Product Price: How To Show The Customer What You’re Worth
Price. It's been the nemesis of small business since the first monetary transaction. The consumer is trying to get it as low as possible, while the business owner tries to keep it as high as the market will allow. So, what does price really mean to the average customer that walks through your doors?
Studies have shown that when price is the only information the customer has then different price levels are associated with different quality levels. However, when other information is introduced, such as brand names, features and benefits, there is little evidence to suggest that price equals quality. If I were to ask you to think about a CD player, a price might jump into your mind. If I then said, "It's a Sony, with multiple changer, graphic equalizer, etc., ... another price, probably higher than the first, would jump into your mind. Price is a perception of value. We do know, that in most cases, quality will cost more. We also know that, if we want a good product, we will have to pay a higher price in most, but not all, cases.
Step Right Up
Have you see the Ginsu knives infomercial on TV? The presenter spends 20 minutes of the half hour showing you one or two knives that do several things. Then he announces the price Usually around $29.95 or $39.95. Seems high, ...but wait. If you order right now he'll throw in the 6 steak knives, the corkscrew blade, the melon ball maker, the juicer knife, the grapefruit knife all for free. Instead of 10 to 15 knives for your $39.95 you bought 3 knives for $39.95 and got 7 free. What a deal. Do you see what happened? It's not the price of the knives, but how the value was presented that makes the difference.
Pricing Strategies: Three Options
Prestige Pricing: BMW, Sony TV, Maytag. These are all companies that take great pride in the fact that they are never the lowest price in their markets. They use the principle of prestige pricing to convince the customer that they will be in the elite to have these products.
Perceived Value: How much value should the customer expect to receive if they purchase your product or service? When the customer looks at all the benefits of buying the product, there is the perception that the price asked is a fair trade for the value based on the customer’s need. This is the best strategy for consumer sales. Make sure when using this strategy to remember the one hard and fast rule. Every feature of your product or service must have a corresponding benefit or the strategy fails. A feature is what a product has, a benefit is what a product does. Features alone do not translate into value to the consumer. A benefit is a betterment derived from using or owning the product. The more benefits to the consumer, the easier to justify the price, and make the purchase.
Value-In-Use: In this strategy, the customer has to look at the savings of the product over the long haul. The computer with the word processor is more costly than the typewriter. But, in the long haul, the secretary will be more productive, and the work will look more professional. Energy saving light bulbs may cost more but, use less energy, and last longer. This strategy is best used in business-to-business situations. Consumers often want the quick fix for a low price and will be reluctant to look at the savings over time.
If you get sweaty palms and dry mouth when the time comes to give the price to your prospect, you haven't convinced yourself of the value of your product or service. Until you are genuinely convinced that the price is a fair value for the dollars asked, you will have a problem moving your product. Sit down and make a list of features and benefits for each product or product line you carry. Put a mental price on each benefit if necessary.
Price Is Only A Problem If You Make It One
We make our purchasing decisions based on emotions and use logic to justify our emotions. That's why the benefits are so important. Make the customers life easier, cheaper, longer, or less stressful and you'll have a sale.