Does Higher Price Means Better Quality

Does Higher Price Signal
Better Quality?

INTERFACES

presents articles focusing on managerial applications of management practices, theories, and concepts

D P S Verma and Soma Sen Gupta

Executive Summary

KEY WORDS
Product Quality
Perceived Quality
Purchase Decision
Price-quality Relationship

With differentiated products, consumers may not be aware of the quality and features of the products they buy. They are often unable to make a quality comparison among various brands. Moreover, they often gather little information even when the financial commitment involved is substantial. A popular belief is: ‘You get what you pay for.’
Therefore, consumers tend to believe that high price is an indicator of better quality.
Although many studies conducted on price-quality relationship have supported this belief, there are other studies that have found the relationship to be product-specific and weak in general.
This study seeks to examine the relationship between the price of the product and the buyers’ perception of quality in respect of durable, semi-durable, and non-durable products in the Indian context. Three products were selected for the purpose of the study: colour television as a durable product; T-shirt as a semi-durable product; and toothpaste as a non-durable product. Data were collected from the primary sources with the help of a non-disguised, pre-structured questionnaire.
In particular, the authors sought to explore answer to two questions: (1) Does high price have a positive influence on the buyers’ perception of product quality? (2) Is there a significant difference in the buyers’ perception of the quality of products falling in different price ranges?
The major findings of the study are as follows:
For a durable product, like colour television, setting the price too low will negatively affect the quality image of the product and the consumer would be reluctant to buy a low-priced brand as it might lower his image in

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