The power and perception of pricing
There are far fewer things that buyers buy ‘purely on price’ than sellers believe there to be. The simple fact is that people buy what a product or service will ‘do’ for them, not the product or service itself. If you are starting a business, or you are interested in growing your existing business, then ‘pricing’ is one of the most important things for you to get right.
What does your price say about your products?
Because people buy the result of your product or service, you should be pricing it accordingly. That means that if, like most business owners, you believe that what you deliver is better than your competitors, your price should reflect that. If it doesn’t then your message is different to your belief. So, what are your customers going to think? Putting a 50% premium on your price would suggest that you believe it is 50% better. Of course, your marketing must support that message too, but pricing is a vitally important part of your marketing.
Let me give you a couple of examples. In my office and at my home we drink Evian bottled water. A rough calculation would tell you that this, as with most bottled waters, costs me about 1000 times more than what is available from my tap. Do I really believe that it is 1000 times better? Is it a coincidence that Evian backwards spells Naïve? Do I really care about those things or do I just prefer buying (and drinking) Evian?
There are hundreds of examples in our daily lives of things where the associated benefits and conveniences appeal to us many times more than the price. Consider what you pay for a prepared salad in a supermarket compared to the pennies that each component costs. What about coffee at Starbucks which costs many times more per litre than the fuel you put in your car? And then there is the car itself that you drive. There will definitely be cheaper options available that would get you from A to B more economically than your car would. But you have chosen comfort, style, image and other extras over cost. If none of the above applies to you, then you are in the vast minority. Which means it would still be a massive mistake to assume that your customers are not like this.
Do you want to know the secret to pricing your products well?
The other important factor to consider, from a business point of view, is what your price needs to be to make it worthwhile for your company. Too many businesses get into a ‘price war’ with their competitors that they can ill afford and that often leads to the ultimate cost. If your business cannot create a healthy margin on its products and services, then you should seriously consider doing something else. Or at the very least look at making your products more valuable to your customers.
As with all of the examples cited above. The key is to consider the perception, the emotion, how it makes your customer feel, the convenience and the whole experience that you deliver. Remember, no one pays a premium for things that they need. People pay more for things that they want. This might sound over-simplistic, but it is the simple things ‘done very well’ in businesses that stand between the successful and the mediocre ones.