The concept that customers buy based on price is a myth and it must be taken seriously by marketers and brands in order to survive and prosper.
Price on its own is meaningless and claiming that the price of a product or service is the sole reason for its lack of popularity or failure to sell is simply an excuse, a cop out if you like.
Customers make purchasing decisions based on perceived value – value equates to what you receive divided by that you pay. We can all default to price when it is too difficult to compare a product or service and herein lays the opportunity. This practice of default goes somewhat towards explaining the instances where price is equated to quality and when being higher priced can be an advantage.
Before you leap to raising your prices in line with perceived quality or jump into a pricing war, you need to consider exactly how customers assess price and value. Firstly, understand that people are lazy and we don’t like to waste energy. Thinking, comparing, assessing – products, businesses, brands, features, benefits, price – all requires a lot of energy. So, to avoid all that, customers will take any short cuts available to make their purchasing decision making easier and faster.
Take care with initial pricing since customers’ initial perceptions tend to get locked in and hang around to cloud judgement. You never want your customer’s first experience with your brand to be one of a huge discount as they are unlikely to ever pay top dollar or full price in the future.
Smart pricing for long term success works in this way – value first, always. Highlight your most expensive product or service first in order to set a higher reference point for your customers. Include an easy-to-compare option that is similar and yet slightly inferior to the product or service you really want to sell. Before ever offering a discount, determine if there are ways that you could maintain your price and add more value instead.
Customers aren’t buying on price! With that in mind it is well and truly time to focus your efforts on ensuring that your customers can make easier, faster and better purchasing decisions.
With assistance with branding, positioning, pricing and adding value to your product or service contact the brand agency Liquid Creativity team, your local branding specialist.