For a marketeer understanding of the concept of just noticeable difference is extremely crucial to the success of his offering. What exactly is jnd???
Just Noticeable Difference is the maximum amount by which a marketeer can alter any attribute of an offering without the consumer or the target market coming to know of the change. This is crucial to marketing.
When one has to increase the quality of an offering or a product, the marketeer must be careful that the increase in quality is felt by the consumer and that leads to a direct impact on the sales. For this to happen, the increase must be higher than the just noticeable difference, below which the consumer would be inert to any change. Similarly, while increasing the price of a commodity, the increase should be based on the jnd concept. The increase should be such that the consumer doesn't notice it, i.e, just below the just noticeable difference.
For example, take a pen that costs Rs. 10. Suppose reasearch shows that the just noticeable difference for it is Rs. 2. Now, the marketeer should be smart enough to hike the price to Rs. 11.99 and exploit the jnd. Anything above it would be noticed by the customer. Anything below it would qualify as lost revenues.
The problem arises when the marketeer contemplates a second hike, i.e, from Rs. 11.99 above. Many say that the jnd would come down now to say something like Rs. 1.50 and that the marketeer should not hike it beyond Rs. 13.48 (11.99+1.49). The jnd continues to come down progressively beyond this.
Now here is where the problem lies. Isn't the jnd a percentage of the actual cost? And if that is so, shouldn't it rise every next time? Possible. Especially when the product is a costly or premium one and there is enough gap between the two hikes. For example, a premium car.
Even for other products if the jnd progressively comes down, wouldn't it boil down to zero?
What then?
Another point is that if the hike in price is accompanied by a raise in quality, how would the jnd be affected then?
Things to be thought over possibly!
3 comments:
The concept of JND was brought about by Ernst Weber. The formula is delta I /I=k. If price were I and in your case Rs.10 and delta I, 2 the size of the Difference threshold would have been 2/10 that is 0.2. Now in the second case when price is increased to Rs. 11.99 then the JND would be 0.2 multiplied with 11.99 that is Rs.2.40. So as you see it is not a percentage of the actual price but a constant that is initially found out and then multiplied with the current stimuli, price or quality, whatever it is.
Thanks fr the comment aparna...
I didnt mean that its actually a fixed percentage and hence should go up..What i meant was that since it takes up some % of the price..it should subsequently rise...which according to ur formula actually does.. from 2 to 2.4.... That just proves the point that every subsequent hike should increase!!!
Ain't it??
Good one. Write more applications. Good point Aparna
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