5 Tips Coming up the Price without Under-Price Your Product
To come up with a price is one of the tough issue when you comes to business strategy because sometime it means that you need to guess and read your customer’s mind. If it’s too low, you’ll get less profit. If it’s too high, you’ll lose customers. To understand your customers is one of the factor which helps you come up with the right price for your customers without under-price your product.
When we truly understand that some customers like premium product. To come up with a really high price couldn;t be a problem as long as you deliver the high and premium product for them. But most of the people like great product with low price! Generally we’d think of the way to underprice your product to compete with other business in market. But this way might not be the smartest way in competition because it could lower our product’s value and also your company profit as well.
Should we come up with standard price and generate more sales with these psychological strategies?
Under-price could lower our product’s value and also your company profit as well.
1. Compare Similar Products
When it comes to comparing 2 similar products with similar quality and price. This makes the customers compare this 2 products but if you put 3rd product which is similar to 1st and 2nd product but with lower quality or value. Making decision is much easier than just comparing 2 products which is in the Tour Package Example here.
- OptionÂ A1: Paris Trip + Free Breakfast
- Option A2: Paris Trip + (without breakfast)
- Option B: Rome Trip + Free Breakfast
From theory, people will actually compare A1 and A2 about the option they’ll get and it’s hard to make decision. But if they get B in comparison. They’ll just ignore comparing A1 and B which is harder that A1 and A2.
From the statistic, people will actually choose A1 the most. Which A2, probably the most useless option, comes and did a great job in helping customers making their decision.
2. Compare the Differences in Price
In fact, product itself will not generate value. Its value depends on what they’re compete with.
For example, if you’re eating a steak which cost THB 150. You’d feel expensive if you compare to THB 40 street steak, but in the opposite way, you’d feel it’s really cheap if you compare it with THB 2,000 steak in high class cuisine.
With this psychology, some store used to create a product with extremely high price to compare and make their customers feel that other products are cheap and good.
3. Is it VALUABLE enough to PAY ?
When customers feel that your products are too expensive. The thing we should change is not the price but the perspective and feeling for your customers. As you’re the promoter and sales, you have the duty to convince your customers to make them feel that it’s really cheap and valuable to have it.
- Share the price in to small amount
- Sometime your price is really high which make your customers feel that it’s too expensive. We might wanna share and divide the price out into days or months which make the price drop down in to tiny little price. For example, Life Insurance will advertise their campaign to THB20/day but actually it’s THB7200/year.
- Valuable in Feelings
- Why do Starbucks sells THB150 / cup of coffee ? It’s because the create the value in their product. They do not just offer their coffee but the atmosphere once you step in their shop compare to some small coffee shop you can find on street or mall.
- Valuable in how hard they could get the material or ingredients
- Show them how really hard you can get the material like some Green tea company. They shows that their green tea leaf is from somewhere hard to find and really high quality which takes time to wait and collect.
4. Offer 3 Choices
It’s obvious that people like cheap product. But their cheap product is not the cheapest product on the shelves. One of the research statistic in US shows that if customer have 2 types of beer in comparison, they’ll choose the HIGHER price beer. But if you put 1 more choice for them which the price is in the middle of the range. Customers will choose the middle price beer.
In conclusion, customers will choose the average one which they think that it’s not too high or too low.
5. The miracle of Number 9 (#9)
It’s not a strange thing, isn’t it?, when you see the price tag in your near department store which have end the price with #9. It’s because in psychology, people will think that the price is in the range of the lower sets of number.
For example, if customer sees THB39 they’ll automatically thinks that it’s just THB30 price which in fact it’s really almost THB40.
Under-price is not a wrong way of doing but it would be better that you can keep your profit and also convince your customers in buying your products. Try one of those methods above in coming up the price by yourself!
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