Question

A new grocery store opens in the area. During the first six months, the manager keeps all of his/her prices considerably below the nearby competition. Very gradually, the manager begins to raise the prices after it is assumed that people are accustomed to shopping at the store. This store marketing strategy can be best explained by the _____ view.

a) Economic
b) Behavioral
c) Psychological
d) Marketing

Answer 1

The grocery store's marketing strategy is best explained by the behavioral view, which is part of behavioral economics. It demonstrates how customer habits and perceptions influence their shopping decisions and loyalty to a store even as prices rise.

Step-by-step explanation:

The marketing strategy described in the question can be best explained by the behavioral view. Initially, the new grocery store sets prices considerably lower than competitors to attract customers and establish a customer base, relying on the principle of loss aversion where customers perceive the lower prices as a gain. As customers become habitual shoppers at the store, the manager gradually raises prices, counting on another aspect of behavioral economics—the fact that customers' shopping habits have framed their decision-making process to continue patronizing the store despite the price changes. This strategy aligns with the observations of behavioral economics, which examines how psychological, cognitive, emotional, cultural, and social factors affect the economic decisions of individuals and institutions.