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Should Shipping Charges Be Included In Product Prices?

The world of online shopping abounds with shipping surcharges as well as offers that include shipping in the price of the product. For example, one website might sell a pair of sneakers for $80 plus $9.99 for shipping, while another site might sell the same pair of sneakers for $89.99 including shipping. While economically equivalent, these prices evoke different reactions from consumers. Prior research had shown that marketers stood to gain by dividing the price into two parts.

In a new paper published in the Journal of Marketing Management, Center Project Coordinator Luke Kachersky and a non-Fordham colleague found the issue to be more nuanced. Essentially, they found that different consumer segments had different beliefs about which of those two pricing tactics constituted a sort of "trick," intended to make consumers only think they were getting a good deal. In turn, consumers tend to reject offers using the price format they perceive as dubious. Notably, this rejection is exacerbated when consumers are unfamiliar with the product being offered. The takeaway? Marketers should know their target customers' beliefs about pricing tactics and adjust their price communications accordingly. SOURCE: Kachersky, Luke and Hyeong-Min (Christian) Kim (2011), "When consumers cope with price-persuasion knowledge: The role of topic knowledge," Journal of Marketing Management, 27(1-2), 28-40.

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