SCIENCE · VERIFIED DEVELOPMENT
Shoppers Less Peeved by Cost Hikes Due to Scarcity, Retailers Blame Rising Costs
WHY IT MATTERS
Companies that use market-based justifications to explain price hikes may be able to reduce customer churn and retain more customers, especially in times of economic uncertainty when households are struggling with the cost of living and are less willing to pay a premium for added features.
What happened
A recent study found that shoppers are less likely to exit a product or service when a price hike is justified by market-based rationales that emphasize supply and demand forces and invoke scarcity. This approach was found to be more effective than cost-based or value-based justifications in preventing customer churn.
In a study with a Canadian self-storage company, customers who received a market-based justification were 30% less likely to exit compared to those who received cost-based or value-based justifications.
The study suggests that companies should consider using market-based justifications to justify price hikes, especially in times of prolonged inflation.
PRIMARY SOURCES
Shoppers are less peeved by cost hikes due to scarcity – but retailers more often blame their own rising costs
The Conversation US · Hoorsana Damavandi, Assistant Professor of Marketing, University of Tennessee · CC BY-ND; link/attribution intake only—no edited republication