The other major psychological factor influencing price perception
is the pain of paying.
What do I mean by pain of paying?
Let's use some actual example.
I want you to think about last time when you see a running taxi meter.
How does that make you feel?
If you are like most people, nobody likes to
watch a running taxi meter because it's painful
even though the incremental change in monetary value is pretty small and
trivial at each moment. But
overall we have a general negative feeling whenever we see the meter running.
And that is what happens when you are being reminded of how much you paid for
each transaction.
So I have other examples including pay per call phones,
pay per usage charges for fitness gym.
So in both of these cases,
consumers do not like to be reminded about the process of paying,
because it's highly unpleasant, it can evoke the sense of pain of paying.
And similarly, none of us like to be parted with our actual cash,
because it's a valuable resource, it actually feels quite painful to be
paying via cash versus just paying via plastic card or a gift card.
So all of these examples illustrate how consumers can
acutely feel the pain of paying during the moment of transaction.
Now a formal definition of the pain of paying, requires an evaluation
of what goes through consumers mind when they are considering a major purchase.
So in that case, consumers typically do a cost versus benefits analysis.
So the cost is typically factored into the price that's being paid.
And if the cost or the price exceeds the anticipated benefit of the purchase,
then consumers are not likely to go ahead with that purchase.
Now if the cost and perceived price is perceived to be lower than the anticipated
benefit, then consumers are much more likely to go ahead with the purchase.
So similar mental processes was going on
when consumers try to evaluate any of their consumption experience.
For example, if consumers are contemplating taking on their next big
vacation, they need to do an evaluation off their consumption experience.
If the perceived cost is considered to be greater than the benefit here,
they are going to have overall a rather unpleasant experience,
looking forward to their vacation.
Now if the perceived cost is relatively small compared to the perceived benefit,
in this case, consumers are going to overall have a pretty positive
experience looking forward to the vacation.