What is the main purpose of reference pricing?

The main purpose of reference pricing is to display a moderate-priced item next to a more expensive option. This strategy effectively helps consumers evaluate the value of the products they are considering by providing a frame of reference. When shoppers see a higher-priced item alongside a moderate option, they may perceive the moderate item as a better deal, leading to a greater likelihood of purchase.

This approach leverages the psychology of comparison, whereby consumers tend to judge the worth of an item based on contrasting prices rather than absolute values. By positioning a moderate-priced item next to a more expensive equivalent, marketers can influence consumer perceptions, making the moderate choice appear more appealing and reasonable, thus promoting higher sales of that item.

In contrast, setting a price below the competition is focused more on price competitiveness rather than establishing a value comparison. Charging a single price for all items is a pricing strategy that doesn't consider the relative value of products within a category. Bundling products together for a discounted rate aims at increasing sales volume through perceived savings, without necessarily guiding a consumer's perception of individual item value through comparison.