What is the reference price in marketing?

The reference price in marketing refers to the regular or original price that consumers use as a basis for comparison when evaluating a product's value. This concept is integral to consumer decision-making, as it shapes how they perceive the value of a product based on its pricing context. When consumers see a product that is priced significantly lower than its reference price, they may interpret it as a good deal or a bargain, which can increase their likelihood of purchasing the product.

This understanding of reference prices is important for marketers who strive to position their products effectively in the market. By establishing a strong reference price—usually through strategies like setting an initial higher price point or displaying the original price next to a sale price—marketers can create a perception of savings, thus enhancing attractiveness and driving sales.

Other concepts, such as the price consumers are willing to pay, or the average market price, do not specifically apply to the idea of a reference price, which is inherently about comparison against a recognized baseline.