There is a psychological theory that states that people for perceptions based on present and past stimuli (Helson, 1964). This has been extended by marketing academics to include the concept of reference pricing. They do this by stating that consumers, based on their previous exposure to products and their promotion - have an internal 'learnt pricing level that they believe is equitable for a given product (Jacobson & Obermiller, 1990). This essay examines the role of reference pricing in the pricing decision, and particularly the evidence on which this theory is based. It will be concluded that although the reference price provides a starting guideline for making the price decision - there is little evidence to support the theory in actually setting price structures. Put simply, a reference price is a standard against which observed prices are compared (Biswas & Blair, 1991)....

Number Of Pages: 8

Number Of Words: 2076

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