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Is Your Pricing Strategy On Point?

See why the lowest price may not be the right price.

You’ve worked hard to establish your pricing strategy. You’ve considered your costs and you’ve calculated a profit margin.

You’ve studied your competitors and have decided on a price you think will be preferable to customers.

Why then, do buyers still seem reluctant to make a purchase from you? If you think it’s because they want an even lower price, think again.

The manner in which you price your products or services conveys much more than just purchase price. Read on to discover what customers are really looking for and why your well-intentioned pricing strategy might unwittingly be telling them to shop elsewhere.

Customers have always been drawn to the promise of “lowest price around.” As the decades have marched along, though, they are casting a doubtful eye on lowest-price goods

The new cost of offering the lowest prices

Customers have always been drawn to the promise of “lowest price around.” As the decades have marched along, though, they are casting a doubtful eye on lowest-price goods, fearing that low prices also indicate low quality.

Indeed, as companies have sought new ways to reduce their costs, some have turned to cutting corners in product content, quality and delivery.

Their customers, therefore, have become more cautious of what they’ll actually get for their money, especially when presented with a lowest price proposition.

They might ask, “If the price is so low, what’s the catch?” With that, lowest prices have become a possible harbinger of an inferior product, one that doesn’t satisfy as it once did or is a weak imitation of a higher-quality item.

For business owners who think they must compete on price alone, this can be a losing battle among competition as well as in the eyes of their cherished customer base.

Customers understand the value of ‘value’

If lowest prices are a potential pitfall, isn’t it as difficult if not more so to ask for higher prices?

Indeed, price pressure has never been more prevalent, and yet the quest for real value is as strong. Consumers understand the saying, “you get what you pay for,” since they live with its promise every day. Deeply discounted pricing is often followed by disappointment for consumers, they who are left wondering just what they can get for their money.

They’re seeking good values as much as they’re hunting for great bargains. But in today’s economy, the two are becoming mutually exclusive

In a word, they’re seeking good values as much as they’re hunting for great bargains. But in today’s economy, the two are becoming mutually exclusive.

This, then, becomes a business’ opportunity to dispense with low price pitches, opting for offering solid value instead, at an appropriately upward-adjusted price.

Explain value first, price second

So if, up until now, you’ve sought to attract customers based on low prices, this is your opportunity to draw them in with a promise—perhaps even a guarantee—of value for their money spent.

To effectively express value, you need only provide your customers with information about the compelling attributes of your products, services and terms. They might ask, “Your prices are higher than the competitors. How come?”

Your job is to communicate what they will be getting for their money by educating them about what you offer.

  • Describe the key features of what you’re offering as they relate to what your customers want most in this sort of product or service. Indicate how each feature measures up on a quality scale of lowest to highest.
  • Provide comparative information about the features as they relate to one another, providing guidance where quality is most needed—and noticeable—and where it is of lesser importance. This provides customers a relative ranking of the features and attributes so they can better understand how each contributes to the overall final value (usefulness, not price).
    Once you’ve explained the value of what you offer, you’ve laid out justification for the manner in which you price your product
  • Explain how your method of product selection, delivery and warranty adds to the value of the customer’s purchase. This is becoming a key differentiator in the era of price wars, offering customers support and service beyond the point of their completed transaction.
  • If you’ll provide upgrade offers or loyalty perks, be sure to explain those. These days, consumers are looking for businesses they can trust over a longer term, and that’s something that’s high on the value list.

Once you’ve explained the value of what you offer, you’ve laid out justification for the manner in which you price your product. Through the information you’ve provided to your customers, you’ve helped them understand the value of what you offer and how the price you’re asking will ensure they get what they pay for, and maybe even a bit more.

Too high, too low or just right?

But after you’ve offered a compelling argument for the unmistakable value of what you’re offering, does that mean you can ask for whatever price you like? Not necessarily.

In fact, you’ll still need to acknowledge the prices of other same or similar offerings available to your customers (even though you won’t fret to meet or beat those prices). So, if you price too low to match a competitor, you risk lowering customer expectations to the reputation of those low-price alternatives.

When you set their expectations to higher levels, assuring them there will be no mishaps or mishandlings common to cut-rate alternatives, they’ll develop a loyalty to your business

If, however, you price at lofty “boutique” levels, you may alienate customers who might think you’re gouging them to fund an elite shopping experience.

Naturally, you’ll want to be somewhere in between these ends of the price axis. Don’t be afraid to fully cover your costs as well as the costs of the value benefits you provide.

Work to establish a price platform that’s tailored to your customers as well, perhaps a bit higher than your competitors but one that ensures them a quality product, service and experience every time.

When you set their expectations to higher levels, assuring them there will be no mishaps or mishandlings common to cut-rate alternatives, they’ll develop a loyalty to your business.

In short time, they’ll actually prefer to pay a bit more when they recognize that they get more for having done so. With this, you will have served a customer’s desire for real value and full satisfaction. These days, that’s a consumer experience for which many are willing to pay.

About the author

Dennis L. Prince
Dennis L. Prince has been analyzing and advocating the e-commerce sector since 1996. He has published more than 12 books on the subject, including How to Sell Anything on eBay...and Make a Fortune, second edition (McGraw-Hill, 2006) and How to Make Money with MySpace (McGraw-Hill, 2008). His insight is actively sought within online, magazine, television and radio venues. Opinions expressed here may not be shared by The Online Seller and/or its principals.



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