Influence of prices on consumer buying behaviour: A study on food products.

Submitted To:
Md. Rakibul Hasan
Assistant Professor
Department of Marketing
Jahangirnagar University

Submitted By:

Mahzebin Rahman
ID: 1058
Session: 2016-17
Master of Business
administration
Department of Marketing
Jahangirnagar University

Business Research Proposal: IC Broker, Inc.

JAHANGIRNAGAR UNIVERSITY
eting Science, 33 (1), pp.79-95.
Introduction

Food prices frequently arouse consumers’ attention. Increase in food prices usually generates a
public debate on consumers’ resistance to high food prices, the demand for low-priced food, or
the unfairness of premium pricing, and attitudinal evaluations related to these factors are usually
included. According to neoclassical economic theory consumers are willing to make rational
choices and maximize utility by looking for the lowest acceptable price. However, some
consumers seem to make irrational choices preferring high-priced products to ones with a lower
price (Thaler 1985), or perhaps may even refuse the deal totally if the price is perceived as unfair
(Kahneman et al. 1986). Understanding the consumers’ subjective price evaluations is
challenging. From the 1950s onwards a growing interest in individual differences has turned the
focus on psychological and behavioural processes in the field of economics (Katona 1977) and
especially in marketing.

Consumers’ ability to search for price information and to remember earlier prices has been a
matter of academic theoretical investigation for several decades. Results have confirmed that
consumers’ price knowledge seems to be quite limited especially with low-involved products
such as foods (see Monroe 1973; Rao and Monroe, 1988; Monroe and Lee, 1999). Similarly, for
several decades marketers and marketing researchers have been trying to understand consumers’
price evaluations in order to predict consumers’ buying behaviour more accurately. Therefore,
consumers’ acceptance of prices is an important issue to consider in competitive pricing
strategies. However, in Finland, using price as a competitive attribute in food markets became
relevant as recently as 1988 when a general price control was abandoned and food was allowed
to have price alterations (Reimavuo 2003, 56).

In Finland, one may think by reading the newspapers that food is perceived as somewhat
expensive, and that Finnish consumers demand low food prices. This may give the impression
that Finnish consumers only value low-priced food. For example, the recent global increase of
food prices in 2007 evoked an interesting media discussion on food prices and the competitive
ability of Finnish food chain. Low food prices were seen as a threat to Finnish food production
and the discussion of high-priced food was considered necessary to increase the profile of
Finnish food (Korhonen 2007). Similar concerns have emerged globally. Declining food prices
have been considered a threat to the food quality and safety, national agriculture, the
environment, or animal welfare. Low food prices are said to be the consequence of pressures
created by consumers who are unwilling to pay high prices, as well as price competitions
between retailers and producers (Appelby et al. 2003).

There are also global concerns related to high food prices. For example, high prices have
been found to be a barrier to eating more organically produced meat (McEachern and