To answer why a technology supply store would advertise new TVs at [tex]$100 a month for 12 months instead of a price of $[/tex]1,200, let's break down the details step-by-step:
1. Cost Perception:
- When customers see a price of [tex]$1,200, they perceive it as a large, single expenditure. This large upfront cost can be intimidating and may discourage potential buyers who feel they can't afford to pay such a hefty amount at once.
- By advertising the TVs at $[/tex]100 a month for 12 months, the store breaks down that large cost into smaller, more manageable installments. This smaller monthly payment is perceived as less financially burdensome and more affordable, even though the total cost remains the same.
2. Affordability and Budgeting:
- Many customers find it easier to fit a smaller monthly payment into their budgets than to allocate a significant sum all at once. Monthly payments of [tex]$100 might be more feasible for individuals who budget their expenses on a monthly basis.
3. Psychological Effect:
- The smaller amount ($[/tex]100) each month can create a psychological effect where customers feel they are making a less significant financial commitment. This perception can lead to a higher likelihood of purchase because it seems like less of a financial hit.
- Even though 12 months of [tex]$100 payments will equal $[/tex]1,200, presenting the price in this way can reduce the sticker shock and make the item more appealing.
4. Marketing Strategy:
- This approach can increase the accessibility of high-value items, attracting a broader customer base who might otherwise be unable to purchase the product upfront.
- It also aligns with common marketing strategies that prioritize showing lower monthly payments to make high-priced items seem more reachable.
Given these points, the store's strategy is clear: offering the televisions at [tex]$100 a month for 12 months can appear more attractive and manageable to customers than advertising a single price of $[/tex]1,200. Both amounts are indeed the same in total, but the monthly payment plan can lead to higher sales due to the perceived ease of payment.
In conclusion, the technology supply store uses this pricing strategy to make the TVs seem more affordable and to encourage more customers to make a purchase, leveraging cost perception and payment manageability to their advantage.
