Question

Company A wants to launch a new product for consumers in the Seattle area. They want to build a strong brand identity that

Assume there are currently two major competitors selling comparable raincoats to this target segment of customers. Competitor X sells its coats for $400 and Competitor Y sells its coats for $470. Test marketing indicates that, in this context, customers are actually more likely to choose Company A’s new coats if they are sold for $450 than if they are sold for $399.

Which of the following concepts would NOT help explain this finding?

Costly signaling

Compromise effect

Left-digit bias

Inelastic demand

Price-quality inference

Answer 1

Answer :- Left-digit bias.

Left digit bias concept is the opposite of what is described in this case. Left-digit bias is when consumers are more intended to buy products which are priced as 0.99 as they understand these pricing better than 500, 550 etc. Consumers thinks this type of pricing products are more profitable than others and thus fail to understand the marketers strategy. So, this concept would not help Company A to get the findings as the Company is intended to sell the products at 450 rather than 399, which is totally opposite to the Left-digit concept.

On the other hand, the best concept for this finding is Compromise effect as here consumers are mostly tends to buy products which are priced middle than that of any extreme prices which exactly fits the strategy of Company A.

Hope this helps:)