CULTURED MINDS

PRICE

 

“[price]is a signal that conveys meaning and as such it is perceived in quite different ways across cultures and across individuals” (Littrell & Miller, 2001).

 

Consumers are exposed to a range of contextual information throughout their decision process. They will pay attention to different cues and interpret information according to the cultural ‘lens’ and/or thinking style they use. Price is particularly relevant because it is one of the most widely used and readily available information sources. Thus, understanding the ways price is interpreted and used is crucial for marketing strategy. 

 

Context Dependence

Compared to analytic thinkers, holistic thinkers pay more attention to the context and relationships between objects (see appendix). This means they are more susceptible to ‘framing’ biases; where the arbitrary layout of information/objects affects choices. Framing biases include over-dependence on price-quality schema, loss aversion, peer conformity and anchoring effects.

 

 

Price-quality judgements

Those with an interdependent self-construal (linked to the holistic style of reasoning) are more likely to use price information to judge the quality of a good, even though the two factors are not always related.  Researchers were even able to enhance acceptance of higher priced brands by encouraging holistic thinking (e.g through priming) during brand exposure (Lalwani & Shavitt, 2013).

 

However, there is a significant exception to the above findings. Most Chinese consumers (commonly used as an example of interdependent and holistic-thinking peoples) seem to doubt the credibility of price as an indicator of product quality more than their Western counterparts (Zhou, Su & Bao, 2002). The elevated doubt over price-quality schema is perhaps because fake products are more common in the Chinese market environment. Thus,  (Zhou & Nakamoto, 2001) advise that companies provide “other market cues such as store and brand name … to assure the product quality  and prevent the impairment of fake brands”. 

 

Loss Aversion and Peer Conformity

A group who studied object valuations in more depth found that framing effects, an actor’s morality, and group membership affect participants’ estimates of financial value. US and Chinese subjects were described an object (ring, chair, coin) that had been found/lost, by a high-moral/low-moral person (as implied by profession e.g nurse vs drug dealer). The owner of the object was either in the participant’s in-group (e.g from your hometown) or out-group.

 

Consistent with prospect theory (losses are perceived as more important than gains), those who read about a person losing the object scored it as more valuable than when others read about a person finding the identical item. As predicted by their tendency to use holistic processing, Chinese value estimations were more influenced by the loss/found framing of the questions. This was perhaps because “asking about intrinsic object values …cause[d] Americans to focus on the object (and thus ignore the context of the frame, reducing framing effects)…Chinese, however, are already more likely to focus on the context than Americans, [so] asking about intrinsic value was not enough to shift or diminish Chinese participants’ sensitivity to contextual information” (Levinson & Peng, 2007)

 

Participants scored object values as highest for low-moral in-group members (e.g a burglar from your home town) and lowest for low-moral out-group members (e.g a burglar - no town specified), again this effect was stronger for Chinese participants.

 

 

Anchoring  (mixed results)

The anchoring effect is one of the best-known framing biases. Anchoring effects are present in many domains and all across the world from Israel (Kahneman, 1973) to Hong Kong (Wong & Kwong, 2000), Romania (Anghel & Tirla, 2014) and the USA (Ariely, Loewenstein & Prelec, 2004). A recent literature review of anchoring effects (Furnham & Boo, 2011) did not mention country or culture effects. This finding is surprising since analytic/holistic thinking styles have strong moderating effects on other framing biases. Although (Furnham & Boo, 2011) did evaluate the role information processing style (thinking styles) play in susceptibility to the anchoring effect, they concluded “mixed results… it seems that researchers have failed to identify any cognitive or trait variables that have a systematic and explicable effect on anchored decisions.” More recent research (Swaab, 2013) has again validated the cross-cultural robustness of anchoring effects, but showed no evidence of the expected analytic/holistic differences in sensitivity to the anchoring effect.