Are organizational buyers rational? Using price heuristics in functional risk judgment

Abstract

Although recent studies on B2B marketing suggest that organizational buyers may not be as rational as the prevailing perspective would assume, empirical evidence is still scarce. We argue that managers infer a product's functional risk from its price level, which is a behavioral response to price stimuli similar to what happens in the B2C context. We conducted an experiment manipulating the price, importance of the decision, and type of product (intense in search and credence attributes). Our findings narrow a research gap previously identified by various authors regarding the lack of empirical studies on behavioral aspects of B2B pricing, specifically related to the price-quality effect (a common heuristic used by shoppers in the B2C market, in which buyers perceive price to be a signal of the inherent qualities of a product). We identify potential boundary conditions that explain the relationship between price and perception of a product's functional risk.