Strategic implications of a multi‐dimensional pricing environment

Abstract

A significant amount of research in pricing has focused on price as a unidimensional construct – one consisting of a single number (e.g. $1.99). However, the evolving marketing environment, combined with notable growth in services and goods categories that require the communication of complex price information, has led to the use of multi‐dimensional prices. Multi‐dimensional prices consist of multiple numbers (e.g. $199 a month for 36 months) and as a result require the consumer to carry out specific mental computations to determine the cost of the offer. In this paper, empirical evidence on consumer difficulty in evaluating multi‐dimensional prices is examined. Then the strategic impact of such difficulties for pricing managers as well as regulators is examined. The paper concludes with a discussion of the implications of multi‐dimensional pricing on past research findings, and reflects on existing understanding of consumer response to price.