prestige sensitivity. The authors conducted their study using multi-item scales that had been used in previous research and conducted their field work at two different grocery stores in the western United States. Interviewers were recruited and trained, and the results measured against the hypothesis. Using regression techniques, the authors concluded that consumers may perceive price cues from the factors already cited, but also suggest that additional factors may provide additional cues.
Michael V. Marn and Robert L. Rosiello find that effectively managing a pricing strategy can increase a company's profitability in their article, "Managing Price, Gaining Profit" (Harvard Business Review, September-October 1992, pp. 84-94). Most companies, according to the authors, do not pay enough attention to the "pocket" price of their products, but focus instead on the invoice price. The pocket price is the amount that the manufacturer actually receives after all discounts and off-invoice deductions are made from the invoice price. Considering just the invoice price paints a distorted view of the company's performance. By making subtle changes in the pocket price, companies can increase their profitability (through increases in the pocket price) or their market share (through decreases in the pocket price) and effectively manage their performance.
Saporito finds that price wars are unlikely to end in the near future because companies that engage in long-term price wars have conditioned customers to expect commodity-based pricing for their products. Increases in the price to consumers would result in a decrease in market share, and many large companies have too much invested in capital equipment and fixed assets to justify such a loss. Instead, the companies must try to maintain some level of profitability, either through cutting prices or by purchasing or merging with competitors. There is also the possibility that once consumers ...