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Partitioned Pricing

Partitioned Pricing Definition

In their research paper “Divide and Prosper: Consumers’ Reactions to Partitioned Prices”, Morwitz, Greenleaf, & Johnson (1998) explore the effect that splitting a total price of purchase in to two (or even potentially more) parts can have on consumer behaviour: this is named Partitioned Pricing.

In most cases, your typical consumer is unlikely to undertake the cognitive effort required to accurately add the separate components together before they make the decision to purchase. The “base price” – being the price itself of the product – is sometimes the only part really taken in to account with any “surcharges” – being additional costs that are presented separately, such as shipping, handling or taxes – simply discarded mentally. If they do decide to calculate the full amount it will often be using rounded-down numbers that make for more manageable sums so the overall price is therefore reduced in the mind of the customer.

However, the opposite effect can be had if all components of the partitioned pricing aren’t made salient as the customer can feel as though they are being misled in some way which will lead to no purchase at all or an unhappy post-sale situation. For example, if you offer a cruise for £100 and, all the way through the purchasing process, this remains the only visible cost with sudden extra costs for port fees, baggage handling and/or medical insurance only added at the final payment page then the unexpected escalation in cost is likely to disrupt the purchase as well as lead to possible anger at the misrepresentation. This is why it is important to ensure that the majority of costs are included in the “base price” so that any additional surcharges are nominal enough that they won’t affect the decision to purchase.

In web marketing, this can be a useful tool to help increase conversion rates as reducing the perceived pricing of a product by not including delivery charges or obligatory handling fees in the main product price will, of course, make the pricing seem more competitive and attractive. This will help the customer to make their decision to purchase based on product price alone and having additional costs presented separately can make it seem like a better deal, despite the overall amount being the same.

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