Home » Customer Value in Pricing Strategy » A karate school for youth and adults has just conducted a client survey after its successful second year of business. Some customers noted that costs increased significantly in the second year. Owners are puzzled because cost increases between the first and second year were intentionally quite small.

A karate school for youth and adults has just conducted a client survey after its successful second year of business. Some customers noted that costs increased significantly in the second year. Owners are puzzled because cost increases between the first and second year were intentionally quite small.

Question 2

A karate school for youth and adults has just conducted a client survey after its successful second year of business. Some customers noted that costs increased significantly in the second year. Owners are puzzled because cost increases between the first and second year were intentionally quite small. The only change implemented the second year was that uniform, prop, and performance fees were billed separately throughout the year rather than up front in an annual registration fee, as they were the first year. How would you best explain the impact mental accounting is having on customers’ perception of the school’s costs?

1 / 1 point

Customers feel that they are getting a deal with the payments broken into smaller, discrete chunks.

Customers are experiencing the frequent payments as multiple losses, and even though the overall amount is only slightly higher, they feel disproportionately dissatisfied.

Customers are calculating and coding the distributed payments the same way that they did with the single payment the first year.

Customers need more explanation of the fees, because they are actually experiencing multiple wins with the new billing process.

When the customers were billed for all fees at once the first year, they experienced that as one loss rather than many losses spread over the second year. Because people would rather experience one loss than many, integrating losses is a very effective strategy. The school may wish to consider returning to the billing process they used the first year.