Pricing your product or service is one of the thorniest marketing decisions you will make. Typically, you will consider the costs of producing and providing that product or service, distribution, advertising, and the competitive environment. And, of course, profit. Maybe there’s a little wiggle room to make more or less profit and still stay in business. And then you hold your breath and hope the market finds your pricing acceptable, and hope the competition doesn’t blindside you with an aggressive pricing strategy. There doesn’t have to be such angst.
Consider one of my favorite marketing principles: It’s never the price, it’s always the value. It’s never the price. It’s always the value.
This principle applies to all kinds of categories: automobiles, vacations, financial services, healthcare, membership organizations, telecommunication services, to name just a few. Whatever the category, people will pay more if they believe they are getting something more for their money. That “something more” can be physical features or benefits (bells and whistles) or it can be psychic benefits (emotional gratification, status, etc.). Some companies have different lines (with different brand names) that have different price points and different value propositions. It could be an upscale line with bells and whistles and psychic benefits; or it could be a “budget priced” line that is more “bare bones” for those who aren’t tempted by the bells and whistles, much less the psychic benefits.
First, you have to understand your target audience. What will motivate them: status, excellent quality, luxury, or the thrill of getting more for less? What do they care about? Then you have to decide what you can most effectively promote—what is a credible position for your brand? What are the best reasons you can give people to buy your product or service? You may want to conduct some focus groups to decide this.
Once you’ve confirmed these positions, make sure you incorporate them into all of your marketing communications. Don’t forget to include all points of customer contact such as telemarketers and customer call-in lines in your implementation of these value propositions. Depending on the nature of your target audience, you will probably want to include social media in the mix. Everyone in your organization should be aware of your value proposition and be prepared to feed it back to customers whenever and wherever necessary (e.g., trade shows, consumer shows).
If you keep in mind that people tend to buy things to satisfy a need or solve a problem, and you give them reasons to buy from you, then your pricing strategy won’t be a problem. If you give your customers value they will happily pay the price.
Author: Ann D. Middleman is Principal of ADM Marketing & Research Consulting, an independent practice whose mission is to help companies become knowledge driven, rather than assumption-driven, with respect to their marketing decisions.