Managing quality cues for product‐line pricing

When firms offer consumers a choice of price‐quality levels – the “good‐better‐best” choice – a challenge for managers is how to set price differentials. This article examines how consumer preferences across such price tiers are influenced by non‐price cues about quality. The results suggest that the pattern of preferences observed across price‐tiers can be influenced by: how quality cues (as well as price levels) are framed; the distribution of various price‐quality tradeoff strategies across potential buyers; and the degree of perceived quality variability within the product category. Specifically, the use of ratio‐scaled cues is most likely to impact “trading‐up” behavior when there are a large number of consumers who exhibit “best value‐seeking” behavior in a market.