Business Services

When Shopping Local, Buyers Connect Price with Quality

BLOOMINGTON, Ind. – A study led by a professor at Indiana University’s Kelley School of Business reports that consumers who make an effort to buy local often associate higher prices with better quality.

“Consumers tend to use price to judge a product’s quality when their local identity is most important to them,” said marketing professor Ashok Lalwani in a statement. “When promoting high-priced or branded products, marketers can situationally activate consumers’ local identity. To accomplish this objective, businesses can encourage consumers to ‘think local’ or employ local cultural symbols in advertising and other promotional material.”

The study, published in the Journal of Marketing, also reported that for low-price items, pushing the product’s global appeal and distancing price from quality could be an effective strategy.

“Discount stores, such as dollar stores, should discourage consumers from using the price of a product to infer its quality,” Lalwani said. “They would be better served by temporarily making consumers’ global identity more prominent. Cues in advertisements that focus on a product’s global appeal would help achieve that goal.” 

For the study, four professors – Lalwani, Zhiyong Yang of the University of North Carolina, Sijie Sun of the University of Hawaii at Hilo and Narayan Janakiraman of the University of Texas – conducted two field studies, interviewed 15 senior managers for Fortune 500 companies and reviewed secondary data.

In the study, an executive for a snack food company said that in their field, with readily available products and plenty of price points for consumers to compare against, “it is important to have a reasonably high price since it communicated ‘premium-ness’ and then reinforce it with advertising and packaging. But we don’t know for sure why such consumers prefer premium brands.”

Meanwhile, a manager for a pet products company said that price point often helps their customers infer quality.

“In dog sweaters, it is difficult to judge quality, so I am sure that my pet parents use price, in addition to other factors, to choose,” they said.

The study, available here, also includes guidelines that companies can examine to determine whether they should focus on a global or local identity.

“For products to be marketed to the places where people tend to have a more local identity (such as rural areas), local flavors and ingredients can be used in the products,” the study said. “As these consumers are more likely to make price-quality associations, marketers may not need to allocate much ad budget to convince consumers about price-quality associations.” 

Source: Indiana University Kelley School of Business

Published by The Business Journal, Youngstown, Ohio.