Question

Smashburger is seeking to attract customers who eat out at casual dining​ restaurants, like P.F.​ Chang's and​ Applebee's. The average ticket price for customers at these restaurants is​ $13. For these​ customers, $13 is a​ __________ in considering the relative value of​ Smashburger's offerings.

A. reference price
B. target price
C. good value price
D. ​break-even price
E. competition-based price

Answer 1

The $13 average ticket price at casual dining restaurants like P.F. Chang's and Applebee's serves as a reference price for customers when considering Smashburger's offerings. A reference price is the baseline cost consumers expect to pay based on previous experiences with similar services.

Step-by-step explanation:

For customers at casual dining restaurants like P.F. Chang's and Applebee's, where the average ticket price is $13, this amount is considered a reference price when evaluating the relative value of Smashburger's offerings. A reference price is the price that consumers expect to pay or consider the norm when looking at similar products or services. In contrast, a target price is the price a buyer is willing to pay; a good value price signals an affordable cost for the perceived benefit; a break-even price is where costs and revenues are equal; and a competition-based price is determined in relation to competitors' pricing.

Considering the typical consumer's budget problem, such as Alphonso's, where he must allocate a fixed amount of income to different wants and needs, the concept of a reference price is significant. For instance, if Alphonso is used to spending $2 on a burger, this sets his expectation when considering alternative dining options. When Smashburger courts customers from establishments with a $13 average price, it must take into account consumers' perception of what is a reasonable price for a meal, shaped by their standard reference prices.