Raising the Bar

The new affordable impulse buy is all about the Benjamins.
Magazine Contributor
2 min read
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This story appears in the April 2005 issue of Entrepreneur. Subscribe »

Browse through retailer sales ads or walk down the aisles of a Target or a drugstore, and you may be surprised by how many items are being offered at or around the $100 mark. Suddenly, it seems like a myriad of self-pampering products are popping up to soothe us, entertain us and/or simplify our lives--all with much higher price tags than the previously accepted price of $19.99. Have consumers' attitudes shifted to make $100 the new affordable impulse buy?

Daniel Howard, chair of the marketing department at Southern Methodist University's Cox School of Business in Dallas and consumer research and behavior expert, says inflation is one factor in the rising costs of products. But he adds that, psychologically, consumers are also allowing price points to move upward, especially when it comes to gadgets. "Americans are fascinated and obsessed with technology-type goods and are willing to pay somewhat of a premium for technological ways of doing everyday tasks, even though many times the technological method of doing it is more difficult and arguably less efficient," Howard explains.

Entrepreneurs can feasibly offer items like electronics or anything that "would qualify as a reasonable gift," Howard says, pricing right up to this psychological price barrier. Howard points out the academia-accepted odd-even pricing, noting that selling an item for $99.99 as opposed to $100, for example, is perceived by consumers as "significantly less expensive." However, he adds that the latter, used by retailers such as Neiman-Marcus, is seen as being significantly higher in quality. So when pricing your product, take into account whether you're positioning it for quality or as an economical purchase.

As the trend continues, entrepreneurs and businesses will bring increased competition to the field, which will drive down prices if consumers' fading sense of novelty doesn't do it first, but, Howard says, "We're not through with this yet." Until then, let the electronic toothbrushes, shiatsu back massagers, golf-score PDAs and their brethren reign.

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