents (79.3%) opined that it would be of very high quality and 21 respondents (11.7%) believed that it would be of high quality. Thus, it appears that the higher the price of colour television, the higher will be the consumers' perception of its quality.
The mean, percentage mean, and standard deviation for each of the price ranges are presented in Table 4. It indicates that the higher the price range, higher is the perception of quality of the colour television. The first rank was secured by the colour televisions falling in the price range of 'Rs 25,001 and above' while the lowest price range of 'up to Rs 10,000' secured the fifth and the last rank.
Thus, the consumers considered price as an important criteria in judging the quality of colour television. They perceived higher-priced televisions to be of high quality. Significant differences relating to the perception of the quality of colour televisions falling in different price ranges were also found. Thus, we may accept the fact that high price has a positive influence on buyers' perception of product quality.
Price-Quality Relationship: Semi-durable Product
The T-shirt market is flooded with a host of brands - local, national, and multinational, besides the unbranded ones. Even among the branded T-shirts, the buyer is faced with the problem of making a distinction between a genuine and a fake brand. Most of the reputed brands are sold through the company outlets or exclusive show-
rooms. Hence, it becomes difficult to distinguish between brand reputation and store reputation. Moreover, T-shirts are found in a very wide price range of, say, Rs 50 to Rs 2,500, and predicting the quality of a particular T-shirt available at a particular price becomes all the more difficult for the buyer.
From the data given in Tables 1 and 2, we can examine the influence of price on the buyers' perception of quality of a T-shirt. It is evident from the tables that price was an important factor for the respondents while purchasing a T-shirt and in judging its quality. Price got the second rank among the factors considered by the respondents while purchasing a T-shirt and the third rank in terms of its quality-revealing ability.
Perceived Quality of T-shirt Falling in Different Price Ranges
In order to ascertain whether the buyers' perception of product quality is affected by the price of the T-shirt, nine price-classes were selected, starting from 'below Rs 50' to 'Rs 1,201 and above,' and the respondents were asked to rate the quality of a T-shirt falling in these nine price ranges. The responses are presented in Table 7.
Table 7 reveals that the lower the price, the lower is the quality rating given by the respondents. A total of 133 respondents (76%) were of the opinion that a T-shirt falling in the price range of 'below Rs 50' would be of 'very low' quality and another 34 (19.4%) said that it would be of 'low' quality. On the other hand, for the last four price ranges, i.e., the T-shirts priced above Rs 451, not a single respondent gave a 'low' or a 'very low' quality-rating. Thus, the respondents believed that the higher the price of the T-shirt, the superior would be its quality. Furthermore, the mean, percentage mean, and standard deviation for each of the price ranges were computed and then these price ranges were ranked on the basis of their mean scores. The results are presented in Table 8.
Table 8 shows that while the T-shirt falling in the highest range of 'Rs 1,201 and above' secured the first rank with the highest mean score, the lowest price range of 'below Rs 50' got the last rank with the lowest mean score.
High price has a positive influence on the buyers' perception of the quality of T-shirts and people see a significant difference in the quality of T-shirts available at different price ranges. However, ultimately, buyers judge the price of the product on the basis of its features such as the strength and texture of the fabric, colour, design, and shape of the T-shirt, and not merely on the basis of their perception about the price or the 'high price-superior quality' image.
Price-Quality Relationship: Non-durable Product
The respondents paid less attention to the price of the toothpaste, as shown in Table 1, and hence 'price' was ranked fifth among the seven factors. However, in terms of the quality-revealing ability of this factor, it managed to get the third rank after 'brand reputation' and 'features' as can be noticed in Table 2. These results indicate that although people do not pay attention to the price of the toothpaste while making the purchase, they do associate high price with superior quality.
Perceived Quality of Toothpaste in Different Price Ranges
The respondents were asked to judge the quality of a 150gm toothpaste tube on the basis of six price ranges. The purpose was to ascertain whether the buyers' perception of quality was affected by the price of the toothpaste. The responses are summarized in Table 10. As shown in the table, people perceived that the higher the price of the toothpaste, the superior will be its quality. While 86 respondents (50.3%) believed that a 150gm toothpaste tube priced below Rs 10 would be of very low quality, for the highest price range, viz., 'Rs 51 and above,' 88 respondents (51.5%) gave a very high quality rating.
On the basis of the results shown in Table 10, the mean, percentage mean, standard deviation, and the ranks corresponding to the mean values for each of the six price ranges were computed. The results are presented in Table 11.From Table 11, it is evident that the higher the price range, the higher is the mean value or the quality rating and, therefore, higher is the corresponding rank. The highest price range of 'Rs 51 and above' scored the highest mean value of 4.39 and secured the first rank. Thus, the respondents perceived a difference in the quality of toothpaste available at different prices and gave a high quality rating to the high-priced toothpaste and vice-versa.
Thus, the buyers believe that the higher the price of toothpaste, the superior will be its quality. However, they would like to pay a high price for toothpaste which has the maximum number of features as they believe that such toothpaste will give the maximum value for their money. Moreover, most of the respondents were either brand-loyal or went for reputed brands and, therefore, paid little attention to the price of the toothpaste.
PRICE-QUALITY RELATIONSHIP: MANAGERIAL IMPLICATIONS
An analysis of the price-quality relationship for the three products reveals the following:
Colour television: Among the seven factors considered by the buyers while purchasing a colour television, price is the most important factor. The buyers perceive a considerable difference among the quality of colour television falling under different price ranges. They believe that price can reveal its quality and the higher the price of the television, the superior will be its quality. Moreover, while purchasing a durable product like a colour television, buyers prefer to go for a high-or a reasonably-priced brand, rather than a low-priced one. Moreover, they want value for their money and find it risky to buy a low-priced product.
T-shirt: For purchasing T-shirts too, price is an important consideration while selecting a brand. However, the buyers would like to pay more for reputed brands and for features present in the T-shirt like the strength and texture of the fabric and fast colour. They believe that the lower the price of the T-shirt, the inferior will be its quality. However, they are a bit sceptical about the
'high-price-superior quality' relationship. Nevertheless, they perceive a considerable difference in the quality of the T-shirt falling in different price ranges. The expectation of getting value for their money has more importance to them than the high-price consideration.
Toothpaste: The buyers generally pay less attention to the price of the toothpaste while making the actual purchase. Brand loyalty, features of the toothpaste, and brand reputation takes precedence over price. However, they see a significant difference in the quality of the toothpaste available at different price ranges. They do believe that the lower the price of the toothpaste, the inferior will be its quality and vice-versa. But, this belief is somewhat weaker for toothpaste in comparison to the other two products. Again, in comparison to colour television and T-shirt, while buying a toothpaste, the buyers are less concerned about whether they will get value for their money from that purchase.
The findings of the study have the following implications for the marketer for pricing of the three types of products:
Colour television: In the case of colour television, setting the price too low will negatively affect the quality image of the product and the consumer would be reluctant to buy a low-priced brand which may lower his or her image in the society. Pricing it reasonably high will give the product a high quality image. But, the marketer
should also take care of the competitors' pricing policies and the purchasing power of the target market.
T-shirt: Pricing of the T-shirt is all the more difficult. The problem faced by the marketers of T-shirt in the Indian market is that their target market segment mainly
consists of the young, especially the college-going ones, having limited purchasing power. They would prefer local or not-so-reputed brands of trendy T-shirts rather than spending on expensive branded T-shirts. But, they
will definitely prefer a T-shirt of reputed brand if it is within their purchasing power. However, reducing the price of the the T-shirt may dilute its image. Hence, the marketer of the T-shirt should adopt appropriate market segmentation strategies, select the appropriate target segment, and price the T-shirt accordingly.
Toothpaste: For toothpaste, brand image is a decisive factor and the marketer should price the product according to the reputation enjoyed or likely to be enjoyed by the brand. However, the price-quality relationship for this product is rather weak in comparison to colour television and T-shirt. However, the marketer should keep in mind that charging a very low price would create an inferior quality image in the minds of the buyer. Moreover, the buyer, generally, judges the price of this product in terms of his/her internal reference price. Hence, an understanding of the buyers' internal reference price is necessary for the marketer.