In the late 1940s, a Marketing Professor at Harvard University, Prof. James Culliton, mentioned for the first time ever the “Marketing Mix” concept. From that point on, a lot of Professors and Marketers studied and deepened that theory, which became a foundation concept in Marketing soon after.
The “Marketing Mix” refers to four broad levels of marketing decisions, namely: product, price, promotion, and place.
In this article, I’d like to explain my idea about price.
Is it still a fundamental element in today’s marketing campaigns?
It definitely is. But as expected, we should keep up with technology, and the current marketplace’s features and demands.
Nowadays, when it comes to purchasing a product it’s easy to get all the information you need. As I wrote in the article “How to take advantage of Smartphone Revolution”, customers don’t need a salesman to tell them a product’s characteristics: they easily find them on the Internet. So, what should be your aim as a seller?
First of all, you need to get the value of your product across. It’s of utmost importance to put the price in context and to give your customers the opportunity to evaluate the situation without any pressure.
Then we have to decide where to position our product in the current market.
In this case, we have three options:
- Cheap Products;
- Expensive Products;
- Niche Products.
Cheap Products have their pros and cons. According to the Market Demand, cheap products sell very well. Usually, customers who buy these kind of products don’t go looking for information, as they only want to save money on the purchase they’re making. This kind of customer is completely unreliable, as it tends not to be loyal to your service.
Moreover, in my humble opinion there are a lot more negatives:
- low prices will undermine your Brand’s image;
- in a price fight, larger competitors will be stronger than you;
- charging less than what you’re worth will lead to wasting money.
Of course, selling expensive products has its downsides as well, like losing a lot of potential customers. On the other hand, having high prices will raise your brand’s image perception.
People do not have an accurate quality awareness, they usually associate a higher price with higher quality.
As businessmen, we should get in the field “good value for money” of the following chart:
Also, once you have successfully raised your prices, your income will go up significantly every time you sell your products or services.
It’s crucial that your product or service looks and feels expensive in order to maintain a high number of customers.
Tip: if you’re selling physical products, take care of the packaging and attention to detail. On the other hand, if you’re selling info-products, remember that videos look way more expensive than text. A good idea could be delivering DVDs instead of publishing your videos on a web page.
Last but not least, we have niche prices. They’re way higher than the other ones. If you want to adopt niche prices, you should find a group of people who literally love your service and your products.
Typical niches may be personal development, horse-riding and luxury jewellery.
Just take a second to consider that 100 customers that pay 1000$ per year to your company will transform it into a six-figures business (100*1’000=100’000).
Now that we have decided where to position our products, we have to learn how to take advantage of pricing techniques, in order to skyrocket our sales.
In the history of marketing, a lot of techniques have been published. However, I tend to prefer the following four:
- Anchoring: as human beings, we’re not good at form a general opinion, so we have an inclination to formulate a comparative idea.
This principle is the reason why shops displays very expensive watches: they sell poorly, but the 3000$ watch close to them will look affordable. This a technique called “Anchoring”. We tend to focus a lot on the first piece of information which we receive.Have a look at this video:
Steve Jobs announces iPad price
Steve Jobs literally mastered this principle. It’s not compulsory to compare your product to another one, you can do like him: first, anchor a high price in your customers’ heads, then tell them the actual price.
- Price Points: nine is magic. Unconsciously, we form a different opinion of a product if its label shows 99$, or even 99,99$, instead of 100$.
Retailers believe that 9,99$ will generate 10 to 20% more sales than 10$.
It’s incredible, isn’t it?A similar concept is related to former and current price. Customers are more inclined to buy your product if it’s on sale. This works especially well if you put an expiry date or how much pieces are still available on a sign next to your product.
- Decoy Pricing: this is pretty interesting. Look at the image below:
Product B: MP3 120GB 280$, Product C: MP3 100GB 350$Product C is the typical decoy product. Its function is to foster customers to buy other products. In this case, Product A and Product B will seem more convenient.
To better grasp the concept, read this article and take your considerations about its test:Nobody bought the cheapest option
- Three Packages: this concept works very well with info-products. You have a product and you want to optimise your revenue? Then offer three packages:Which one would you choose?
Just like with decoy pricing, people like to feel special. So, if you offer a “premium” pack which is slightly better than the “basic” one, your customer will hardly get the cheapest one.
In conclusion, “pricing” is a crucial part of your marketing strategy. Take care of it, as much as the other three Ps (product, promotion, and place), and your business will only get better and better.
Also, take advantage of these techniques as soon as possible: you will be surprised by their efficacy.
Remember Franklink P. Jones’ quote next time you will pricing your products:
“A bargain is something you can’t use at a price you can’t resist.”